An interesting, if not very well written, article appeared in the British newspaper The Guardian on Monday (27th Oct’08). Reporter Gary Younge discusses the prospect of many Americans being denied the opportunity to vote due to a compromised voter registration system and a complex ballot process. Mr Younge compares the indignities that might face American voters, especially black and other ethic groups, with the solemnity of the first democratic elections in South Africa back in 1994.
http://www.guardian.co.uk/commentisfree/2008/oct/27/african-american-voters-barack-obama
This analogy got me thinking. Whilst Mr Younge berates the American voting system (and let’s face it, it does have problems), the similarities with 1994 South Africa can also be positive. Thanks to the work of the Obama team and others more Americans than ever before and especially more young Americans and those belonging to ethic or minority groups will have the opportunity to vote next Tuesday. Even if a proportion of these new voters (hopefully only a very small proportion) have their vote challenged this is still a reason to celebrate. After all democracy depends upon the participation of the people and the more people who take part in the democratic process the more democratic a society will become.
So my advice to you is to read Mr Younge’s article. Think about the dignified way in which millions of black South African’s cast their first vote and do the same. Put on your best clothes, join the line early, queue quietly and respectfully, make sure your vote counts. Whatever shenanigans occur at the polling station your solemnity will overcome all obstacles and demonstrate that, even if your right to vote is challenged, you have far more dignity and decency than those who would seek to manipulate the system.
A Presidential President
Following the race from the White House from afar it is interesting to observe which of the candidates appears most presidential. In 2008 it is quite obvious that both Barak Obama and Joe Biden have the grace, dignity and character to be President whilst neither John McCain nor Sarah Palin come across as “presidential”.
From a foreigner’s and US foreign policy perspective the ability of the President to be presidential is very important. The United States is often referred to as the “leader of the free world”, in this capacity the President of the United States is also the President of the free world. Whilst the free world followed Bush (GW) into Iraq and Afghanistan the presidency of the United States has since become so discredited that it must be doubtful if the rest of the world would follow the US quite so readily again. Indeed the financial crisis has seen a lack of world leadership from America with France, the UK and Australia enabling multi-lateral talks. No doubt this reflects Bush’s low standing in the world arena. It is quite possible that the damage done by American financial institutions to the global economy will reduce the respect and influence that the US commands as the world’s biggest economy. It is reasonable to expect that both governments and businesses world-wide will look to reduce their reliance on the US economy and diversify their financial activity so that the collapse of no one country can again trigger a global crisis.
In such a situation the leadership and influence that the United States is able to exert will depend not so much on economic strength (or even military might) as on the personality of the President. Consequently, if America wishes to retain its global influence it will be essential that the next US President be truly presidential. In watching the four debates and subsequent campaigning by the respective candidates it is obvious that the Obama/Biden partnership understand the gravitas that goes with role of US President. John McCain probably understands this too, but is so determined to prove his “maverick” credentials that he loses sight of the main game and chooses Sarah Palin as his VP, and her chances of being presidential are about as good as my chances as an Australian becoming US President.
So what does being “presidential” mean? There’s probably an essay if not a thesis in answering that question. To try and be succinct: a president should have an understanding of the world and the influence they can have on the world, they should be prepared to use that influence to the benefit of all but only take a decisive or significant decision after due consideration, reflection and consultation with those of the same and a different persuasion. A president must be able to inspire with their words and actions, have confidence in themselves and so be able to put the needs of others before their own needs. A president should earn respect through well argued debate being gracious in victory and defeat. To take a quote from the US Government’s Presidential Management Fellows Program, a President of the United States of America should have a “clear interest in, and commitment to, excellence in the leadership and management of public policies and programs”.
Obama and Biden have more than demonstrated that they have presidential qualities. John McCain and Sarah Palin have not. If America wants to remain the leader of the free world through respect for its leadership rather than by force of economic and military might then it is time for change, it is time for Barak Obama and Joe Biden.
