I have been quiet on the presidential campaign.  I'm not much of a political writer in the first place and am firmly of the opinion that you should only write to your strengths.  However, Obama's appearance on Fox news was a tactical mistake of massive proportions.  In addition, it legitimized the greatest threat to our country -- fact free debate.  As such, Obama has lost my vote.

Housing is what started the current mess me are in.  Thanks to record low interest rates from the Federal Reserve, the US consumer went on a debt-induced home buying binge.  That binge is now coming home to roost.  And it's not going to let up for the foreseeable future.

Once again, we're hearing economic la-la land from the Republican candidate.  As usual, we're hearing the great canard -- there is a free lunch, you can have something for nothing and you can cut taxes and increase revenue.  Let's go over the facts AGAIN for those of you playing at home.

The whole dust-up about Obama's statement about people being bitter is, well, overdone.  People have every right to be bitter right now.    Consider the following facts.

I have been against the Iraq war from the very beginning.  However, my arguments didn't rest on the lofty perches of ethics or morals; they rested on the far cruder cost benefit analysis of war.  The bottom line is war costs far more than it is worth economically.  And the longer this war progresses, the more expensive it gets.

From the WSJ:

After several years of relative stability, a wave of rising prices is washing over the world economy.

It comes at a most inconvenient time. The Federal Reserve is sharply cutting U.S interest rates -- the opposite of the usual response to rising inflation -- to prevent the housing bust and credit crisis from causing a deep, prolonged recession. That's making the global response to inflation more complicated.

OK -- I'm not sure that's what actually happened, but there are some strong coincidences in this story line that make me raise an eyebrow.  More below the fold

Either we're in a recession or we're about to start one.  Either way, the latest expansion is over.  While there may be some question about when it happened (the expansion, that is) the reality is it was the least impressive expansion since WWII.  Below I will explain why.

Yesterday, Bernanke testified on capital hill.  His testimony, which is available on the Federal Reserve's website, offers a good overview of how the Fed views the economy.

I don't know where it started, but it has become quite clear that the Bush administration has done nothing to protect the US consumer and worker.  Nothing, zilch, nada.  If this is "compassionate conservatism", well, it's not so let's lose that label.

As if on cue more news is coming out that shows how the government has let business say and do things that aren't good for the US public's health or overall working conditions.

Over the last 4-5 years we have seen an astonishing amount of problems in the business community.  And it's not just a minor incident here and there; it's everywhere. From the complete breakdown in the financial sector to toy recalls to meat recalls every industry that has "self-regulated" has shown that it can't.  

Over the weekend, Barry Ritholtz over at the Big Picture blog had one of the most thought provoking posts I have read.  It's titled "Investing in a Post-Fact Society (a/k/a, Were the Good Times a Mirage?)".  It is a post I will be chewing over for quite some time.  I asked him if I could use it to riff off of and he said yes (Being a good lawyer, I still have the email!).  Below is part of the post and then some of my own thoughts.

Last week has a historic week for the Federal Reserve.  Going back to the end of the previous week we learned that one of Wall Street's oldest and most venerable investment banks was basically bankrupt.  Over the weekend we learned that JP Morgan was working to buy Bear.  And then we learned that JP Morgan purchased Bear for $2/share with a $30 billion guarantee from the Federal Reserve in the event some of Bear's loans were bad (which some pretty much have to be in the current environment).  Now that all of this is over, let's look at the pros and cons of what the Federal Reserve did.

Over at the Washington Note, Steve Clemons linked to a 2003 article titled The Debtors Empire.  What I find incredible about this article written almost four and a half years ago is how prescient its observations are today.

This post is also on my blog.  I will update it throughout the day as events develop.  Any further updates from the trading day will be on my blog.

There were some fast moving developments in the Bear Stearns situation.

Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed -- after prodding by the federal government -- to be sold to J.P. Morgan Chase & Co. for the fire-sale price of $2 a share in stock, or about $236 million.

From Bloomberg:

Bear Stearns Cos. shares plummeted a record 53 percent after the New York Federal Reserve and JPMorgan Chase & Co. stepped in to rescue the fifth-largest U.S. securities firm with emergency funding.

After denying earlier this week that access to capital was at risk, Bear Stearns said today that its cash position had ``significantly deteriorated'' in the past 24 hours. The New York Fed agreed to provide financing through JPMorgan for up to 28 days, the bank said in a statement today.

From the London Times online:

Global stock markets may have cheered the US Federal Reserve yesterday, but on Wall Street the Fed's unprecedented move to pump $280 billion (£140 billion) into global markets was seen as a sure sign that at least one financial institution was struggling to survive.

The name on most people's lips was Bear Stearns. Although the Fed billed the co-ordinated rescue as a way of improving liquidity across financial markets, economists and analysts said that the decision appeared to be driven by an urgent need to stave off the collapse of an American bank.

"The only reason the Fed would do this is if they knew one or more of their primary dealers actually wasn't flush with cash and needed funds in a hurry," Simon Maughan, an analyst with MF Global in London, said.