Indications are that the US economy is slowing a bit, although there is not yet enough data to officially call it a recession (two consecutive quarters of declining real GDP). Gasoline prices are high, real estate prices are sagging, mortgage foreclosures are at record levels, and the stock market is down ten percent. Wall street traders are crying in their imported beer, banks are writing off their losses, and the media acts like the U.S. economy is six feet under. Now the really bad news…the Federal Reserve Bank and the Politicians are going to “fix” our economy.

Our economy doesn’t need fixing. It is incredibly resilient. Within months we recovered from the crash of 1987, when the stock market lost 22.6% of its value in a single day. Our economy survived the savings and loan crisis of the late 80’s and early 90’s. It roared on, despite the terrorist attacks on September 11, 2001, creating jobs and prosperity. When left alone by government, economic distortions caused by terrorists, Enron, sub-prime lenders, and stock speculators will eventually self-correct, albeit with some pain inflicted on those businesses and individuals who’ve acted stupidly.

The Federal Reserve System (The Fed) exists to control money and credit in the United States. It’s primary responsibility, in the opinion of this economist, is to maintain a stable, non-inflationary money supply. The Fed can use monetary policy to control interest rates. If the economy is in recession, the Fed can lower rates in the hope that businesses and consumers will borrow more and spend more. This is precisely what the Fed attempted last week when it lowered the federal funds rate by ¾ of a percent. I’m not sure this “easing” of rates was necessary at this time. I think a bit more patience would have been in order.

The Congress can engage in “Fiscal Policy” to boost an economy in recession. Bush snuggled up with Congressional leaders last week to propose an “economic stimulus” package where the government will, in essence, spend $150 billion that it doesn’t have and hand it out to American families. This is supposed to increase consumption expenditures, which will boost the economy. Where will this money come from? The government will sell $150 billion in US bonds, meaning that we will borrow it from the China, Saudi Arabia and other governments who purchase US securities.

The additional $1,200-$1,600 that eventually arrives in US households will likely be spent to pay off credit card bills, or to pay higher mortgage payments for a few months. Even if some of the spending actually stimulates the economy, the timing may be off, as the economy might already be recovering when the stimulus occurs. The end result could actually be inflationary.

The reason that Politicians are now bringing the economy to the forefront has nothing to do with economics and everything to do with politics. There is, after all, an election coming up. I wish the politicians would leave the economy alone. Let Wall Street speculators take their well-deserved losses. Let homeowners who bit off more than they could chew move out of their expensive houses into more affordable accommodations. Let the banks that made those lousy sub-prime loans continue to lose additional hundreds of millions of dollars.

Dear politicians, stop treating Americans like stupid dupes, bailing us out every time we make a mistake. We’re better than that. People willing to face the consequences of their mistakes or successes built our nation. This fostered an atmosphere of personal responsibility and integrity that created the most prosperous economy the world has ever known. Please, fair politicians, have the courage to leave us alone so that we can make technological innovations, invest capital, start businesses, and create jobs. Laissez faire!

Dear Don,

Thanks for writing this article. It makes me thinking about our situation in China. Our government does the similar thing to boost our economy when our economy goes downward. The difference is that we hear most of the favourable opinion rather than the rational analysis like you offered.

I benefit something from the last paragraph. It tells me how to face this problem and reason the situation and make the right choice. Thanks a lot.

Xiao

Yesterday I had a mission; to help move my daughter from Minneapolis to Chicago. On the surface this isn’t a big problem; we have access to a really nice diesel Ford 350 truck, complete with topper and a bed large enough to hold all of her belongings. The plan was simple; drive up to Minneapolis Friday evening, pack her stuff and drive down to Chicago on Saturday. But, there was one small complication; we had to move her horse too!

Generally, I think my wife and I have done pretty well raising our children, but in my opinion we made one huge, colossal, incredible, nasty mistake. My wife doesn’t share this view, but she doesn’t move horses from Minneapolis to Chicago either. The mistake was allowing my daughter, at the age of five, to attend summer “horse camp” at a little ranch near our home. For a hundred bucks she went over there every day for five days. She learned how to ride the horsies, feed the horsies, clean out the stalls of the horsies, and do whatever horsie owners do. The result was nothing short of complete horsie addiction. This, along with a lot of daughter persistence, led to buying an old nag, selling that nag and buying a better nag, selling the better nag to buy a good show horse, buying another horse keep the show horse company, and taking both horses to college (which necessitated the purchase of a triple horse slant load goose neck trailer with front dressing room and rear tack, and a 3/4 ton used Chevy pickup to pull the trailer).

