M-O-O-D in the U-S-A

Jeff  Carter
|
Posted: Jan 18, 2012 12:01 AM

It’s awful tough to make a generalization on the mood of an entire nation, especially one as diverse as the US. However, there are enough clues out there with a common thread that tell me there is one dominant theme that is an election winner. The candidate that grabs that theme and speaks coherently about it will win.

It’s economics. It’s not JOBS JOBS JOBS. But it is a prescription on how we will get out of this no growth high debt mess.

Americans have gotten a tremendous economic education lesson over the last four years. They have witnessed and experienced first hand what different economic paradigms do to daily life. When the facts are stacked up, it’s clear that some things work, and some things ought to be relegated to the economic dumpster behind policy makers buildings. Here are just a few economic lessons we have learned. Add your own in the comments.

We had a financial collapse from too much leverage. The government was the backstop of that leverage via Fannie, Freddie, FHA, and all kinds of other programs.

Lesson: If you keep the government out of finance, banks can’t build up artificial leverage to take extreme risk that will bankrupt a country.

We had regulations on the books that supposedly would stop corporate fraud. Sarbanes-Oxley was passed after Enron, Dodd-Frank passed after the 2008 debacle.

Lesson: Even with regulations on the books Jon Corzine and MF Global managed to steal $1.2 Billion from their own customers. Excessive regulation doesn’t prevent bad things from happening. Better to structure private markets in the correct way to do your regulating for you.

The government passed the most massive government spending package in history with the March 2009 stimulus. This was supposed to jumpstart the economy.

Lesson: The multiplier effect of government spending is 0. We have had almost zero economic growth for Obama’s entire term, with high unemployment. More people are on food stamps, unemployment benefits, and other government assistance than any time in American history. It only proves that if the government is going to give out free money, there will be plenty of hands out and minds working on how to get a piece of it.

The government promoted green energy by spending money on several solar power firms, ethanol firms, ethanol subsidies. Most of those firms were later found to be large donors to the Obama campaign.

Lesson: Governments cannot pick winners and losers. Ethanol subsidies drove up the cost of food that destabilized much of the Middle East and other parts of the world. Green energy is a technology better left to private venture capitalists that can invest with constraints. The free market does a better job of picking energy resources and allocating money to them than a centralized government.

The government bailed out big banks, and let smaller banks fail.

Lesson: When government gets involved in private industry, excesses occur. We are left with zombie banks that have terrible balance sheets and can’t go back to lending in the way that they once did. This causes a lack of economic growth over the long term. Better to let the banks go broke, take short term pain, and then let new healthier banks begin the process of rebuilding again.

We have watched the slow motion economic destruction of Keynesian Europe, and don’t want it to come here.

Lesson: As Rick Santelli says, “Stop Spending.” Ron Paul’s continued poll numbers hinge on his ability to tap into the people worried about the economic future of the country. His prescriptions for getting out of the situation are basically wrong (gold standard, end the Federal Reserve etc), but his tone is correct.

The candidate that talks about how to grow the economy using the private sector and decreasing the size of government will win the election. Last night in South Carolina, they had a Republican presidential debate. Newt Gingrich was most in command of the economic facts and what to do going forward than any other candidate. He is surging in polls today.

What’s also interesting is it took one hour and twenty two minutes last night for the first economic question to get asked. Why is the media not asking questions about the most important issue in people’s minds? Economic policy ought to be the only thing we are talking about since Obama has adopted most of Bush’s foreign policy and it seemingly is working.

The reason Mitt Romney has had a prohibitive lead the entire way is because most people think he has the most experience with real world economics and business and can lead the country out of this prolonged economic turmoil better than anyone else.

Obama will have to run on his economic record. It’s poor. It’s worse than poor. It’s a total fail. His platitudes should fall on deaf ears. Let’s hope Americans have learned their lessons well.

follow me on Twitter