Economic Freefall

Posted: November 23, 2008 by April Watkins in Bailout, Current Events, Current Issues, Economy, Financial Markets, Issues, Our Government, Politics, Wall Street
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In the wake of the Obama victory there was little time to celebrate as we saw the financial markets begin to slide downward.  Historically, the markets have dropped after a Presidential election due to the uncertainty of a change in leadership.  Unfortunately, the 2008 election comes just after the unprecedented mortgage crisis which has caused chaos throughout the world’s financial markets. 

Economy falls

Economy falls

Coupled with the election of a liberal Democrat, U.S. markets shivered at the thought of doing business in an environment of new and tighter regulations and tethered entrepreneurial efforts.  According to Investor’s Business Daily, the two-day successive market dive after Obama’s election has been the worst the U.S. has seen in 21 years.  “Global recession fears intensified [last] Thursday on falling retail sales, soaring job losses and bearish corporate outlooks.  The S&P 500 fell 5% for a two-day loss of 10%, the worst in 21 years. The Dow lost 4.9%, the Nasdaq 4.3% on the eve of what may be an ugly employment report.”  Unemployment claims hit a 25-year high of 3.84 million and continue to slowly rise.  With the announcement of more layoffs and downsizing, our economy is slipping and sliding its way toward the year’s end. 

3 largest automakers

3 largest automakers

Facing growing unemployment and a volatile market, manufacturers fear slowdowns in factory orders to the point of potential closure.  The U.S. automotive industry stands to be hit the hardest.  This past week the heads of the three major automakers (Ford, GM and Chrysler) and the Union of Automotive Workers (UAW) met with Congressional leaders on Capitol Hill pleading for an additional $25 billion in loans, which is on top of the initial $25 billion in bailout funds already allocated.  Their plight appears so critical that they have “offered to accept conditions such as granting stock warrants to the government in return for capital,” reports The Wall Street Journal.  Democratic leaders are considering this proposal, but not without strings.  The Journal continues, reporting that House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (D-NV) “made no explicit promises to the auto-industry delegation about approving additional assistance.  A spokesman for Mrs. Pelosi said after a meeting with the auto makers and UAW that she wants some form of ‘recoupment’ for taxpayers in return for more subsidies, possibly faster rollout by the car makers of more fuel-efficient vehicles.”

Speaking of unions, union leaders should be happy with the return on their investment of campaign contributions and union votes as President-elect Obama has agreed to back “card-check” legislation which would allow the formation of unions without concealed balloting for workers.  Anti-union groups claim that, without the privacy of a concealed ballot, workers who are against unionizing would be subject to intimidation and harassment.  The card-check legislation is another rung on the ladder to socialism – where government and group thought reigns over the wishes of the individual.  It is expected that with the Democratic backing, unions will begin to organize in low-price retail operations, such as WalMart.  While some folks will benefit from higher wages and additional benefits, the costs will be borne by the consumer who will pay higher prices for goods and services.  In a depressed market environment, this would inevitably lead to a drop in sales, spur layoffs or downsizing, and could help push the low-price market into a spiraling decline – exactly what we have witnessed in the auto industry. 

The irony in these expected changes is that the end result is most detrimental to people in the low income bracket – the same people that Obama and the Democrats have vowed to help.  We should all be wary of the easy way out of our economic crisis.  The largess promised by the Democrats is a double-edged sword; while it provides immediate relief for some, it is accomplished at the expense of many.  And that is…Why It Matters.

  1. rjjrdq says:

    Give me control of a nation’s money and I care not who makes her laws.
    Mayer Amschel Rothschild

    Obama will only control your paycheck, and the financiers who really run the world don’t care about that.

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