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Sunday, October 19, 2008

Joe the Plumber and the new Global Economic system

A First in Human History

Something really big is happening –bigger than Joe the Plumber. People are being laid off in places like Iceland (not just Michigan and Ohio) because of their banks buying bad American mortgage paper. Like a rare planetary alignment, events have come together to create the need for a new Global Economic system for the first time in human history. Things have gotten so bad that it now requires a “Global Solution” to a World Economic Crisis.

It was American housing paper, built on a foundation of sand that had no oversight and encouraged mortgage fraud, “liar’s loans,” adjustable rate mortgages -- and selling this fundamentally flawed paper to buyers around the world that caused economic collapse from New York to L.A., and from Iceland to steamy Brazil. The SEC Chairman and those in charge of federal agencies were asleep at the wheel or negligent in their duties. Perhaps they were picked more for loyalty to the President and his party than for competence in doing their jobs. Perhaps they were picked NOT to do their jobs –i.e., to let the financial giants do whatever they wanted. Either way, the result was the same.

But the situation is more than that. At the same time the wheels were coming off our financial train, we’ve outgrown the national economic system in a globally-integrated economy, where money races to the best safe haven around the world via wire transfer in micro-seconds.

However, we lack a global set of rules to take us to the next level. Just like the American economy outgrew management by 50 different States and needed organization on a national level in the 1930’s (requiring the development of national laws such as the FDIC and SEC to set standard rules for operating between states) – now it is apparent that economics have outgrown a single national economy. One country will no longer financially control the destiny of the entire planet or be its economic engine. We will sink or swim together.

Europeans found out during the financial meltdown that if only one country insured deposits and others didn’t, then money would be pulled from one country to another–capital flight was causing runs on banks around the world -- until they each offered the same level of security and government insurance. Only when Europeans teamed up to offer the same bank protection was stability achieved. Ironically it was Britain that took the lead in providing a bank protection solution that worked – which was followed by a reluctant American administration whose prior $700 billion plan had not.

President Bush inherited a $64 billion surplus. Eight years later, it’s been replaced by a $5 trillion hole of debt. China presently holds a majority of the world’s currency and foreign exchange reserves of over $1.5 trillion. Russia has over $500 billion in reserves. The U.S. has none. In eight short years, the U.S. has lost its 200-year lead as the world’s greatest financial power. We are now the world’s largest debtor nation. Financial institutions are short of credit and a prolonged recession is taking hold. Continued stability will depend on a global system of securing deposits from America to Asia.

All of this points to a global conference being necessary to create some global rules of the road – what has been referred to as a “Bretton Woods 2.0.” President Bush will start the meeting by the end of this year. The next President will have to finish it as nations seek ways to cooperate economically on a global scale to get us out of this mess.

Cooperation with the world’s governments on a global financial system is the only choice left.

Who has the cool reflective judgment it will take to do this is up to the American voter? Since the current situation was generated by a Republican administration that doesn’t believe in government oversight, I don’t see it as the answer to put America back on top.

Even Joe the Plumber would pay more under Sen. McCain’s tax plan than under Sen. Obama’s. I wonder if it is racial bias that, I’m sorry to say, makes certain lower-educated white men (and some women of a certain age) blind to the candidate, whose tax policies actually favor Joe Six Pack and the middle class more than the rich guy’s plan.

I was sent a photo of a white man on a motorcycle with a racial slur on his back (using the N-word and “white” house), so don’t tell me that there aren’t some real morons out there who hate people based solely on their color—which shows their limited mentality. These Joes will end up voting for the guy whose plan benefits the super rich more than the little guys like them because they can’t get past skin color. Now that is stupid! McCain’s plan favors multi-millionaires--it is a continuation of the Bush formula of favoring the top 5%. How has that helped us? Is a person’s color more important than your pocketbook?

My bottom line: I’m going to vote for the guy with only one house. I’m voting for the one who was poor and had to struggle to make it on his own, not because dad was a Senator. That guy is more like most Americans, unlike the guy who isn’t sure how many houses he owns. He can afford to be wrong. Even if he loses half his houses, he can still sleep in the other 5 or 6! And being married to a beer heiress making $10 million/year, he would benefit more from his tax policies favoring the top 2% than Joe the Plumber and the bottom 98% of us.

The guy with only one house is going to be a lot more cool, thoughtful and careful in making decisions on a global scale. That’s what America needs to regain its global standing at this transitional moment.

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