US Faces Debt and Job Losses

In addition to the recent financial and banking crisis in the US the country faces unprecedented debt and massive job losses. The US economy has been shedding jobs at an alarming rate. Because of losses in the stock markets many have seen their retirement savings dissipate and their children’s college funds shrink to a fraction of their former value. The fact that the US faces a presidential election only adds to the uncertainty felt by millions. Interbank Forex markets have been slow to react to the massive US bailout package and credit markets remain frozen.

Economy Bad News For Incumbents

For the incumbent administration and members of their party bad news is simply bad news. For the challengers bad news is good news and recently there has been no shortage of bad news. Historically during economic downturns US voters have traditionally punished the incumbents blaming them for current economic conditions.

Lack Of Confidence in the Economy

Despite the $700 billion dollar bailout and the $250 billion dollar plan to recapitalize banks many are not confident that the economy will fully recover. Unemployment is still only 6.1%, but everyone expects it to rise. Some economists feel the US is entering a recession and many voters feel it has already entered a recession. Massive home foreclosures, slumping house prices, massive job losses have most voters on edge. Recent actions by the Fed have contributed greatly to the strong performance of the dollar on interbank Forex markets and is still the currency of choice for risk adverse investors.

Economy Good News For Challengers

Few voters truly understand why the economy is in crisis but many blame the Bush administration. John McCain although a competent candidate is saddled with being from the same party as Bush and many voters see his candidacy as a continuation of the policies of the last eight years. Mr. Obama, due to the fact that his party does not occupy the current white house has a hefty advantage among the disgruntled. Barring a sudden economic turnaround, Mr. Obama’s prospects look good.

The candidates differ on economic issues with McCain sticking to relatively conservative positions and Obama promising tax reform and many social programs. Obama’s tax cuts would favor the middle class while McCain’s tax policies would be a continuation of the Bush policies. McCain favors corporate tax cuts in an attempt to stimulate business growth but opponents characterize these as ‘tax cuts for the wealthy.’ The truth probably lies somewhere in between.

Problems Unprecedented

No matter which candidate wins the election, he will face economic problems of historic proportions. On Wednesday, the International Monetary Fund — a cornerstone of the Breton Woods system — warned that the world economy faces “the most dangerous financial shock in mature markets since the 1930s.” Obama must offer voters a coherent plan for the economy if he expects to win in November. The problem is no one really knows what to do about current economic conditions, not Obama, not McCain, not Ben Bernanke or Paul Krugman or Larry Summers or Hank Paulson. The country is facing problems for which there are no clear solutions.

US Dollar and Economy at Stake

A lot can happen between now and November and it will be January when the new administration actually takes office. The future of the US economy and its currency are at stake. At present the US dollar is holding its own in interbankForex markets and the recent rise of the Euro is seen as an indicator that the global bailout is starting to work. The US faces unprecedented economic challenges and whoever wins in November will face challenges not faced by a US president since Franklin D. Roosevelt took office in 1933.

AIG Executives Hold Bailout Party

In an astonishing display of hubris, executives at insurance AIG headed to a $440.000 retreat at one of the nations most luxurious resorts. The retreat was held less than a week after the Federal Government offered an $85 billion dollar bailout to the insurance giant. Executives had no qualms about tapping into the $85 billion dollar loan sending executives to the St. Regis resort south of Los Angeles. Executives received royal treatment including golf and $28,380 worth of spa treatments. Angered congressmen expressed outrage at the frivolous spending of taxpayer dollars meant to shore up the troubled company’s finances. Because of the irresponsible actions of executives like the ones at Lehman Brothers world markets are in turmoil and interbank forex markets have been impacted.

Congress Outraged

Democrat Henry Waxman expressed the feelings of many when he said in an opening statement, “Average Americans are suffering economically. They’re losing their jobs, their homes and their health insurance. Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation.”

Lehman Brothers CEO Defends Compensation Package

In another amazing display of arrogance the CEO of the recently bankrupt Lehman Brothers investment bank defended executive pay of himself and other executives responsible for Lehman Brother’s woes. Former Lehman Bros. CEO Richard Fuld attempted unsuccessfully to defend the $484 million he has received in salary, bonuses and stock options. In an attempt to shed blame Fuld blamed the failure of Lehman Brothers on short selling and market ‘manipulation’ and conceded no errors in judgment.

$20 Million in ‘Special Payments’ to Execs

The congressional hearings finally put a face-Fuld’s- on their outrage at corporate CEO’s who took home millions while betting on risky mortgage backed investments that brought the world’s financial markets to a grinding halt. Internal company documents and emails revealed that despite financial troubles executives “continued to squander millions on executive compensation” in the words of California Representative Henry Waxman. Waxman also cited another company document that showed that four days before filing for bankruptcy, the compensation committee recommended that three departing executives receive more than $20 million dollars in ‘special payments.’

Fuld also nixed a suggestion from Neuberger Berman, the company’s money management subsidiary, that Lehman management should forgo yearly bonuses. The suggestion was designed to “send a strong message to both employees and investors that management is not shirking accountability for recent performance.” In a time when many Americans are losing their homes to foreclosure congress was less than receptive to excuses given by executives who received millions for poor performance.

Forex Market Still Performing

Because of executives like Fuld, world credit markets, stock markets, Interbank Forex, and financial institutions are currently in dire straits. The bailout remains politically unpopular in the US and investigations by congress are bound to reveal sordid financial dealings by executives of failed financial institutions. The only markets that have produced any positive results have been retail and interbank Forex markets where the dollar is trading high against several currencies including the Euro. The Euro is currently at a 14 month low against the dollar. At present it would seem that Forex markets are the only place where investors can hope to come out on top.