At this point it’s pretty clear that even the best private economy can’t yet deliver a home and a flat screen television to everyone.  Heaven knows America has tried to the past couple decades.  And the effort has resulted in a very serious economic downturn.

The fact is that leveraged spending for non-productive uses ran far ahead of productive investment.  Inevitably, there came a point where underlying productive activity couldn’t support the spending overhead:  Cash flow couldn’t pay the debt off.

The stop-gap temporary medicines have been applied worldwide like never before.  Liquidity has been pumped into the financial system.  Interest rates have been ratcheted down dramatically.  But indebted consumers, indebted investors and financial intermediaries such as banks humbled by massive shareholder losses, means no one wants much to either borrow or lend.  Governments find themselves, at some point, to be just pushing on the proverbial “string.”

Nevertheless, the patient’s temperature is stabilized.

Now is the time to apply a cure.  It’s time for fiscal stimulus.  It’s not as though there aren’t productive areas of investment that haven’t been identified.   The alternative, renewable energy transformation that’s absolutely necessary is well defined.  Governments worldwide need to unleash their power in directing taxpayer, and private investment, into these areas. 

Taxpayer seed money, accompanied by common sense enabling legislation inviting private investment, will have long term beneficial effects on the global economy.  The list of endeavors for investment that would benefit everyone, is lengthy and well understood.  The challenge is how quickly can governments devise and implement such fiscal, stimulative, strategies.

Former Labor Secretary Robert Reich has recommended that at least 50% of the taxpayer money injected into the bank system be earmarked for loans.  Reich is basically arguing for fiscal stimulus because banks are unwilling to lend into consumer related areas.  The problem is that after years of consumerism, America doesn’t really have as many productive industries to lend into.  It’s difficult for a bank to identify enough borrowers worth lending to.. 

This is a problem that government can attack with tax policy and subsidies.  The quicker government gets to this job, the quicker the private economy can respond.  Beezer believes a motivated, Democratic government, can respond much faster than anticipated.

As for America’s Presidential race, the differences between Obama and McCain are not as great as the campaigns would like everyone to believe.  Obama has a middle class tax cut, and McCain basically wants to keep the Bush tax cuts that Obama would roll back.

Who cares.  The true issue is jobs and productivity in America.  And neither candidate really differs fundamentally here.  Working class and middle class Americans are worried that their jobs will soon disappear.  And all classes are dissatisfied with America’s loss of manufacturing jobs.  That’s it in two nutshells.  And the cure, as far as govenment is a player, involves fiscal policy.

The real difficulty in achieving these goals successfully in America is posed by Congress.  There’s a reason why Congress is unpopular.  It has become dominated by intransigent idealogues.  Whoever is President will have to speak directly over Congress to the public because Congress has become dysfunctional. 

The lack of leadership in Congress means leadership will continue to reside at the White House.  Senate Majority Leader Reid, and House Speaker Pelosi are both weak leaders, unable to rally a majority of their respective bodies to consensus action.  Even with strong Democrat majorities, both hold beliefs that are wildly unpopular with the majority of voters.  Their hypocritical stand on discovering America’s true wealth of fossil fuels ranks number one in unpopularity.  If the economic crisis hadn’t materialized, this issue alone would have sunk Democrats in this election, and Beezer believes it is the primary reason Obama can’t seem to shake McCain no matter how bad the crisis gets.

Fiscal stimulus is needed now.

There’s a golf joke where it is observed that bad shots seem to come in threes.  If you hit a fourth consecutive bad shot, the rule still holds because the fourth bad shot is simply the first one of the next three bad shots.

In the financial markets, we’ve already experienced three bad shots.  We underestimated portfolio risk and foolishly encouraged financial gambling, we created yet another property asset bubble, and we piled on debt just about everywhere. 

Unfortunately, we’ve already hit our fourth bad shot, we just don’t acknowledge it yet.  It’s energy, or the coming lack thereof.  If you want a clear headed explanation of this next crisis, click through a recent presentation to America’s future energy engineers given by energy guru Matt Simmons.

