George Sarant

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Posts Tagged ‘economy

G-7, G-8? CANADA, US, & EUROPE

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The west again has a leader with vision, courage, and resolve. Too bad he’s not an American. He is Stephen Harper, the Prime Minister of Canada, who had the fortitude to directly call out Vladimir Putin for his bad behavior, particularly with regard to Syria, where Russia continues to provide vital support for the Assad regime. At the “G8” summit Harper boldly stated that there is no G8. He stated that instead “this is the G-7   plus one. Let’s be blunt, that’s what this is: the G-7 plus one,” basically giving up on Russia ever behaving like a normal country. 

The G-7 was originally a group of the world’s leading economic powers with a shared democratic government and market economy. Membership consisted of the US, Canada, Germany, France, Italy, Great Britain, and Japan. Then Russia was invited in in 1997 to encourage the continued transformation toward democracy, political and economic freedom. Unfortunately Russia has instead reverted to an authoritarian tradition that goes back centuries. It is nowhere near as odious as the Communist Soviet Union was, but it has consistently been at odds with the west on issue after issue. Part of this is Putin’s illusion of being a great power, which is achieved by opposing anything the US does. He is basically disruptive of the G8, as Harper suggested, and is not suitable for participation. This doesn’t necessarily mean expelling Russia, if only for the Russian people, and the hope that they will eventually produce a less thuggish regime instead of one headed by a clown who cannot be taken seriously. 

Leaving this aside the US is also negotiating a free trade agreement with Europe, which would be a tremendous plus for the economies of all participants as well as the whole world. Obama deserves credit for pursuing this opportunity, which if consummated, will be the major achievement of his administration. Notwithstanding very justified criticism on the domestic front, when the President does something good in foreign affairs he ought to get credit for it. One of the principle roadblocks to completing the agreement has been put up by France,which wants some exemptions and protections for its cultural institutions. In this instance I sympathize with the French, in trying to maintain their national culture and not be overwhelmed, i.e.  by Hollywood. They do not want their culture ruined the way Hollywood has ruined ours, with mediocre productions, offensive material, and monotonous left-wing themes. I hope that they can be accommodated and that other countries will follow suit, in order to maintain their distinctive cultural identities. For that matter it would be nice if Americans rediscovered their own identity, which has been trampled not only by Hollywood, but by a dysfunctional education system. 

Written by georgesarant

June 17, 2013 at 7:21 PM

THE ELECTION

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If the polls still show a dead heat by the end of the day, my guess is that Romney will win the election for a couple of reasons.  The polls chronically undercount Republican voters, who usually wind up running ahead of what the polls predict. Whatever undecideds are left usually break for the challenger not the incumbent. Right now both sides are putting their faith in the polls that show them running best, with a lot of wishful thinking that may or may not pan out. 

There is something incongruous in a system where after months upon months of nonstop campaigning and the expenditure of two billion dollars the race is still too close to call. As I’ve indicated in the past, we need election reform, or at the least some kind of limit on the amount of time in which campaigns can be conducted. As it stands now politicians must put far more effort into campaigning than into governing, especially at the congressional level, although this president has broken all records for the unprecedented amount of time he has spent campaigning. 

That is one of the biggest problems of this administration. He is far more comfortable campaigning with agreeable crowds than with the nuts and bolts of government, or with the engagement and political give and take that is required to get anything done, where he is totally clueless. He is patronizing and petulant because his self-regard, reinforced by those around him, vastly exceeds his actual abilities. He made little effort to work with the opposition, and when his party had full control of the congress he left crucial details to them and forced through a monstrous, costly, unpopular, and poorly conceived health care bill instead of focusing on the economy, job creation, and growth first and foremost. The result is that people are no better off than they were four years ago, and things are not getting significantly better. 

