Wednesday, February 25, 2009
Republicans vs Obama, Keynes, Einstein, Darwin & Newton
Last night, I and millions of Americans watched and listened to President Obama layout what we, as a country, need to do to bring our country out of our economic recession. President Obama’s speech was well crafted and laid out the major sectors of the economy that need support -- energy, healthcare and education. The rest of the world does not even argue anymore about the importance of these three segments to the success and survival of a complex society in the 21st century. It is time that we, as a nation, realize that what holds us back can be corrected. The economic philosophy that the central government has no part or responsibility in bringing a nation’s economy out of a recession is just plain stupid. Stupid because it was under another administration that the national deficit reached a trillion dollars. What do we have here, a semi-permeable membrane where Republicans can create a deficit, but the democrats can not use Keynesian economics to bring us out of the recession?
President Obama mentioned better regulation of the banking and securities industries in his speech last night. I hope he will direct some of that regulation towards the need to rebuild the credit rating agencies (CRAs) and the serious role they play in the world wide credit markets. The economic recovery, as President Obama said, can not take place without the flow of credit to the people that need money for education, to start a business, to buy a car or to buy a house. The extension of this thought is the smooth operation of the structured finance market. This can not take place until the conflicts of interest in the CRAs is confronted and dealt with successfully. The flow of capital to and from the points within our economy that needs credit to grow must be addressed in light of the financial vehicles of the 21st century. Collateralized debt obligations are not going to go away, but they must be made safe for investors. Credit to build this nation is much more than the U.S. Treasury issuing debt instruments to foreign governments, it is the movement of capital in the private sector that will rebuild the middle class. This was what President Obama was talking about in his speech last night, and why it is critical for the flow of credit to be flowing again. But this time, with credit ratings that mean something.