I’m not going to go through Simmons’ lucid presentation.  But the warning is that we have about five years to get some real serious work done on altering our energy use and energy infrastructure because, ladies and gentlemen, oil is about to be withdrawn from us at an increasingly rapid pace.  Just like the faulty math used to assess risk in portfolios, we have been doing much the same in assessing our energy risk.  We are grossly underestimating, and therefore not pricing correctly, the true cost of energy.

Finding out what exactly lies under our own land is necessary, but even if we discover a Saudi-sized oil ocean, we absolutely must begin a massive energy overhaul now.  Next Friday would be nice.

We don’t need roads.  We need rails.  We need a full scale assault on building wind energy, and quite likely nuclear energy too.  Coal use is likely to increase simply because it’s there and we know it.  And until we’ve restructured our energy system, SOMETHING has to produce enough electricity to get us through.

We need to conserve like crazy, to understand the term ”negawatts” and appreciate it’s power to improve our lives.  Ninety percent of the world’s population uses a negligible amount of oil.  We use 24% of it, much of it wasted.  It’s a crime that new construction isn’t forced to use basic renewable energy sources and modern conservation techniques.  Use of these huge savings in energy should be mandatory.  You should have to use solar.  You should have to use geothermal.  You should have to use energy efficient lighting and appliances.  Don’t have the money?  How about $700 billion!!

If we don’t do these things right now, our energy withdrawal pains will make the credit crisis look like chump change.  How about this scenario.  Panic in the energy markets can stop the movement of food.  Try doing without that commodity for an extended length of time.

I would bet just about everything I own that somewhere in the bowels of the Department of Defense, a group of people have already mapped out what the military will have to do in order to keep people fed during such a crisis. 

The best way to avoid falling off a cliff, is to avoid walking near the edge of the cliff.  In our relentless drive to achieve efficiencies we have left ourselves with a very little margin of safety.  The margin of safety has been diminished, the margin of risk has been increased.

We are living in what Nassim Taleb calls “Extremistan.”  It’s a place where failures to correctly assess risk result in huge negative consequences.  And it’s a place where successes are equally magnified to the upside.  It’s also a place that encourages wide income disparities.

It’s time we started doing the things that give us the opportunity to succeed.  Restructuring our energy system is such an effort.  This effort will not only create millions of productive jobs, but it will at the same time reduce the huge income disparity we’ve had this century, a disparity that historians might rightly point to as the base cause of our current financial crisis.

If Republican Presidential candidate John McCain wants to know why he is suddenly 10% behind Democrat Barak Obama, it’s here.  Obama talks about income disparity.  He talks about tax cuts in a way that people understand.  He talks about energy, but in a muted way because he rightly fears a backlash if the average voter knew the Democrats have no intention whatsoever of finding out what lies beneath our land in the way of fossil fuels.

And neither candidate is going to talk frankly about the inevitable strengthening of government power.  The free market will never correctly price risk.  When it comes to risk, free markets have a terminal case of Attention Deficit Disorder (ADD).  And governments will never be able to create the best solutions for solving long term risks.  Both must act together.  Governments can create boundaries, can demand cushions (don’t walk beside the cliff), can create broad goals and policies aimed at encouraging free market problem solving.  But governments cannot create solutions.  Free markets are much better at that.

Planned economies can have free markets.  And free markets can have planned economies.  They are not mutually exclusive.  

Like it or not.  This is the way we are all headed.  Guaranteed.

Two months ago, it appeared that the Democrat party’s refusal to “drill now” would finish off the Obama campaign because of the huge runup in oil prices and gasoline prices at the pump.

My how things have changed.  The Democrats still have a hypocritical and unsustainable energy view, but who cares?  Oil has almost halved in price.  And to make things better (for Democrats and Obama, not the economy) the banking crisis and the worsening global economy have pushed the energy problem off the table.  

Barring some dramatic event that would change this setup, Obama appears to be headed to victory.  And the same setup may well increase the Democrat party’s control of Congress, as well.   As voters open their mail and check out the plunging value of their retirement savings, it is likely they will primarily blame Republicans, not Democrats.  The truth is that both parties are equally responsible for the current state of affairs, but the reality is that Republicans will get most of the blame.