Given all that, his campaign has been devoid of substance, reliant on celebrities, and on attacking his opponent with little in the way of a positive message. He has avoided even the generally supportive mainstream media,  instead trivializing the office by going on late night television, talk  and comedy shows etc. where he only has to answer congenial softball questions. Meanwhile our standard of living is declining, and many of us who have been around awhile realize sadly that life was better in past decades, and the country we have known and loved seems to be slipping away. Granted the President is not responsible for all of this, and indeed blame goes across the board in terms of ineptitude. The problem is that he has shown no capacity to address these fundamental problems and has provided no vision for doing so in the future, and is completely lacking in leadership skills. Strictly based on performance, this election shouldn’t even be close. 

The House of Representatives will remain in Republican hands, and possibly the Senate, (although a couple of goofy candidates may have blown the latter). That means there would be stormy days ahead if there is divided government and the outlook will be dismal. On the other hand, if Romney is elected there is at least the possibility that some of these problems may be successfully addressed, we may begin to get out of debt, and business confidence will be restored. In that eventuality I believe the stock market will rise and more importantly we will see an economic boom in the years ahead. There will be major job growth, a renaissance in American industry, and rising incomes across the board. Even if you don’t care much for Republicans the choice you have is to continue the dismal present or take a chance on something better.  After four years of “charisma” it’s time for some competence. 

 

Written by georgesarant

November 5, 2012 at 5:35 AM

THE END OF THE HIGH END

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People like luxury, especially if someone else is paying for it. To a remarkable extent that has generally been the case for the well-to-do. whether corporate CEO’s or officers of virtually any organization. Dinner in fancy restaurants is great as long as one isn’t paying for it personally; the same for first class travel, nice hotel suites, etc. But the same people have always been remarkably stingy when it comes to spending their own money. An airline official was once asked what question they get the most from CEOs. The answer was how to get a first class seat without paying for it. Better to spend their money on luxury items, but then there never were enough of them to support famous brands, so luxury sales always depended on wanna-bes seduced by the allure of a “brand.” That has now ended as prudence takes hold. High-end, upscale stores and brands are doing poorly in this economy. In fact the only retailer currently doing well is WalMart, and a few other downscale enterprises.

Written by georgesarant

March 4, 2009 at 12:49 AM

Posted in economy

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A TIME OF DISBELIEF

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The sentiment that seems most appropriate for the present moment is shock and disbelief. Disbelief over the financial crisis, and shock at how the value of things could collapse so steeply. There is incredulity at how once solid institutions have fallen apart at how the economic intelligensia could have been so wrong at a point in history when there was a greater accumulation of knowledge and expertise. Others are waking from disbelief that Obama is actually president. Suddenly nothing is as it was, and may never be again. The best of times may have already past. These sentiments seem to be increasing, and we have not yet seen the worst of things. Gloom feeds upon itself, eventually leading to despair.
The government is now involved in all aspects of life, which unfortunately makes politics all the more important as the stakes are much higher while the competence is much lower. The administration, rather than calming the waters is inducing panic, and causing the market to continue to tumble due to lack of confidence. Money will not flow, capital will stay on strike, as things move in the wrong direction. Companies cut back, people don’t spend, or pour money into things like gold that don’t produce anything. The manageable is becoming unmanageable.
There is little reason for confidence in the direction of things, which may get steadily worse. But out of this we may regain a sense, in this most optimistic of lands, that life is ultimately tragic. But once that realization sets in, it can be followed by a calm resignation that things are what they are, beyond our control, except for those that are yet most immediate and dear to us.

Written by georgesarant

February 27, 2009 at 8:24 PM

Posted in economy

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STIMULUS PACKAGE

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The stimulus bill passed by the House includes just about everything on the liberal Democratic wish list. All sorts of interests are lining up for a piece of it. Government has never been good at picking winners and losers, and it is mostly losers that are lining up. 
It is worth noting that conservatives are the ones committed to free market capitalism. The capitalists are committed only to self-interest, untroubled by principle, and if that means dealing with the government or the devil himself, they’ll do it.

