I mean no disrespect to the financial minister of Japan who apparently felt so overwhelmed by the global financial crisis, he drowned his sorrows in a bucket of sake. The only problem is he then appeared in that altered state on the world stage on Saturday and then resigned in disgrace Monday morning. I can guess how he feels and I am not going to demean this obviously all too human reaction. It is scary, and if I were the finance minister of a G-7 nation and I had no answers, I might be tempted to belly up to the bar myself.
At the same time, General Motors is hinting that without further government assistance, their 80 year old automotive experiment will be for naught. The government has a problem in that they asked GM for a major renovation to their business plan, and when GM complied with massive union concessions, the union said “no way” sending GM back to the drawing board with no time left. So, either the government bails on GM or they bail on the union.
It is pick your poison time.
Now, let’s get pragmatic (President Obama likes that word). If GM goes belly up, the nation loses hundreds of thousands of jobs and potential votes. If GM goes under, Chrysler follows suit; why would you need a union? In my mind, it’s a lose-lose. Lose the jobs, lose the unions and you lose the union vote. If you were the President who just presided over an 800 billion dollar bailout, whose arm would you be twisting?
California is broke.
So, is Kansas.
On the heels of trillions of dollars of bailout money, we seem to be going to heck in a hand-basket. In the words of Dr. Phil, “how’s that stimulus package working for you?” I made this point last Friday on Fox Business; we are spiraling downward and it is rapidly starting to spiral out of control because the government thinks it can fix it.
It cannot.
How much more proof do y’all need? With stimulus in place dating back to August of 2007, the market has gone from 14,200 to 7500 on the Dow. How’s that for effectiveness? All my media friends then retort, “yeah, Danny, but where would we be if we didn’t provide the trillions of dollars in bailout money?” Alright, I reply; somebody give me a number. Would we be at 5,000 on the Dow? Would we be at 0? Where is the bottom? To date there has been no answer from anybody, and there you have the politics of fear.
This recession will end when America regains its confidence and starts spending. That will happen when the prices are viewed as bottoming. We are already starting to see that happen as evidenced by the 1% rise in retail spending in January. Home sales and starts are starting to see some activity as evidenced by the declines in sales being less than anticipated. The stimulus package does not help this process; it hurts it.
The G-7 meeting is important for that confidence. The free world needs to convey the sense that they are on top of the situation. It doesn’t help when one of the major players drinks his breakfast. On the other hand, a reminder of our own collective humanity isn’t the end of the world either because it points to our need to recognize our own human limitations.
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