So what can Obama, President of the United States, actually do that’s not already being tried, and tried again, by world leaders from Peking to London to Manhatten/Washington D.C.?  Change the Treasury Secretary.  But what can this as yet unamed person do?  The fact is, the worldwide slowdown is in control of events.  Asset prices have already declined dramatically and nobody really has a handle on where they will bottom out.  If the huge mass of investors want to sell, no one is going to stop them.  They will simply stop selling when they are exhausted from the effort of losing money daily.

And can any US President force banks to lend?  Short of total nationalization, the answer is “no.” In the current economic slowdown, it is rational for any lending institution to curb its appetite for lending and to preserve cash.  Any successful efforts by coordinated governments will come from central bankers and government regulators, and they are working overtime right now trying every tool at their disposal to jump start lending.  Obama being in the West Wing isn’t going to change these efforts, no matter who he names to Treasury.

Plus, whoever wins the White House will be forgiven what has already happened.  It isn’t necessary to make dramatic change immediately.  There are some moves that can be made quickly, of course.  But they are not the kind of moves that will have immediate impact, particularly if Congress has to be asked for a vote.

Eliminating gambling and market manipulation can be done relatively fast, however.  Changing the SEC membership wouldn’t take long at all.  But the resulting perception of increasing fairness and transparency would have a positive impact quickly.  As for the recently wealthy gamblers, their numbers have decreased markedly of late, as is the normal fate of gamblers in the intermediate to long term.  The markets are taking these folks out and shooting them now, one by one.  It’s only later, after investigation, that the public will learn how they’ve been so thoroughly fleeced.

Fact is, while voters decide who they want in the White House, central bankers, regulators, sovereign funds and everyone else involved professionally in the markets, will have to decide who is solvent and deserving of survival, and who isn’t.  The quicker they accomplish this necessary liquidation, the better for Obama.

The next issue that will arise is the lagging one of unemployment, which has started its inevitable rise as economies slow down.  And that’s likely to be the first main issue Obama will face and be held accountable for.  A tax cut might be available even though Congress has to go along.  Tax cuts aimed at the “middle class” are tough to oppose because that’s where the voters are.

But facing legions of unemployed is a problem recent Presidents haven’t had to face.  And then there’s the issue of the dollar.  As the national indebtedness necessarily climbs, many believe the dollar may plunge in value.  This issue may be the most difficult one the next President will face.  Neither of these issues has had any meaningful discussion during the campaign.

Once those two issues hit, no one is going to remember what the campaign was about.

Obama will face a particular problem that McCain wouldn’t have.  Obama’s constituency includes an important sector that will need to be trimmed due to budgetary realities:  Government employees of all kinds.  This constituency is buffered against the economic uncertainties, and pain, that private sector employees will be experiencing.  It poses political difficulties for Obama if private sector employees feel that they are shouldering all the pain alone.

Another tough one for Obama is the critical need to reign in two organizations, Fannie and Freddie.  These government supported organizations were at the heart of the housing bubble and they are closely knit to Obama constituencies.  In fact, they are closely knit to Obama directly.  How Obama is going to impose stricter lending standards, or even just return to any standards at all, is problematic at best.  The normal way in politics is to have someone else do the dirty work in Congress.  That way, Obama can simply let the reform pass without his signature.  This doesn’t really fool anyone, but it provides some political cover and that is better than no political cover at all.

As for the here and now, the global financial system is being re-arranged, and where need be, dismantled.  Deliberate speed is important here, particularly the dismantleing part.  A lot of the huge numbers, the trillion dollar ones, involve complicated securities and the actual total is not likely to be anywhere as large as the figures bruited about constantly by the media.  The same securities, or at least parts of them, appear in several places.  Double or triple counting is likely in these nominal totals.

It’s the same with property, as always.  When things are good the values are too high and reported profits are overstated.  When things are bad, the values are too low and reported losses, or potential losses, are overstated.  In contrast to the deliberate speed needed in determining just who is a viable financial institution, deliberate slowness is probably better for property.  Separate it, and then sit on it.  Do the workouts wherever possible with an eye to keeping existing mortgages viable at some reduced level.  For those where this is impossible, foreclose and sell.

America has a knack, normally, in providing excellent candidates for President.  In Obama and McCain, the quality is arguably very high.  Whoever is elected will need all those qualities in full.

