“If you are rich and unhappy, it’s your own damn fault…”

An American consensus for the common good is in trouble right now. Politics is organized around conflict, and drawing sharp distinctions. Robert Kraft (Patriots owner) made this observation about Congressional political gridlock. “They have the blue team, and the red team, yet we are missing the red, white and blue team. The USA”. That’s us. I believed I fired this Congress months ago. If I am in a room to negotiate, the deal won’t get done if someone leaves the room. Big talk from the likes of me. I began my life rather lackluster as a door to door aluminum siding salesman with a trunkful of samples in Bridgeport, Connecticut. Perhaps best left unsaid.

In 2009, any responsible President’s priority would have been, should have been, stabilization of the financial system. Obama was looking at a financial collapse, and a mortgage collapse. He was elected as a pragmatic, unifying reformist who appeared to be, and would become, more responsible than Bush. He did not ignore Bin Laden, but set a course to find him. He did. Bin Laden was captured and killed, yet according to “The Donald” anybody could have, and would have, done the same thing. A depression was averted, the bailout of the auto industry was amazingly successful, and the Iraq war was ended with no troops left behind. He has done some stuff.

Now, with the clarity and ‘prescience of hindsight’ (this is where even I can look good), his critics are highlighting chinks in his armor. Unemployment remains stubbornly high, and no President has been re-elected with > 8%. The national debt continues to rise unabated. Obama rejected a Canadian company’s plan to build a $7 Billion oil pipeline across the United States. Estimates of 20,000 new jobs were at stake, yet Obama wants more reviews on its environmental impact. His critics salivate at this sound bite.  A Hobson’s choice for a man conflicted.

For 30 years, the Fed lowered interest rates with the hope that credit markets and risk assets would expand proportionally. It worked. Then, someone siphoned one drop too many into the beaker, and the mixture turned cloudy. Stoichiometry’s law of definite proportions didn’t approve of the quantitative relationship of the reactants. When you get down to zero interest rates, the world changes from Newton to Einstein, with regard to the physics of money. How many of you aced ‘physics’ in college? I thought so. When money yields nothing, banks won’t lend it. The combination of low return and high duration risk freezes the system.

The economy is improving (so I read). However, opponents bark that we are not going where we want to be quickly enough. We have come to believe in the emerging market story. China, India, Brazil, Turkey… sprouting a middle class, and filling the growing divide between the very poor and the very rich. Interesting. You are not considered very rich here in the U.S. until you have at least $10 Million of liquid assets (no real estate, please). The middle class here is vast. So populated, we have a lower, middle and upper-middle class. The middle class is the most productive, and they buy lotsa stuff. They want to make it to the top, and many do.  Many have become “almost rich”. The emerging nations are where we were 50 years ago. Many remember our parents humble beginnings (here is where I am amused by what some of my generation deem as humble). The richest person in town may even have been a millionaire. Many of the children of this generation became millionaires, their parents in awe with pride. This burgeoning growth throughout the world will help us grow our way back.

Euroland, like all families, is dysfunctional. The parental, frugal north, and the spoiled children of the south. There is a marked difference in their competitiveness. The longer you support less competitive countries by lending money to them, the longer the crisis will drag on, and losses will increase. Wages and prices in the south need to deflate. If you can devalue your currency, then you recover, and can see the sun rise again. On the Euro, these nations are uncompetitive. Tough, tough choices need to be made. If they keep subsidizing the noncompetitive countries, they crowd out the good banks and the good guys in the private sector. They will finish the day with more government and less efficiency. From a structural point of view, Europe won’t be able to compete.

Christine Lagarde, managing director of the International Monetary Fund (IMF), and former French Finance Minister, is noted for her ability to listen, assess, pull together a team, and get the best out of a tough situation. An IMF staff member remarked that you don’t leave the room until a decision has been reached. That is music to my ears. Leaders are created by the crisis of the times. Her management style is inclusive. A consensus is formed, which prevents a waste of future time convincing people to implement the plan. She opened her eyes to the magnitude of the problem, and warned that banks did not have enough capital reserves to withstand the crisis. Her style has built confidence in her leadership, and has recently mollified market jitters, for now.