Several years ago we got rid of the horse trailer and the pickup, but one horse remains in our inventory. So last week I borrowed an old horse trailer from a farmer friend. It had not been used for a few years, so I had the bearings checked. I toyed with putting “new rubber” on all four tires prior to the trip, but wanted to minimize my “horsie” expenditures. The tires were old and one of them was particularly bad, so I replaced it with a new tire. I figured the other three tires would last for the 120 mile trip to Minneapolis and the 340 mile trip to Chicago. In other words, I tried to “horse around on the cheap.”

There were no problems on the trip to Minneapolis and we picked up horsie at his boarding stable near Prescott, Wisconsin. The temperature was -11 when we left Minneapolis, and I’ve since found out that cold temperatures are very hard on tires, especially bad tires. We made it to I-94 near Osseo, WI before the first tire on the horse trailer blew! After limping along to the next exit we were lucky to find a wonderful gentleman who had a small tire shop. When he looked at the sizing number on the side of our blown tire he told us that tires of that size designation haven’t been sold for 25 years! He sold us a good used tire and we were again on our way. Forty miles later another tire blew up and disintegrated, which was a psychological blow, given that this was supposedly our best “used” tire. We had to limp our trailer along I-94 at about 10 miles an hour before finding an exit at Warrens, Wisconsin. The fix for the second blown tire took a lot longer and by the time we were on our way again it was nightfall.

By now, we only had one of our original tires left. It was Saturday night, no garages were open, and I prayed that the last tire would hold together. I’ll have to admit that I prayed a lot; first for our safety and second that we wouldn’t be stranded again. We lucked out. The last old tire hung together. At 10:00 p.m. we got horsie to his new digs near Streamwood, Illinois about 5 hours behind schedule. It was a big relief when we unhooked that trailer. It was also an important lesson for me; when dealing with horse ownership, you’re in the “sport of kings” and it doesn’t pay to do it on the cheap!

When Friday, August 31, 2007 finally arrived, along with American Airlines flight 307 to O’Hare airport, Marcus was eagerly awaiting Subani’s return from Colombo. When he saw the big smile on Subani’s face as she entered the baggage claim area, Marcus’ apprehension about her love for him melted away in a second. As they kissed, tears of happiness mixed on their cheeks; regardless of time or place, both of them were “home” again.

Her summer in Sri Lanka had seemed like an eternity for Marcus. Every day, doubts entered his mind as to whether or not she would return for her Junior year of college, if her parents would find a match for her in Sri Lanka, or whether she would fall in love with another man. Marcus’ fear of losing Subani was as intense as his love for her. Suddenly his decision to leave his job on the foundry floor to pursue his degree in engineering made more sense to him than ever. With a degree in engineering he could earn a decent living to support a family. As he and Subani drove up I-94 and crossed the Wisconsin boarder the talk was non-stop. Marcus thought about a day, perhaps years in the future, when Subani would give him a son or daughter. The idea of being a father to her children was for him not an act of progeny or a biological event; it was the privilege of a lifetime.

Subani’s summer had passed slowly for her. She had always looked forward to summers at home, but her heart and thoughts this last three months had been with a strapping, handsome fellow in Hubbard, Wisconsin. Summertime had been a beautiful in Colombo, punctuated with sunny days, fresh fish, and tasty mangos. Subani “went through the motions” of shopping with her mother at the market, attending various social events with family and friends, and giggling with the household servants while helping them prepare meals.

Everything was predictable until three weeks after her arrival. On one of the walks that she and her mother take every afternoon, Subani’s mother blurted out, “You’re in love with someone, aren’t you, my dear? I can see that your mind has been somewhere else ever since you arrived back home. You can confide in me, honey. I’ll never speak a word of it to your father.” “How did you know, mother?” exclaimed Subani. “I was a girl once, too, my dear,” said her mother. “I had those same feelings and a secret of my very own, but that is another story for another day.”

Subani was astounded that her mother was so perceptive, but they had always been close. Her mother was her confidant, her protector, and her best friend. Subani opened up and told her mom the entire story about the handsome young man she had met in Hubbard, Wisconsin. She talked about his smile, his character, and his serious attitude toward his engineering studies. Subani even showed her mother a photo of Marcus, which she had tucked hidden away in the folds of her wallet.