And some good luck.

The only thing mentioned in last night’s Presidential debate that caught Beezer’s attention was McCain’s recommendation (suggestion?) that mortgages should be reduced to the now-lower real value, or some approximation of that value, in order to get relief directly to homeowners in the form of reduced monthly payments.

If applied to all homeowners with mortgage payments, this is an aggressive, and no doubt expensive proposal.  But it was new.  One suggestion, however: Relief should only come to those homes that are primary residences for the mortgage holder.  Flippers are not invited, nor are vacation homes.

Otherwise, the talking points pretty much adhered to what’s gone before.  Neither candidate seemed to feel all that comfortable.  Obama was steady, but the format does diminish his ability to make a stemwinder speech.  Not really a bad thing.  Most voters are probably getting a little tired of the “Have I been transported to a southern Baptist revival somewhere?” reaction to Obama.

Not many specifics.  But politicians realize that offering a lot of detail is not smart.  To do so just leaves you open to a whole lot of criticism, most of which totally distorts what you’re trying to explain.  So you just don’t do it.

Some specifics can be used, so a little advice to both candidates.  Specifics are real good if they support a broad policy statement.  For example.  Obama understands the need to focus on negawatts–the energy we don’t use is the cheapest energy of all.  So when he makes such a broad statement, he should use a specific.  An example: Using energy efficient lighting is like not having to build 5 nuclear plants, or 10 coal fired plants.  Or, having good, properly inflated tires saves you $4 per tank fill up.  That sort of specific is useful in any debate.  Neither candidate does this, but both should.

But on to the more important matters, such as the credit crunch.  There’s plenty of liquidity, it’s just that the current credit dispensing apparatus is dysfunctional and not lending.  Fear is now in control, after years of greed on the part of everyone-not just bankers.

So who would use money right now without hesitation?  Taxpayers.  They would use it to pay down debt, thus increasing their available cash flow going forward, and they would spend the rest.   Or save it all and put it in the bank.  In all of the cases above, liquidity would get injected into the economy much more efficiently and thoroughly than what’s happening now.

All the efforts made to date have been, at first blush, unsuccessful.  They may eventually have the desired effect of loosening credit markets.  But there’s a nagging suspicion regulators are fighting with the wrong tools.  Liquidity is there in abundance.  It’s just locked up.  Maybe giving the prisoner the keys is the way out.  That would be giving the keys to all those millions of folks going to work everyday and functioning as they normally do.  Let them save and pay down debt, for a change.

It’s been argued that government spending has to be deeply reduced, at all levels.  This might be true, and may actually be forced on the next President by necessity.  But if unemployment soars, the government will have to step in aggressively with a jobs program.  Beezer doesn’t believe government spending is going to go down the next few years.  The likelihood is that it will go up as unemployment rises.

Another thing that will go up is taxes.  They have to go up.  But higher taxes are a big problem in a recessionary economy.  So they will go up on those very few who have the largest incomes.  Obama has that program and he’s stuck to it despite the McCain attacks.

Both candidates have the conclusion right on energy independence.  The point that we send most of our discretionary wealth oversees because of our addiction to fossil fuels has been pushed back because of our credit crisis.  To both candidates’ credit, they kept this issue upfront where it belongs.

As for McCain’s mortgage debt reduction by fiat.  The press, at least last night immediately after the speech, didn’t even take note of what he proposed.  No surprise there.

The $700 billion bailout, or $1.5 trillion, or whatever amount it turns out to be, may eventually have some success, but the persistent contrary idea is what impact would such largesse have if just given to the “base” of the financial pyramid:  Taxpayers?

So far the “top down” bailout has had very little of its intended effect.  Bankers are still stuck in their offices, apparently refusing to lend to anyone (even their bretheren, especially their bretheren), while waiting for someone (Treasury, FED, FDIC, or all three) to take their keys away and escort them out of the building.

(Aside.  One of the funnier observations Beezer came across was where the current bailout effort was termed a “Whack a Mole’” approach.  Cute.)

What would 225 million (or so) taxpayers do if provided this money directly?  Probably what they did when a similar, though much smaller, experiment was done with the tax refunds last Spring.  Much of the money went to reduce credit card debt, and quite a bit was spent as well.

