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Archive for Wednesday, February 11, 2009

Building confidence is the key

February 11, 2009

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All indicators are that the American public is becoming more and more nervous about the present economic situation and the seeming inability of government at both the state and local level to put in place programs designed to make things better. In the space of only a few months we have moved from talking about an economic “downturn” to a recession to an “economic meltdown.” Now a few brave souls are beginning to use the “D word,” a depression.

Unemployment is up, as is the savings rate to an unprecedented high in the United States. We seem to be experiencing a “crisis of confidence” in our leaders and our economy and we are now seeing what the economist John Maynard Keynes referred to as the “paradox of thrift.” As people become more worried about the economy in general and their own economic security in particular they spend less and save more.

As this happens more frequently, the economy goes into a downward spiral: People buy fewer goods, producers and retailers sell fewer products, and corporations, seeing their profits turn into losses, cut back operations and initiate layoffs. These are then highlighted in the news and people, even those who are not economically challenged, become more fearful and save more and spend less. And on it goes ever deeper into mass psychological depression, which leads to economic depression.

The best cure for such a psychology of fear is a government which can reassure people that things will get better, that they need not hide currency under their mattresses, and, most important, that our leaders know what they are doing and have matters under control. That is precisely what government leaders across the United States have not been doing.

Day after day our leadership tells the media that they don’t know what is wrong, don’t have specific solutions to identified problems, and continue to put politics ahead of real analysis and practical solutions. How does one convince the senior members of our government that telling the American people that they don’t know what they are doing does not build confidence? When do the Democrats and Republicans figure out that endlessly fighting with each other simply makes matters worse?

After 9/11, both political parties came together, as they did after Pearl Harbor. In both instances, our leaders realized that our nation faced threats to its very existence. How long will Congress continue to bicker, continue to frighten the American people rather than restore confidence? The threat to our national existence today, I would suggest, is just as great as it was on Dec. 7, 1941 and Sept. 11, 2001.

Tough times require that our leaders start acting like leaders. The American people are growing tired of scattershot programs in which the corruption seems greater than that which we deplore in Iraq. The New York Times this past Sunday reported that the oversight committee on TARP, the great “stimulus” package designed to improve credit flow through bailing out banks, grossly overpaid by tens of billions of dollars for troubled assets. Are the people in charge in Washington complete crooks or simply idiots?

There is no more time for the governmental escapades we have been seeing over the past nine months. Millions of Americans are suffering. More lose their jobs each day. We have a new president and a new Cabinet. The time for partisan politics is past. Our new leaders need to speak frankly and intelligently. They need to speak forcefully. And they need to make sure that what they do works.

We cannot tolerate any more mistakes, any more corruption, any more partisanship. Our leaders need to restore faith in themselves, their honesty, and their competence. Time is running out.

— Mike Hoeflich, a distinguished professor in the Kansas University School of Law, writes a regular column for the Journal-World.

Comments

George Lippencott 5 years, 2 months ago

Thank you Dr. Mike. Confidence is a central factor in the ongoing problem – however we got here. One factor has not really surfaced in the dialogued - how are we going to pay for all of these “confidence’ measures? Somehow, I think that is to be our job. How bad will each of us be impacted? Unknown! I know we are considering significantly increasing the cost of Medicare. I know that social security will be impacted somehow. Private and government retirement programs are on the block. Medical insurance is in jeopardy. Many of us have experienced major losses in our savings. Even if we are still employed the financial security many of us have built over a lifetime is threatened! I think of the small business owners – the people who generate most of the jobs. In addition to facing the same challenges as everyone else, why would they borrow to expand business (create jobs) when the tax code, regulatory environment and lending costs of that expansion are up for grabs. They will wait it out or more appropriately pray for survival.All these issues have one thing in common- they stem from perceived government actions. The precipitous implementation of all these “changes” is the real threat to our confidence. Who is willing to spend on consumer goods in this environment? Comments about the need to “ante-up” or “the party’s over” may play well with the anointed but they really destroy confidence in the rest of us! Mr. President, please drop the other shoes so we can get on with our lives!

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Godot 5 years, 2 months ago

It is going to take much more than optimism and cheerleading to overcome this. Maybe this is why Obama looks so scared."By Bruno Waterfield in BrusselsLast Updated: 1:51PM GMT 11 Feb 2009A secret 17-page paper discussed by finance ministers, including the Chancellor Alistair Darling on Tuesday, also warned that government attempts to buy up or underwrite such assets could plunge the European Union into a deeper crisis. National leaders and EU officials share fears that a second bank bail-out in Europe will raise government borrowing at a time when investors - particularly those who lend money to European governments - have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain to pay it back. “Estimates of total expected asset write-downs suggest that the budgetary costs – actual and contingent - of asset relief could be very large both in absolute terms and relative to GDP in member states,” the EC document, seen by The Daily Telegraph, cautioned. “ "It is essential that government support through asset relief should not be on a scale that raises concern about over-indebtedness or financing problems.” European Commission officials have estimated that “impaired assets” may amount to 44pc of EU bank balance sheets. The Commission estimates that so-called financial instruments in the ‘trading book’ total £12.3 trillion (13.7 trillion euros), equivalent to about 33pc of EU bank balance sheets. :http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4590512/European-banks-may-need-16.3-trillion-bail-out-EC-dcoument-warns.html

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Godot 5 years, 2 months ago

The politicians jumped to action after 9/11 and Pearl Harbor because defense of our nation is one of the few powers the Constitution grants the government. The President, the 535 senators and representatives and their staffs not have the knowledge, the ability, the tools, or, most importantly, the constitutional authority to attempt to control the economy. That is why they are failing, and why the intervention that has been foisted into the market has made things worse, much worse, than matters would be if they had not begun meddling in private commerce. Government officials are not immune to the temptation of greed, corruption and self dealing that accompanies the control of trillions upon trillions of dollars.

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just_another_bozo_on_this_bus 5 years, 2 months ago

"After 9/11, both political parties came together, as they did after Pearl Harbor. In both instances, our leaders realized that our nation faced threats to its very existence."And then proceeded to make absolutely idiotic decisions, and gave BushCo a blank check to carry out its full measure of arrogant incompetency.

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