For a while her mother just walked in silence. Then she said, “Subani”, how serious is your relationship with this young man? Subani answered, “Some day he and I will give you a grandchild.” “Not soon, I hope!” said her mother. “No, mom, not for a few years,” said Subani. “Your father will not hear of this for a while,” said Subani’s mother. “We’ll break it to him slowly, over the next two or three years. Our first hurdle is to convince him conceptually that interracial marriage doesn’t mean the end of the earth. We’ve got a big hill to climb.” “I know, mom,” said Subani, as they hugged in the dusty street.

Thirteen months ago, on December 3, 2006, Hillary Clinton was the odds-on favorite to receive the Democratic Party Nomination for President of the United States. Hillary was then considered the undisputed “anointed one” of the Democratic Party. I wasn’t convinced. In my blog titled “My Crystal Ball” dated December 3, 2006, and long before Barak Obama’s announcement that he would run for the Presidency, I predicted: “Barak Obama, the junior Senator from Illinois, will be elected President of the United States in 2008.”

My rationale for this prediction, as stated thirteen months ago, was this: “Despite Obama’s lack of tenure and experience in Washington, Presidents are elected on the basis of image and charisma and Obama is incredibly rich in both. Not since John Kennedy has this country seen a politician as infectious and riveting as Obama. An excellent orator as demonstrated by his keynote address at the 2004 democratic national convention, if Obama chooses to run for President, Hillary Clinton doesn’t have a chance of getting the Democratic Party nomination. Obama can muster more charm in thirty seconds than Hillary can display in an entire evening. In an open forum debate with Obama, Hillary Clinton would be cannon fodder. The Democrats would be stupid to nominate anyone other than Obama and they aren’t going to be stupid this time around. I predict that once Obama has secured the Democratic nomination and his campaign gets up to full steam, there isn’t a Republican on earth that can beat him in 2008.”

It remains to be seen if the Republican nominee can beat Obama in November 08, but Obama unquestionably mopped up Hillary in Iowa last week and has a very good chance of winning in New Hampshire next Tuesday. If Obama wins in New Hampshire, Hillary will be “toast” by the time the ballots are counted on “Super Tuesday.” Obama has a lot of money and a lot of charm. Hillary has no charm whatsoever, and is indeed “cannon fodder” when she shares the stage with Obama. She appears tight and nervous. She lacks sincerity. Obama appears smooth and “electric”. However, even putting aside charismatic considerations there are other a couple of other reasons why I think Obama will beat Hillary Clinton as the nominee of the Democratic Party.

First, as far as gender and race issues are concerned, Obama overshadows Clinton. A year ago, many voters were pretty excited about the prospect of electing the first female President, but that pales in significance now that they have the opportunity to elect the first black President. After all, when you have the opportunity to elect as President of the United States a guy who couldn’t even drink out of a water fountain in Selma, Alabama fifty years ago, that’s pretty exciting stuff. It speaks mountains about the progress that this nation has made in the arena of civil rights.

Second, Obama is a candidate of change and Hillary is not. After watching it’s second “Bush” struggle through a Presidency that borders on idiocy and having already experienced one “Clinton”, the public has lost it’s appetite for political dynasty. Most voters are so tired of established politicians (as evidenced by historically low Presidential and Congressional approval ratings) that they don’t care who’s elected or what his or her specific stands on issues happens to be, as long as it represents a change from the status quo. For example, many voters don’t care if Hukabee or Obama don’t have any experience in foreign affairs. They figure that the new guy, no matter who it is, can’t possibly screw it up any more than what has happened in the last eight years. As the voters look at the list of Republican and Democratic candidates, they seem to value one characteristic over all others, a fresh face. Sorry, Hillary, but you’re not a fresh face.

Don’t get me wrong. I’m not going to vote for Obama. In fact, I don’t know whom I’m going to vote for this year. It used to be that I could count on the Democrats to rob me of my economic freedom, while sparing me some of my civil liberties. On the other hand, Republicans would leave me with something in my pocketbook, at the expense of my civil liberties. It now seems that politicians from both major political parties want to make my government bigger and my tax burden unconscionable, all while robbing me of more and more of my personal freedoms. Will we ever learn that Government can’t solve the problems of our society? Is there no human activity in which we believe the Government doesn’t make wiser decisions than we as individuals can make? God help us.