With the US President pardoning a Thanksgiving turkey while the President-elect gets to grip with the financial crisis, serious questions are being asked about who should actually be running the country

There’s a great sucking sound coming from south of the Canadian border. It is the result of the frightening power vacuum that now exists within the United States government. There’s a rule that you can’t have more than one President at a time – despite the fact that all living former presidents are still referred to as “Mr President”. Now however, it seems there is no President. Sure there’s George W. Bush who like a reckless farmhand is lost in a sinkhole, and there’s Barack Hussein Obama who is holding daily press conferences to try to stem the blood loss from the trauma patient that is the US economy.

Bush’s “no bull” administration we now know means no bull market. Only bears, and they are not gummi bears. They are ferocious and taking every opportunity to feast on the beleaguered taxpayer.

It has been just over three weeks since the US election, and the transition process of managed succession has received admiring accolades from various politicians and commentators. There’s roughly three months between election day and inauguration day, giving the President-elect time to assemble a Cabinet and supposedly hit the ground running on January 20.

However, as they say in this part of the world – “enough already”. Let’s flag the delay and inaugurate the new President now. That would be a thanksgiving present to the US... and the world come to think of it. A three month delay as the economy lies bleeding on the steps of Capitol Hill is now a luxury. It is a train wreck that Obama – economic paramedics at his side – is being forced to watch.

Empire America’s lame-duck, nay dead-duck, leader ‘W’ appeared earlier this week with the hapless Treasury secretary Henry Paulson for a quickie interview on the latest bailout of Citigroup. Bush couldn’t even get the bank’s name right. He referred to a financial package for ‘Citicorps’. Paulson wince at the clip but feared little better in his following press conference to announce another $800 billion pay-out. Sack Paulson and bring in Tim Geithner NOW.

When asked in his press conference if he would stand aside for Geithner, Paulson said that he was going to “run right to the end”. He wished there was a magic solution but there wasn't, so he was “working to deal with the situation and will continue to develop programmes and deploy them” and will provide a “seamless transition”. Will it perchance be seamless because there will be nothing much left to transition?

As President of the New York Fed, Geithner is actually involved in the series of bail-out projects, so when he takes over as Treasury Secretary will be up to speed on the workings to date. But that’s not the point. For weeks now the current administration has been chucking mind-boggling sums of money at the problem, and the markets, like truculent toddlers, are refusing to be persuaded. Tantrums rule the day, and Paulson was left having to concede that the money that’s being hurled at Wall St is literally being printed and will have to be painfully extracted from the money supply at some stage in the future. Now here’s a surprise – that “future” will be Obama's problem now won’t it? But that’s a pesky detail that won’t keep ‘W’ awake at night.

After all, this week Americans watched Bush pardoning a turkey – a long-running Thanksgiving tradition – and thereby saving it from the fate of being on the dinner table, while Obama was seen presenting more and more of the personnel he will task with keeping the American economy from the garbage bin. Talk about symbolism.

The latest truckload of dosh is to stimulate credit so consumers can go out and buy cars, run up expenses on credit cards, buy houses and pay student loans.

Have I missed something here, or isn’t this whole mess which has rippled across the world been caused in the first place by people running up debts on their credit cards, buying cars and, in particular, investing in houses they could not afford?

Lending money to people to get them spending is one thing. Lending money to people who can’t afford it is about as scary an economic policy as there is. So far there has been no talk of a new form of detection to ensure all those who take out credit can afford to pay it back.

The first $700 billion was supposed to ease up on lending to consumers. Uncrunch the credit crunch if you like. It didn’t work. Retail therapy is losing its touch with consumer spending shrinking to its lowest in 28 years, and house prices – those niggly things that were supposed to only continue increasing in value – have dropped a massive 16.6 percent.

Writer and columnist Thomas Freidman recently referred to the banks as “zombies” given their ability to avoid actual death, and instead just keep coming back for more blood.

It makes you start feeling sorry for the US auto-industry. Remember the chief executives of the Big Three who jetted in to Washington on their corporate jets, tin cups in hand looking for a piddly little $25 billion bridge loan to stave off collapse? They were sent packing and told to come back with proper plans to show why they deserved the money.

Where pray tell are the plans from Citigroup and the like? At least the car companies build something.

In the meantime the most inspiring President the US has had for generations has started using the word “sacrifice”. It has begun to pepper his pronouncements on the economy as he tries to soothe both Wall St and Main St.

Obama is smart enough to know he must come up with a strategy that does not extinguish the hopes of those who elected him. He’s also smart enough to know what a mess he has to contend with. There is now another reason why the Republican mascot is an elephant. Obama's going to need one hell of a large shovel.

Comments (5)

by David Beatson on November 27, 2008
David Beatson

Jane -

Can you tell me something that no-one seems to explain - where is all the US government bail-out money coming from. The New York Times says that in the last year, the US government has assumed about $7.8 trillion in direct and indirect financial obligations. That is equal to about half the size of the nation’s entire economy. 

So, who is really paying the bills that W and Paulson and Co. are running up in their final days? 

 

by Jane Young on November 27, 2008
Jane Young

Hi David, you are right on the button with that question which was asked of many analysts in the post Paulson press conference analysis, essentially questioning how the Fed will pay for the commitments without resorting to printing money. The New York Times reported this morning that "Fed officials have made it clear they are prepared to print as much money as needed to jumpstart lending, consumer spending, home buying and investment".  It has been referred to as a radical new phase in the effort to uncrunch the economy. It seems rather like a Zimbabwe solution to me, although the US seems to at least be talking about a temporary situation, meaning there will be a painful pulling of that money once credit begins to flow again. There is also much concern about how much the US is borrowing from China which is a source of massive paranoia.

by Raymond A Francis on November 27, 2008
Raymond A Francis

So, with the printing of all this money (or creating credit) there must a real chance that there will/could be a massive inflation bubble just around the corner, post world war I Germany, Zimbabwe or Brazil

Meanwhile interest rates are being driven down to almost zero

It doesn't look good

by Tim Watkin on November 27, 2008
Tim Watkin

What does it mean when the Fed says it will start printing money? Slate has a good answer. Click here.

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