Written by georgesarant

January 30, 2009 at 11:37 PM

Posted in economy, Politics

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ECONOMY AND SOCIETY IN 2009

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This year begins with economic turbulence continuing throughout the world. Statistics in the Wall Street Journal each day are discouraging, and the economic gloom everywhere is palpable. Most people alive today have never seen anything like this. If this were a normal post-war recession we would be almost halfway through it at this point. But this is not a “normal” recession judging by the market meltdown and the continuing financial paralysis. Projections for an upturn by the second quarter of this year are very optimistic, and it is more likely to be prolonged because nobody knows what they are doing and the government will likely make things worse. If there is growth at all it will be anemic because of industrial policies that are likely to be put in place by the new administration. 
It is well known that the root of the problem began with the Community Reinvestment Act, and Fannie Mae, and Freddie Mac overextending credit to people who never should have received it ,which in turn encouraged banks like Countrywide and Washington Mutual to push out loans to anyone, with virtually no credit standards or safeguards. Although this began during the Clinton administration, George Bush liked to brag about increasing home ownership and continued to encourage these policies. People could lie with impunity on applications while suffering no consequences. Ironically during the Savings and Loan crisis other people were actually prosecuted for doing the same thing. Thus, all players dispensed with standards and created the resulting housing bubble. Loan originators could be lax because they would sell loans to other institutions or in packages with slices of mortgages, which presumably spread the risk and seemed virtually guaranteed because the good mortgages would more than make up for the few bad ones. Wall Street further muddled these securities through credit default swaps and excessive leverage. The problem now is that no one knows what these securities are worth as they are unable to unravel the labyrinth of slices spread across the market. Until this is resolved there can be no stability in the housing or credit markets. 
But let’s just look at the loans that haven’t been securitized, and are still on the books of the banks as nonperforming loans. Because so many mortgages were made on houses with little down payment, and which are now worth less than the original mortgage amount, homeowners can simply walk away. It all really comes down to this: there is a spread between what these houses were worth during the bubble and what their current market value is. The question then becomes who is going to take the hit- the homeowner, the lender, or the taxpayers? This is further complicated by the fact that these assets have no fixed value and eventually may appreciate again. That argues for the homeowner to sit tight where possible, but mark-to-market rules are making financial balance sheets appear far worse than they are. If the taxpayers eat the difference on the assets everyone describes as “toxic,” who gets the benefit when these assets appreciate again? 
Right now the best stimulus the economy has is low oil prices, which have the added virtue of hampering unfriendly states like Iran, Venezuela, and Russia. Government spending on public works such as roads and bridges will take years to have any impact. Leaving aside the merits of these projects, and although I naturally oppose any tax increase, if ever there was a time to increase the gas tax this is it, with oil prices so low. Such projects should properly be funded this way rather than through more debt. It is also a far better way to encourage the sort of behavior this government desires, as opposed to more regulation, management of auto mileage and production, CAFE standards, Cap and Trade schemes, and “green” expenditures there is no market for. But tax cuts are still the surest and fastest way to encourage growth. 
However this is the sort of situation than feeds upon itself. Psychologically, people believing that things will be bad makes things worse. When things get tight people stop spending on stuff they don’t need, which is a considerable portion of our economic activity. When they do not spend, there is no investment, and less investment means less innovation, and less innovation means less growth. On the other hand with deflation there is more savings and less debt, the downside being increased unemployment.
It seems as though we should know more after so many decades of study and experience, and economic swings should not be so severe. But clearly this situation shows that we know less than we thought we knew, which should also inspire some prudence in attempting to solve the problem. We already have a $1.2 trillion deficit in FY 2009 before the Obama spending program arrives and congress is about to expend another trillion or so. But what if it doesn’t work?

Written by georgesarant

January 1, 2009 at 7:39 PM

Posted in economy, government

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