Economics Often Warped by Politics

In 1970, as a student a Harding University, I was impressed with my economics teacher, Dr. Muncie, because he was a genius at macro-economics. He told us: "There are two things an economy needs:

1. Stability, so that corporations and governments can plan, invest, and make long term commitments. If there is no stability, no one will want to do anything
2. Positive perception and expectation. If expectations are positive, then business and consumers can move forward. If expectations are of fear and uncertainty, then no one will do anything"

After the public hearing no less than 8 televised speeches by George W. Bush that "You might lose your bank, your house, your job" perceptions and stability were both lost.

When Secretary of the Treasury, Paulson, told the U.S. Congress that he would spend the "Billions for bailout" on "bad paper" and "bad mortgages" and only 2 weeks later changed, and told the nation that he had changed course, and was going to invest in "Bank and corporate capital" instead, the idea of stability was again wounded, and the perceptions were that the nation faced an instable future.

In 2009, the new administration, must reflect on how to achieve stability and change perceptions to a positive expectation. Remember, it was Franklin Roosevelt who said: "All we need to fear is fear itself". Roosevelt was right. And he was teaching us how to create stability and change expectations. 

For Christmas, I got a propeller from a Sopwith Camel Biplane, 1916 vintage. This old plane was used to fight the "Red Baron" and had a characteristic that reminds me of the traditional Republicans in the USA. The Camel (because of the gyroscopic effect of the rotary engine) pulled to the right constantly. It was very hard to turn the airplane to the left, but it would snap to the right instantly. In fact, sometimes it would turn so far to the right, that it would end up going too far and to the left direction! That is what Republican leaders have done.

Economically, in response to Wall Street's meltdown, the Republicans snapped to the right so fast and far, that they have made the US economy more "Government Controlled" and more "Government Regulated" system than at any time since Roosevelt.

We all should give Obama all of our support, prayers and help. If we all work together, we can create a new economy, that has promise and stability. That is what we need in 2009.

• STABILITY
• POSITIVE EXPECTATIONS