Plus we’re in the final throes of a Presidential campaign.  If one of the candidates offered such a proposal, even if it never got by Congress later, it would be guaranteed to have a huge political plus for the candidate in the campaign.  A lot of those 225 million taxpayers are totally ripped at the current bailout plan, which they see (with some justification) as simply taking their tax money and giving it to the scoundrels who caused the whole mess to begin with.  According to the sometimes unreliable info found on the internet, such a taxpayer giveaway would be huge individually.  If true it would get Beezer’s vote, for sure.

To the point of who created this mess by the way, read the following essay authored by one Stanley Liebowitz entitled “Anatomy of a Train Wreck” sponsored by the Independent Institute.  It’s about as clear and well written an analysis as Beezer has read.  And it has some surprising observations, particularly the important role that speculation (house flipping–you know the TV show stuff) might have played.

But back to the idea of watering the foundation instead of raining on the top of the financial pyramid.  Beezer has already argued that using debt for productive uses is the real way America will restore it’s economy.  But in order to begin doing that, overall debt has to be reduced.  Giving the bailout money directly to those who, in the end, will have to pay the bill passes the “smell” test.  Taxpayers are now acutely aware that credit card debt, and home mortgage debt, need to be reduced.  Their efforts to get this done is the primary reason the economy is in recession.  They’ve pulled back spending and credit card use, and they are finally beginning to understand what their “means” truly are.  And that’s where they’re now living.  Or trying to.

And what happens to banks if their depositors, fueled by this huge bailout, start to pay down debt and begin to put money aside in the bank?  Sounds to Beezer like the result for banks would be very positive.  Restore that old, neglected, liquidity idea.  Banks, chastened by the current embarrassment, might even begin to lend like they used to-with some standards. 

Nothing like a big chunk of cash to improve one’s mood, Beezer always says.  So Obama, or McCain, make this proposal to spend the $700 billion on taxpayers.  And become President, to boot.  How sweet is that?

So what if you’re Republican and you vote for McCain as President, and then write in Obama for Vice President?  And if you’re Democrat you write in McCain for President and write in Obama for Vice President.

The basic idea is that McCain, at 72 years of age, is President for one term, and Obama becomes President for the subsequent two terms.  No offense to Gabby Joe and Mother Palin, but the two strongest leaders available are at the top of each party’s ticket.  Beezer wants them both.  Now.

Of course, you could reverse the above scenario and have Obama be President and McCain Vice President.

Beezer prefers age and experience over brains and raw talent for the next four years, so McCain becomes President.

Also, McCain really is a Maverick.  A master of surprise.  It is not at all out of the realm of possibility, that with Obama as his VP, McCain would embrace much of what Obama proposes for the upcoming energy transformation, as well as much of what Obama proposes on taxes.

Right now, Obama is too doctrinaire.  He is an unvarnished liberal and has not been able to distance himself much from his party.   McCain is anything but doctrinaire.  He can change course on a dime, and make no apologies for doing so.  The truth is, he has been, and continues to be, an independent.

Neither candidate, by the way, has much experience in the private economy.   It is the one, major weakness both share.  McCain grew up in the ultimate company town.  The military.  He is a third generation Naval officer.  But he is also a fighter pilot and fighter pilots are trained to the nth degree in combat tactics including the most important tactic of all: Surprise. 

Obama did not grow up on poor street either.  He has risen to his current status based upon his raw talent and a little luck along the way.  It’s been pretty much a one way street for Obama, with very few bumps.  He has shown, not in very significant ways yet, an ability to change course when necessary politically.  His quick political response to the “Drill Now” public viewpoint is revealing.  But that is a political response in a campaign, not a real move.

McCain has been giving his own party ulcers for decades.  He can teach Obama a few things about the art of surprise and independence.  And Obama is a very quick study.  Four years in training, and he’d be ready.

Plus the next four years are going to be harsh on the President.  McCain’s been through much worse as Prisoner of War, so he isn’t likely to be fazed by mere economic meltdowns, nor is he likely to be intimidated by the decisions the next President is going to be forced to make. 

Oh well.  Idle thoughts on a Sunday morning.  But it would be a great ticket.