Wednesday, March 25, 2009

Down That Rabbit Hole


Perhaps this is as good of time as any to take a few steps back from the economic scene in the United States and take a look at what we have. Did you watch the President's press conference last night?

First, it is quite evident to me that we have a President that has a highly developed brain. This is a real plus as the job he found waiting for him when he entered The White House was already complicated by the fact that our domestic economy was in the toilet. But, as we all know, the economy is more precisely the political-economy and that means that simple economic problems can not be taken care of by simple economic policy adjustments. Washington, D.C. is our own rabbit hole where things that appear to us outside the Beltway have a way of appearing to those inside the Beltway inverted. Remember the inverted relationship that bond prices have to bond yields? Remember, as price goes up yields come down, and as prices of bonds come down their yield goes up. Well, there are other inverted relationships that I have observed over many years. Some are quite funny, like the more a tie costs the stronger the food magnet in the tie. Cheap ties never attract any food, only an expensive tie will find food the very first time you wear it. Doing the right thing for the majority of the American people is another of those inverse relationships. If you help your constituents when they are down, will they remember you when times are good? Some people remember those that helped them when they needed help and some do not.

It appears that new regulations for the banking and securities industry are on the way. It will be interesting to see what we wind up with. When you make your living shooting fish in a barrel, the idea that you would be made to actually learn how to fish is a pretty frightening prospect. No more financial muggings? Well, I am waiting to see what they will unveil. My pet project, the credit rating agencies, CRAs, is what I am most interested in seeing what they do. Will they eliminate the conflict of interest between the CRAs and the underwriting bankers? Unless they solve this problem, I do not see how bond credit ratings for structured debt financing will have the confidence of the investing community around the world.

I enjoy watching this President work. It is refreshing to see someone who has the capacity to do the job right. His job is not an easy one as he is working against the rabbit hole and the people that live down that rabbit hole. But, if enough of us outside the Beltway support his efforts on our behalf, I think he can make our economy better and prepare the way for our country to lead in the 21st century.

Stay tuned.

4 comments:

LceeL said...

The smart bit has been taking his case directly to the people. Explaining. Exposing. Seeking.

As long as he has the people on his side, he can and should be effective.

He mentioned, during his conference, the desire to reduce the influence and activities of lobbyists. That may be the hardest trick to turn, the neatest and most far reaching reform he could effect - and the thing - if he can do it - the will make him a President for the ages.

moneythoughts said...

I agree.

winslow said...

Obama does display a high degree of intelligence and a pattern for problem solving. The spokespeople for the right and far-right find everything to discredit the presidency. I used to watch one of these programs once in a while just to get a different point of view. I cannot watch any longer. They are too vulgar and negative.

moneythoughts said...

This President is fun to watch even though I know I will not agree with him on all the issues. Quite a contrast from past Presidents. I am looking forward to watching him the next four years. If President Obama is re-elected, and I am fortunate enough to live another four more years, I will feel that I got to live through some very interesting times.