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Some numbers and a question

During the eight years of Bush's presidency, the Dow Jones Industrial Average lost 2,638 points. In the two years since the the Democrats took control of congress, the Dow has lost 5,717 points. In the month and a half since Obama was sworn in, the Dow has lost 1,186 points.

For now, Obama can still lay all the blame for the state of the economy at the feet of his predecessor. But for how long? At which point, both in time and in DJIA points, will the Democrats officially own current economic conditions? (Note that this is a political question, not an economic one.)


Two answers, neither of which will change in the coming years:

1. The good stuff is because of him, and none of the bad stuff is his fault.

2. The bad stuff is all his fault, and none of the good stuff is because of him.

Applies to Obama (well, if I capitalized "Him" and "His" it would). Applied to Bush, Clinton, Bush, Reagan, etc. Applies to pastors and coaches particularly well.

See, it doesn't matter who you're talking about, what matters is who you're talking to. Are you asking the question of a True Believer?

If things go on to hell from here, the "Obama Believers" will say it's in spite of all the beneficial change. He did his best. If he hadn't, it would probably be even worse (like our strictly objective history books say of FDR, Paulson fans say of his banking bailout or Bush fans of his War on Terror).

Conversely, the "Bush Believers (Jindal Believers?)" will say the hell-going is exactly because of the Democrats' actions (like Paulson haters yada yada yada).

Watching the Believers is an amazing demonstration of tribal human nature. We had a local softball coach who was arrested for having sex with his 14 year-old players. The entire team's parents rallied around him!! They weren't stupid, they weren't evil, they were Believers! Remember Jimmy Swaggart, etc.

Me, I'm a big-time believer. I believe the donkey show we call politics is more fun to watch than a, well, donkey show. And the Believers, they follow the show like they're chickens and their man has the corn.

And now, I believe I'll have another beer.

Do you think that the housing bubble was sustainable if only the Republicans had held onto Congress? Do you think that investment banks like Bear Stearns and Lehmen Brothers would've been able to continue indefinitely selling off mortgages on foreclosed properties?

Personally I think that Democrats like Dodd and Franks bear a LOT of responsibility for the excesses that were allowed to continue, even encouraged by both branches of government. Congress can't (nor should they) stop bubbles entirely, but there was a lot that could've been done that wasn't done.

There is a lot of blame to go around, in my view. However, the 2005-2006 spike, just like the spike at the end of the Internet boom, was built on unsustainable business practices and it was the fact that the business models were unsustainable that caused the collapse, not anything Congress did or didn't do.

Now I will grant you that the Democrats show no interest in understanding how their actions contributed to this mess and I agree that their blaming the Republicans, just because the Republicans had more power, is a short term political strategy that is disingenous at best and will work against them very soon as the Republicans can use the same argument against them.

The more I find out about this mess, the more I am pissed at damn near everybody.

That said, what Congress should have done should have been done PRIOR to 2006, before and while the boom was happening.

The Bush-ites seemed to blame Clinton for everything bad that occurred from '02-'08, so why can't Bush be blamed, fairly, at least for some time?
On a totally separate issue, I am trying to flesh out something at my job regarding the last two big bubbles/bursts: the present housing collapse and the tech/internet bubble bust in 2000.
Has anything positive resulted from the housing bust? We're left with a few million excess homes, a deep recession, bank failures, etc., etc. Maybe some unavoidable, and in the long run, worthwhile restructurings will occur as a result, but that's not evident yet.
As for the tech bubble and bursting a decade ago, did anything positive come of that? While there were many losers when tech stocks went south, the 'recession' was about as tepid as could be. There was no national calamity that resulted. And, on the positive side, looking at things from the start of the tech bubble in the mid-90s to its end in the early 2000s, when the bubble burst, our way of life had changed--I'd say--for the positive and irreversibly. Most homes had PCs, the internet was a way of life, a way of shopping, a way of communicating, a way of doing business, a way of advertising, etc., etc.

First of all, let me say that I have personally lost a lot of money with the Dow dropping. At the personal level I am very unhappy that I lost all that money.

On the other hand, I had enough of this. The Dow is dropping because greedy companies and investors do not like whats going on. They dont trust Obama. Well, I no longer care how low the Dow will go. If it goes real down (a friend of mine has predicted we will reach 5000), that may force the nationalization of certain banks and organizations (which I believe should happen any way). We may start talking about real change. We need to evolve to a social-democratic type of system like many european countries have now. The more the economy collapses, the more likely this is to happen. Of course, I do not wish the economy would collapse. Quite the opposite. But if it does (and it seems like that now) there may be something good that would come out of that in the long run.

Well, since the Bushies blamed 9-11 on Clinton, Obama shouldn't get any blame for at least 8 months !

"The Bush-ites seemed to blame Clinton for everything bad that occurred from '02-'08, so why can't Bush be blamed, fairly, at least for some time?" (Fred)

Who's said that G W Bush isn't partly to blame???

G W Bush, like his father, was a stalwart Keynesian Republican, in the mold of Nixon, and Herbert Hoover (the first "Progressive" - the 1920s viewpoint that, "Every problem has a scientific solution, best implemented by a benevolent government" - to occupy the WH).

Bush cut the Capital Gains rate down to 15% and Cap Gains REVVENUES soared in its wake, he cut income tax rates across-the-board and income tax revenues also soared....so he INCREASED revenues (I'm not for that...we NEED to cut the federal budget as Gingrich did, so we need tax cuts down to the point where they actually REDUCE revenues).

