Current news (draft)

Note: I will post some comments on current news – even when articles haven´t been finished.

This will allow me to post what I think is relevant and to sort a brief analysis that may be helpful.American Politics: Hillary made a lot of mistakes on the primary campaign, the most notorious one was her political calculations at every stage, which in the end turned her into an opportunist. She is talented no doubt about it, she is tenacious, strong, decisive, but all those qualities are not good enough if you change your points of view for political gain. We saw a well position Hillary loosing ground in the middle of the fight, while a charismatic Obama was gaining the support of the superdelegates of the party. Hillary made a good ending, more balanced, more accurate, and with Bill kept aside from the stage, her image was improved by wide margins. Obama won the nomination and now faces a dirty Republican machine, which by the latest accounts will turn to see how many mistakes his wife makes during the campaign.

I run into a great article from Bob Herbert at the New York Times today –Savor the Moment – which takes on the matter that this is certainly a historic moment in US politics. The next step will be not to be amazed by an African-American or a woman running for president, the next step will be to see that as a normal thing. America still holds a change in keeping its place in the world as a super power. Things like this make the country a place where tolerance and equality sooner or later take a front stage.

I will like for Obama to be the next President, he won the primary and should get enough support from Hillary´s followers. Remember that candidates represent a movement, so you should cling to the movement not to the candidate. They have flaws and will let you down on some issues, but the big picture needs to be what you are looking for. But my support for Obama goes as the lesser of evil, which means that McCain - or any other Republican - will be the worst thing that could happen to America. Republicans need to find the right approach between pushing for a small government and letting private companies run without any accountability.

McCain will have a tough time detaching himself from Bush, from his policies and from the all “white” GOP. He still praises tax cuts, even when the economy is sinking under them; he still wants free market to run rampant, even when the housing bubble showed us how damaging it could be. We should not stop free market from working, but controlling and setting laws that protect the common good are necessary, so when the “free” market made adjustments, the economy won´t hit rock bottom as hard as it is happening today.

Global Economy: on a different approach to what economist think, let me set two important perspectives clear. The first one is that if the market works perfectly on its own, what is the need for us commenting about the future? The economy will always balance itself – that much we know – but sometimes that balancing will hit millions in severe ways, will rationalize food supplies, will raise the price of oil to records high, will destabilize entire regions, will threaten the well being of nature. Few examples on this:

1- Energy independence: The US did not acted quick enough to keep the price of oil above $4 a gallon to change from big monster SUV to smaller more fuel efficient cars. This has caused the three stooges to be nearly bankrupt closing plants all over the country in recent months. Rick Wagoner might as well be the worst CEO in recent memory. He took a life time opportunity of developing a fuel efficient car and turn it into a too slow too late policy, that is making Toyota take the lead as a “green” car maker. People were shocked the Friedman talked about taxing gas, now that gas is actually at $4 they still think that market should work on its own. LISTEN market will always do the right thing, but that could be costly, if we intervene we can mitigate the impact on our economy.

2- Petro-states: bravo, we fed Saudi Arabia, Venezuela, Iran, Iraq, Russia and many others, with hundreds of billions of dollars. They don’t care what you and I think, they have the money and the resources to makes us crumble. The US can´t even accuse Chavez of “helping” FARC, they can´t allow anyone to attack Iran, and sure Russia can arrest as many detractors as it wants to. Suddenly these states have become the wealthy ones, democracy has been threatened in this regions and the balance in the world has been lost.

3- Food supply is short, bringing down the cost of producing it will be impossible, transporting it is getting tough and with scarce supply on the world market, feeding the hungry on the adequate quantities seem to be impossible.

4- Green technologies: on a pure economic perspective, getting green technologies is not about saving the world, it is about being efficient and using resources as much as possible. If wind and sun light are free, then why not working so they can be use to our benefit. If water supply is scarce, then why not conserving it? On a over populated world with a unsustainable middle class, what we need is green technology that could provide fuel efficient cars, clean energy to our industries and houses, recycling on a world scale, conservation of natural resources and mass transit transportations. Selling millions of gassy cars a year is not any good for our ecosystem, but if you look at the traffic problem in major cities, you can see that is not good for the economy either.

5- Globalization: you can though numbers and prove that globalization has more pros than cons, but the main problem with this force is that we have no control over it. it could go either way, helping poor countries develop faster, helping rich countries expand their businesses, but in the end what is doing is creating the sense that frontiers won´t matter in the future. Why is this a problem? Because our weak international institutions are unable to police bad apples, so companies that hold industries in different countries won´t be accountable for their misbehaviors.

The second one is that the US has run imbalances that are creating chaos on the international markets. If the price of oil at $135 is a shocking number, would it be that high if it was priced on the Euro? Also interest rate this low on the US is weakening even more the already “worthless” dollar. A war that needs to be finance, job losses and unemployment running at 5.5% creates a sense that recession may be worst than previously thought. Unless the next US president assume a correct economic policy and let tax cuts expire, end a costly war, and put the budget on balance again, the US economy may hit a point of no return. The worst scenario will be when a country won´t want to sell you “goods” because your currency is trade so low, that you are not a desirable market. Don’t believe me? Latin America is exporting more and more to Europe rather than to the US, why? Because the euro is stronger bringing more purchasing power to exporting industries.

Economic future: the US will be on hold until the next November elections. McCain must be defeated so republican finally change their lame strategies. A monochromatic party that has caused so much damage to the country should already learn its lesson by losing all that it can lose. A nation that has neglected research, were social programs are unfunded, where health care is too costly, cannot focus on keeping its position as the number one country in the world. I believe that the US will recover after the third quarter of 2009, until then we will see some severe changes in public investing, tax cuts, health care and trade balances. Inflation will hit the American market in couple of months, while the price of food will keep climbing energy cost will take a toll on the travel industry, on the three stooges in Detroit, on purchasing behavior of millions of Americans.

Economists should stop considering all the variables possible that could take an economy down, it is bad enough that we get every fore cast wrong, we tell governments how to act and the economy is getting worst on a daily basis. We can take all the numbers available and correlate the impact of high fuel cost on the purchasing power of people, learning how much it will affect the service industry. So? Read Robert Driskill on a Foreign Policy article “Why Do Economists Make Such Dismal Arguments About Trade?”, to realize why so many people is detracting from our point of view.

Numbers about the future of the economy tell us nothing, more often when Bush talks about tax cuts working, even when we are on a recession, then you hear job losses and people like Michael T. Darda speculate how accurate the Labor Department could be.

The real numbers are on everyday people struggling to pay mortgages, trying to get their kids into college, facing extremely high prices at the gas pump. Sure they are to blame for being careless on their spending, but that is why we have governments, to make sure that we don´t worry about those things. If the GOP thinks that the big bad government is useless, and private companies with no oversight could do better, the Katrina, Iraq, food productions, energy conservation will be in great shape today.