Do you think Congress is responsible for this countries economic problems, or President Obama?
Can we say neither?
Sure, Congress & the administration have had a rough year trying to get along, but most of that hasn’t really affected our economic policy to a degree that it would really send us over the edge.
If you’re looking for someone to blame, we would start with the ten years prior at the Fed, then look at the banks and how they so poorly dealt with a rapidly collapsing housing market, and then Europe, which today is largely responsible for many of the fears and woes that things are going straight back to 2008. If you haven’t, we’d also recommend you listen to this This American Life podcast which really does a great job of explaining “The Giant Pool of Money.” It won a Peabody!
If you’re an international traveler, then visiting Europe just got a bit cheaper. If you’re not, then you can probably ignore currency rates altogether.
MF Global is proof that the choice is between foolish, deadly risk and a steady, unspectacular, and less lucrative future.
You won’t be hearing a lot this week about financial reform, even though Senate Banking Committee Chairman Chris Dodd announced his long-awaited bill on Monday, minus all Republican support. Instead, you will continue to hear mostly about health care, which by popular acclamation and the White House’s tacit assent has become the litmus test of success or failure for the Obama administration.
This is more than a little strange, since it wasn’t the lack of proper health care that almost destroyed the global economy a little over a year ago. It isn’t insufficient health care that’s threatening to disrupt the biggest single market in the Western world right now (the Eurozone). No, the culprit was, and is, an out-of-control financial system that is resisting all efforts at fundamental change. Yet the White House has permitted this truly global challenge to be championed by a handful of obscure legislators on Capitol Hill and poorly resourced if gutsy regulators such as Gary Gensler, chairman of the Commodity Futures Trading Commission. Together, against Wall Street’s army of lobbyists, these outnumbered champions are mounting an offensive that presently looks about as promising as the Charge of the Light Brigade. And yet the big guns of the Obama administration—starting with the president himself—have been only sporadically engaged.
In the long run, CDS only make sense as an asset class if they pay out in the event of default. This is why it’s so curious that there is a market—albeit a small one—for credit default swaps on U.S. government debt. After all, if the U.S. government were to default, who would be able to pay the claims?