Ron Paul, Newt Gingrich, and Rick Santorum are all serving as effective foils for Mitt Romney. Each takes positions troubling to independents, who ultimately decide elections now. Gingrich’s rhetoric may win an occasional primary, but come on; he appears to me to be a name- calling, bickering, grid-lock poster boy. The hard right’s controlling interest in the Republican Party, and its desperate refusal to embrace someone close to the middle is, for me, a troubling augur of a future of more congressional gridlock.  The ideologue’s mantra: ”I’ve made up my mind – don’t confuse me with facts”.

The debate of January 23. Romney goes after Newt for his lucrative consulting fee for Freddie Mac, influence peddling, and his controversial tenure as Speaker of the House. Gingrich was reluctant to spar. Yet, isn’t that the purpose of a debate? You are exposed to your past record of who you are. Let’s see you, hear you, think on your feet. I’m sorry Newt, this job you want, demands a lot. Newt fed at the public trough all his life. He has no “real world” experience. The Republican Party melts down, and guess who’s back? It’s the return of Newton Leroy Gingrich.  He has channeled the anger of the Tea Party movement. After being set adrift by mutinous House Republicans in 1998 with a reprimand from the House Ethics Committee, he has a huge bug up his posterior. His talks are animated with sound bites of “food stamp recipients”, “elitists in Washington”, and liberals like George Soros, to incite a channeling of frustrations. For me, he is a model of insincere rhetoric.  According to Newt, Obama is doing the polar opposite of what he should be doing. Clever, only by suggesting that everything would be perfect by now if he were in charge. Newt describes himself as a visionary. When pandering shamelessly to the ‘Space Coast’ crowd during the Florida primary, he unveiled plans to create a mammoth new space program including a colony on the moon within the next nine years.  Huh?! Gingrich’s rallying cry is an end to big government programs. The estimated cost of establishing such an endeavor ranges between several hundred billion to one trillion.  Who pays for this? What precisely do we need, want, or do with a colony on the moon? Is he imagining populating the moon, or actually solving real problems here on earth. On second thought, I can open an office there. For the adventure seekers, on a quest for a sense of proportion, I have a nice crater-front with a panoramic, distant view of the world. The quintessential, quintessential getaway. After all, we are Properties Unlimited.

Housing continues to need a jump-start. It has been mentioned in the past, and it’s mentioned commonly now. For those who are current in their mortgages, make it easier for them to finance to current lower rates. Give them a break. They are honoring their commitment; please keep them in their homes. Stop the bank owned / foreclosure sales. Housing and autos will lead us out of a recession. Make the bottom firmer, and cut any pent-up inventory gathering on the horizon.

It is the beginning of wisdom when you recognize that the best you can do is to choose which rules you want to live by, and it is persistent and aggravated imbecility to pretend you can live without any. We desperately need broad-based, wholesale, tax, entitlement, and regulatory reform. There is so much work to be done, yet we are trapped in this petty political arena of divisive finger pointing, and name calling ‘no man’s land’. As I recall, we have been through a lot in the past couple of years. We have learned a thing or two. If members of our esteemed Congress are smart (and only smart people should be elected to office), then try to do the right thing. Something. We need to make changes to the way we have become. We need to make reasoned choices. Again, I say, we need to grow a new philosophy. Here is where you might start. Act as if you were paid to achieve, as most people are in the real world. Have an actual conversation, make adjustments, and move on.  A mind is a terrible thing to waste.  Freidrich Nietzsche, perhaps the father of Existentialism, made this observation that seems apposite of this moment. It should be inscribed over the entry to the House and Senate Chambers. I paraphrase, ‘There is something in every man that is inaccessible to revision. That something can be taught nothing.’

Perhaps even better… a person who has skills can be taught. A person who has no honor has nothing.

Til then,
Ray Mott