After that, G W Bush embarked on one of the most ambitious regulatory programs since, well, since Richard Nixon's tenure.

He pushed for and signed Sarbannes-Oxley (in the wake of the Enron, Tyco, Worldcom, Arthur Anderson scandals broke, after flouring for nearly a decade, in the summer of 2001). Sarb-Ox was so costly that even when the recession that began with the Tech Bubble implosion of 2000 ended, the recovery was largely a jobless one, as the Sarb-Ox compliance costs were so high.

Bush sought greater oversight and regulation of Fannie Mae and Freddie Mac in 2003 and AGAIN in 2005.

He spent MORE (even adjusted for inflation) on reckless, useless, pro-dependency social spending than even LBJ did.

G W pushed a housing initiative to increase low-income and especially minority home ownership and actually, although through dubious practices that are wreaking havoc today, DID increase both low-income and minority home ownership rates more than ANY other U.S. President.

BUT even that, signing onto 0% down for FHA mortgages and having Fannie Mae and Freddie Mac buy up more and more high risk, subprime mortgages, was just reckless Keynesianism on Bush-Jr's part.

It's at least somewhat ironic that one of the most Keynesian Republicans, one who wasted Billions fighting AIDS in sub-Saharan Africa (not our fight) and UNDENIABLY did MORE to advance minorities and increase minority homeownership (Clinton comes in a distant second in increasing minority homeownership, though those two are the champs), would be undone by those exact policies!

Irony can be pretty funny stuff sometimes.

What the "housing bubble" taught us is that it turns out that "creating credit (a form of wealth) out of thin air," is even more damaging than "creating currency out of thin air (inflation)," because it allows the private sector to print all the faux wealth (in this case credit) as it wants to. The kind of "credit socialism" that burgeoned over the past few years was as reckless an act as legalizing counterfeiting for a given period. AND virtually ALL of that came about in earnest under Pelosi-Reid-Bush-Jr.!

So, what we have TODAY is NOT a Keynesian (Obama) supplanting a Supply Sider (G W Bush) with "new policies" - NOT AT ALL! In FACT, all Obama's done so far, is more of the same that Bush-Jr DID - more "UN-stimulating Stimulus packages," MORE bailouts and MORE excessive spending.

What we have is exactly what we had back in the late 1970s - a Keynesian and spendthrift Republican (Nixon then and Bush-Jr. now) handing off a faltering economy to an even more enthusiastic Keynesian (Carter then and Obama now).

A LOT of the current situation is the fault of G W Bush, a Keynesian Republican, who cooperated as willingly with Nancy Pelosi and Harry Reid as Bill Clinton happily cooperated with Newt Gingrich.

With a not-so-slight difference - whereas the policies that Gingrich forced on Bill Clinton (CUTTING the federal budget for the first time in over a century and slashing the Capital Gains rate FROM 30%, TO 20%, coupled with the enormous savings engendered in welfare reform) delivered the booming late 1990s, the policies that Pelosi-Reid advanced and G W Bush signed onto have delivered....well, the current mess.

"Of course, I do not wish the economy would collapse. Quite the opposite. But if it does (and it seems like that now) there may be something good that would come out of that in the long run." (BW)

God bless you BW, you have only one speed - DUMB.

The Dow reacts to factors, like unemployment, inflation rates, the prime lending rate, the costs of regulation and other policies on businesses.

Over the past six weeks, there hasn't been ANY "change."

UNLESS, by "change" you mean "even MORE of the same overspending, bailouts and UN-stimulating "stimulus packages" that Bush-Pelosi-Reid delivered over the past two years.

Over the past six weeks we've added $1.2 TRILLION to the National Debt, which will limit private sector (business's and individual's) access to credit, thereby putting a strong upward pressure on both INTEREST RATES and INFLATION (Obama inherited a 2.5% Prime Lending Rate and a 2.2% annual inflation rate).

Let's see where those two indicators are in another 12 to 18 months.

He also inherited a 7.4% annual unemployment rate...now 8.1% and rising, despite, or more likely, BECAUSE of the all that "stimulus" overspending.

The bottomline is RESULTS.

Ronald Reagan inherited DOUBLE DIGIT inflation, unemployment and interest rates (a 23.5% prime lending rate - MORE than 20 percentage points higher than TODAY'S)...a staggering and record post-WW II high 22 Misery Index and reduced those every year he was in office, until they reached SINGLE DIGITS.

By contrast, Barack Obama has inherited a 7.4% unemployment rate (for 2008) a 2.2% inflation rate...a prime lending rate of 3.25% (SEE: http://www.wsjprimerate.us/) and a SINGLE DIGIT Misery Index (9.61
SEE: http://www.miseryindex.us/customindexbyyear.asp)...UNFORTUNATELY, we're NOT headed downward, we're headed UP or WORSE in ALL those categories!

We haven't had a year average out to a DOUBLE DIGIT Misery Index since 1992 (Bush Sr.'s last year in office). Carter left four straight double digit Misery Indexes and an average annual Misery Index of 16.2 for his entire tenure, including a staggering record-high 22 MI that he bequeathed to Ronald Reagan in 1981.

With another Democratic Keynesian following up a Republican Keynesian, we may very well see the economy of the late 1970s - we're pretty far from there RIGHT NOW, but we certainly SEEM to be headed back in a late-1970s direction.

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