Well, the rescue package has been passed despite its shortcoming and some good things are happening. Treasury Secretary Henry Paulson’s intention to take part ownership of banks is a much better approach then buying up bad debt. Buying (new) shares will inject cash into the banks, give the Government some direct influence over what banks do and ensure that a portion of the profits made by viable parts of banks comes back to the Government. At some point in the future the Government can sell its shares and recover its original investment and, hopefully, more. In the meantime consideration needs to be given to better regulation of the banking and investment sector. As I’ve said before, insurance is no answer it simply allows risk to be passed around and ignored by investors. So what’s to be done? Let’s start by outlawing “short-selling” because it relies upon good companies going down to make a profit. Then, make all executive pay, bonuses, “expenses” and other rewards subject to shareholder approval – this will create transparency and accountability. Whilst we’re regulating things let’s put an end to those endless offers to increase credit card spending limits – if you want it you can ask for it and the bank can properly assess your credit risk. On the topic of credit let’s limit mortgage liability to the resale value of the property; that will make the lenders take more interest in the loans they make and get them off the backs of those unfortunate people who are repossessed. Yes, more regulation will slow the flow of money down slightly but once everyone and every business adjusts to this life will continue happily and with a little less financial risk.
What’s really critical over the next few months as things settle down and the financial crisis disappears from the headlines is that its causes and consequences are not forgotten – they need to be addressed. Which makes it doubling important that the next US President has a good economic plan, like the one Barak Obama announced today.
Thank goodness the rescue package failed. Let us hope it keeps failing until it gets to the top and bottom ends of the problem rather than taking the expedient, and expensive, route of pouring good money after bad.
The current crisis has two causes: the common people (you) being unable to afford your mortgages and the rich people being too greedy, as a result the banks are running out of money.
Before getting to a solution lets kill a myth – there’s a lot of fretting about house prices and share prices. House prices are irrelevant, unless you’re selling or buying. Even then it only matters to the extent that you need to be able to afford your mortgage repayments. If you brought at house at $250k, have a $200k mortgage and today your house is worth only $175k it doesn’t matter so long as you can afford the mortgage because at some point house prices will pick-up. Similarly with share prices it only matters if you’re selling, no doubt if you know what you are doing you can pick-up some bargains, otherwise if sit tight until the market recovers. For many firms their share price currently has no relation to the strength of the company because at the moment prices are being driven by panic rather than a rational assessment of corporate vitality.
So, what’s the solution?
(i) The Government pays off a portion of everyone’s mortgage subject to an upper limit on the total mortgage and the mortgage companies reschedule every mortgage so that the remaining balance becomes the new mortgage value with repayments assessed against this.
The benefit of this approach is that it reduces the stress on the typical family by reducing mortgage payments whilst putting money into the banks to keep them solvent. It will also reduce negative equity (i.e. the difference between house value and mortgage). With reduced mortgage payments many people will find themselves with slightly increased cash in the pocket, which they will inevitably spend thus stimulating the economy. The great advantage of spending by the average people like you and I is that it goes on goods and services that in turn keep other people employed rather than clever investments favoured by the rich that keep few employed and have caused this crisis in the first place. The upper limit on mortgages (which may have to be State by State) ensures that the common people benefit and not the rich in their luxury homes, plus there should be a restriction of one mortgage per family to rule out investment property.
(ii) Impose new rules for financial dealings starting with a complete ban on short-trading that relies upon share prices falling so that someone can make a profit and place restrictions on hedge funds to reduce speculation. Follow this up with restrictions on loans so that people are not lured into debt and make sure that if a bank has to repossess your home that’s it your debt is paid. And, throw in some rules on salaries and bonuses for directors and key staff so that their rewards are based upon long-term gains.
There are some principles at stake here that this proposal seeks to address. Firstly, profits should only come from adding value not reducing it, therefore short-trading cannot be allowed and serves no beneficial purpose in the real economy. Secondly, if a company makes a loan it should accept the risk that the loan may not be paid back, this principle will make loan companies take more care in assessing who they loan to and how much (with exceptions for fraud of course). Note that the proposal that banks should insure themselves is a fallacy, this will just transfer the risk not change irresponsible behaviour. Thirdly, successful companies are in business for the long-term, therefore rewards to directors and key staff should be based-upon longetivity rather than vast short-term profits.
As a final act someone should simplify the income tax system. Fewer exemptions that favour the rich, higher taxes for the rich and redistribution to the less well-off through lower taxes and/or improved Government services such as health and education will make most people feel better if not better off and stimulate the economy.
Now is the time to think outside the box and show vision (which is not the same as being the maverick the other guy wants to be) – Go Obama, be brave let’s take a different approach to the economic crisis!
