By: Jack Blackshear
When conservative thinking comes into contact with humans seeking an egalitarian society, particularly when those humans are not of the same race, religion or creed as the conservative, physical harm will come to those humans and over time there will be nothing but blood.

The current battle over the Bush tax cuts is a good example. If conservatives serve their clients well, the nation will be forced to assume a huge debt that will adversely affect the nation’s economy for years.

Since economists say that providing this borrowed money to the wealthiest Americans is not an efficient way to create jobs, doing so will prolong the recession and have a cascading effect on people in countless ways.

A deal that allows this to happen is tantamount to conceding the physical well being of millions to the greed of the few.

The framework agreed with Republicans was not made with this in mind. And the debate among Democrats in Congress focuses on equity, not the ultimate consequences for individuals.

The President should change his mind, offer a new deal and appeal directly to the American people. This hypothetical speech is one way to do this:

Obviously, the President will face a more conservative Congress next year, so it is understandable that he wanted to make a deal before that happened. Nevertheless, the new conservatives will face a difficult decision:

Will they hold out for the wealthiest Americans at the expense of the other 97 percent? Will they force a huge increase in the national debt when their whole reason for coming to Congress is to reduce debt and spending? The President may be in a better negotiating position than he thinks.

Compromising with evil is itself evil and if the President persists in doing so, there will be nothing but blood.

Youtube Playlists: Republican ‘Gridlock’ Tactics | Republican Dirty Tricks |

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From the AIG bonuses, to the economic meltdown, to the war in Afghanistan, it has been an eventful two months in office for President Obama. Steve Kroft has the behind-the-scenes interview.

President Barack Obama said he believes the global financial system remains at risk of implosion with the failure of Citigroup or AIG, which could touch off “an even more destructive recession and potentially depression.”

| More From Politico |

Part 1

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Part 2

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Desperate and badly in need of 2010 mid-term wins — The Republican party’s dastardly strategy, their only one, is to shift the blame from Bush’s years of mis-management to Obama, irrespective of the fact that Mr. Obama has inherited a monumental recession deepened by credit problems, both arising from Bush’s de-regulation policies.

Keith Olbermann places the blame where it belongs:

Grand Obstruction Party

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By Sam Vaknin
Author of “Malignant Self Love – Narcissism Revisited.”
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The Obama stimulus package, worth some 800 billion USD, the 1.9 trillion USD in TARP funds and the endless Fed injections and auctions are bound to revive the moribund American economy by the third and fourth quarter of 2009. The Dow-Jones is likely to touch 10900, consumption will recover, as will housing starts and, in some markets, housing prices.

But this “recovery” will prove to be a false dawn. It will last 2 quarters at most and will be followed by a recession so deep and dangerous that it would truly qualify as a Depression. The current recession is merely a prelude to the depression of 2010-5.

Here are the reasons:

(i) The stimulus should have been more sizable, taking into account the dimensions of the crisis.

The fate of modern economies is determined by four types of demand: the demand for consumer goods; the demand for investment goods; the demand for money; and the demand for assets, which represent the expected utility of money (deferred money).

Periods of economic boom are characterized by a heightened demand for goods, both consumer and investment; a rising demand for assets; and low demand for actual money (low savings, low capitalization, high leverage).

Investment booms foster excesses (for instance: excess capacity) that, invariably lead to investment busts. But, economy-wide recessions are not triggered exclusively and merely by investment busts. They are the outcomes of a shift in sentiment: a rising demand for money at the expense of the demand for goods and assets.

In other words, a recession is brought about when people start to rid themselves of assets (and, in the process, deleverage); when they consume and lend less and save more; and when they invest less and hire fewer workers. A newfound predilection for cash and cash-equivalents is a surefire sign of impending and imminent economic collapse.

This etiology indicates the cure: reflation. Printing money and increasing the money supply are bound to have inflationary effects. Inflation ought to reduce the public’s appetite for a depreciating currency and push individuals, firms, and banks to invest in goods and assets and reboot the economy. Government funds can also be used directly to consume and invest, although the impact of such interventions is far from certain.

(ii) The US government should have nationalized the big banks, let other financial institutions that are not too big to fail do so, and force mergers and acquisitions on the rest. Half-hearted measures intended to provide balance-sheet relief are unlikely to restore trust in financial intermediaries. In the absence of such trust, banks will not resume their traditional roles of capital allocation and interbank lending. As it is, we are likely to see a run on some of the banks, including at least one major (probably Wells Fargo).

(iii) Europe’s real economy as well as its financial sector are a mess. France, in sliding officially into a recession, has joined Spain, Ireland, and, now, the United Kingdom and Germany. Battered by a strong euro, expensive energy, and mighty competition from China, the US, and India, European exports have stagnated. As opposed to the USA (where exports constitute 18% of GDP), Europe is dependent on foreign carbon fuels and foreign markets for its goods and services. Exports constitute more than 40% of Eurozone GDP.

Moreover, Europe’s commercial banks are in horrible shape – far worse than America’s. This year alone, European banks must pay 1.41 trillion US dollars in principal and interest, mainly to bondholders. They don’t have the money and they cannot borrow it from other banks because interbank lending has all but dried up. Many of them are already technically insolvent. They are also over-exposed to emerging markets in Eastern Europe, Latin America, Africa, and Asia.

Car repossessions are up 25% in Romania, as the members of a newly-minted class of consumers are unable to meet their obligations. Austrian, Greek, Swedish, and German banks are exposed to default risks throughout Central and Eastern Europe. Consumers and businesses in Serbia, Ukraine, Hungary, and other teetering economies owe Austrian financial institutions $290 billion – almost the entire GDP of this country!

As local currencies depreciate, debts, denominated in foreign exchange, grow more expensive to service. As the real economy contracts, in the first phase of what appears to be a prolonged recession, bad loans mushroom and reserves are exhausted. This requires cash-strapped governments to recapitalize major banks. Faced with current account and budget deficits, some of these sovereigns are scrambling for outside infusions from the likes of the IMF.

Europe’s recession will be profound and protracted. Asia is likely to follow suit: Singapore, Japan, South Korea, and Taiwan are already technically in recession and China’s growth rate is abating. A contraction of GDP in both India and China is no longer inconceivable. It seems that yet again, the USA will be faced with the daunting task of dragging the rest of the world back to growth and profitability.

(iv) To finance enormous bailout packages for the financial sector (and potentially the auto and mining industries) as well as fiscal stimulus plans, governments will have to issue trillions of US dollars in new bonds. Consequently, the prices of bonds are bound to come under pressure from the supply side.

But the demand side is likely to drive the next global financial crisis: the crash of the bond markets.

As the Fed takes US dollar interest rates below 1% (and with similar moves by the ECB, the Bank of England, and other central banks), buyers are likely to lose interest in government bonds and move to other high-quality, safe haven assets. Risk-aversion, mitigated by the evident thawing of the credit markets will cause investors to switch their portfolios from cash and cash-equivalents to more hazardous assets.

Moreover, as countries that hold trillions in government bonds (mainly US treasuries) begin to feel the pinch of the global crisis, they will be forced to liquidate their bondholdings in order to finance their needs.

In other words, bond prices are poised to crash precipitously. In the last 50 years, bond prices have collapsed by more than 35% at least on three occasions. This time around, though, such a turn of events will be nothing short of cataclysmic: more than ever, governments are relying on functional primary and secondary bond markets for their financing needs. There is no other way to raise the massive amounts of capital needed to salvage the global economy.

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   [Courtesy: GaryVarvel]