The Perfect Storm : Election 2008
Instead of Paying the Price For Deliberately Compromising America’s Financial Systems, The Democrats Were Successful In Blaming It All On George W. Bush.
Part Two of Two (Click Here for Part I)
By Perry Hicks- Special to GulfCoastNews.com 11/08/08
To borrow a sports metaphor, given all of the assets and advantages available to Obama- funds exceeding $630 million, support from Hollywood and the media- and as poorly managed and as comparatively under-funded as McCain’s campaign was, Obama’s victory should have had a far wider points spread. A good portion of the public did not buy into the Obama hype or were otherwise steadfast in their conservatism.
What pushed Obama over the top was the final element of the perfect electoral storm, the global financial meltdown. This was sold to the public as being kicked off by the failures of quasi private mortgage lenders Fannie Mae and Freddie Mac.
These failures, of course, were blamed on the “failed economic policies of the last eight years:” i.e. President George W. Bush. Of course, nothing could be further from the truth.
Anything to do with the banking/financial/insurance sectors is fiendishly complicated and to simplistically lay blame on Bush could be expected to be false on face value. The present mess is global and is borne of multiple interlocking factors including the inability for western nations to create sufficient wealth to support the welfare states to which they have evolved.
The current crop of banking failures had actually begun to be seen in the Germany as early as August 2007 although the seeds for the coming crisis was sown all the way back in 1980 under Democrat President Jimmy Carter with the Depository Institution Deregulation and Monetary Control Act of 1980.
Just as the bursting Swiss housing valuation bubble followed with a mortgage banking crisis, the crash in American housing values also resulted in mortgage banking failures. The difference was that the American real estate valuation crisis had global reach.
However, in GCN’s view, real estate was not the sole factor bringing down the financial sector; the root cause was the valuation of the dollar.
Back in 1980, then Chairman of the Federal Reserve Board, Paul Volcker, was faced with having to support the value of a floating dollar that garnered little confidence on the global market.
America was in the aftermath of a humiliating but self-imposed defeat in Vietnam, two Arab oil embargos, and the Iranian hostage crisis that would ultimately extend out 444 days. A U.S. military rescue attempt had ended in fiery failure in the Iranian desert just a few months prior.
Investors were storing their wealth not in paper, such as securities, but in metal, such as gold, driving the market price of gold up into the hundreds of dollars. This left businesses starving for capital and so forcing them to raise prices even in the face of falling demand (stagflation.)
Volker forced the investors out of the gold market by making paper securities more attractive by restricting the supply of money thus driving up the prime lending rate to as high as 21% at its peak. The result was that not only was the value of the dollar increased, dollars came out of gold and into the stock and real estate markets and interest rates fell.
However, before the economy could rebound, the entire country outside of the petroleum industry was in a deep recession with unemployment in the double digits. This high unemployment along with the Iranian hostage crisis literally opened the White House door to the election of Republican Ronald Reagan.
As the economy took off under Reagan, workers put money into the still new Carter era 401K retirement accounts and the stock market soared and both businesses and individuals suddenly had access to affordable loans. Coupled with Reagan’s lower tax rates, the Reagan Recovery was on.
It wasn’t until 1992 that another recession came on the scene. However, coincident with the arrival of President Bill Clinton was the advent of the World Wide Web and the next economic prime mover, the dot coms.
The 1990s fueled much of the artificial prosperity of the go-go ‘90s. It wasn’t until the arrival of President George W. Bush that the dot com bubble burst along with the terror attack of September 11, 2001.
Since then, the American economy has been sustained by the War on Terror, a war winding down just as the election of 2008 approached.
Current U.S. Prosperity Decline Due to Liberal Policies
America’s current struggle for prosperity may be laid at the feet of post modern liberal policies. Because increased regulation, notably labor and environment, America’s centers of industrial production have been largely dismantled and figuratively, if not literally, shipped overseas.
This has forced American consumers to buy most of their needs from Asian providers, notably China, who have amassed enormous numbers of U.S. dollars. With little more to purchase with them but oil and America itself, the price of both skyrocketed.
This also led to the devaluation of the dollar, a problem that will be exacerbated by the recent financial bailout and follow up legislation. These bills promised nearly 2 trillion dollars that will be provided by the combination of simple U.S. Treasury money creation and a massive level of borrowing from foreign nations, notably China.
The fundamental business climate the U.S. financial markets struggled with has been:
With pressure to continuously increase investor yields in an environment where basically building wealth is not permitted, financial units increasingly turned to internal investment “products” that were based upon repackaging and derivatives.
To say the least, this was a recipe for disaster. The upward valuations of investor 401Ks, institutional portfolios, and other accounts were literally based upon nothing. And when the underlying bubble burst, the collapse of these various funds came like the fall of a line of dominos stretching around the world.
Further exacerbating the situation was the lack of oversight applied to the core institutions, Fannie Mae and Freddie Mac.
Democrat Barney Frank (MA-photo left) served on the House Financial Services Committee while his homosexual lover, Herb Moses, served as a assistant director for product initiatives Fannie Mae, the quasi-Federal mortgage lender that became the “epicenter” of the most recent mortgage financial meltdown.
Frank made numerous assurances that Fannie Mae was in good shape when in fact it was not. Furthermore, Fannie Mae was pushed to loan more and more money to minorities on terms that ultimately they could not afford.
Barney Frank became chairman of the House Financial Services Committee in 2007.
Then there is Democrat Chris Dodd (CT-photo right) who is the 4th most heavily funded senator by the financial services industry, the one he was supposed to help regulate as chairman of the Senate Banking, Housing, and Urban Affairs Committee.
Along with Frank, Dodd refused to hear the alarm about Freddie and Fannie when President Bush called for the application of controls on the two in 2003. Indeed, as late as July of this year, Senator Chris Dodd erroneously announced on CNN that it was “inaccurate” to say anything was wrong at Fannie Mae or Freddie Mac at all.
But Rep. Maxine Waters (D- CA) could deny anything was wrong with either Freddie or Fannie and in particular praised the leadership of Franklin Raines, then Chairman and CEO of Fannie Mae. Raines as of late served as an advisor to the Obama campaign, a role both Raines and the Obama campaign have denied only after embarrassing revelations of his involvement in the scandal had surfaced.
Effect of the Financial Meltdown
After the first bailout plan was thwarted by the public’s massive negative reaction, the legislature quickly enacted another far worse one and President Bush rushed to sign it into law. This left a bad taste of lingering resentment in the mouths of a large number of the voting public.
As a result, on election day, either not enough voters showed up to support McCain, or not enough center voters were swayed to vote Republican; the public relations offense to blame Republicans for the meltdown may just have stuck.
Combined with ballot box stuffing, legitimate get out the vote, the demonizing of Sarah Palin, and the Republican Party/ McCain Campaign failure to expose Obama’s Marxist loyalties, Democrats were successful in convincing the public that the Republicans were at fault for what the Democrats had actually done.
All told, it was the perfect political storm.
About the Author.....
Perry Hicks is a former Mississippi Coast resident and was a correspondent for the old Gulfport Star Journal. He has appeared on Fox News Channel. Perry has also hosted his own radio talk show on the auto industry with a mix of politics. Perry is a former college professor and is GCN's Washington correspondent on stories of national importance with local interests. His articles can be found in the GCN Archive.
Contact the Author: firstname.lastname@example.org