Wednesday, March 19, 2008

It's still the economy, stupid.

James Carville, former political strategist for Bill Clinton during his presidential campaign against George H.W. Bush, originally coined the term “The economy, stupid”.

At that time, George H.W. was the strong favorite in the race for the White House until the (Bill) Clinton campaign adopted messaging that echoed the public’s fears of the economic slowdown caused by the stock market collapse on Black Monday in October 1987, and proven in the actual recessions in 1990 and 1991. Why was George H.W. Bush way ahead early in the polls? Because he was seen as having more experience with national security.

It's still the economy, stupid. "From concerns about the economy and the war in Iraq to the perennial topics of Social Security and the health care system, a range of issues are guiding this year's presidential race," goes on to list the issues and show the poll results. Many of the polls suggest that the most important, if not the main, issue Americans care about is the economy.

So, we know the economy is a concern and we know the credit crisis is almost certainly the biggest concern lately. But, what exactly is the problem? The problem is that we don’t know where the problems are.

As the Economist put it: “There is still vast uncertainty about how much toxic debt remains, and who owns it. This has led banks to hoard money and call in loans.” Until the bad investments are uncovered we don’t know of their existence and banks will remain very conservative. This unknown has created a panic on Wall Street and caused severe cutbacks, speculation and major stock fluctuations over the past few months.

One thing is certain, confidence is key and the current uncertainty will certainly lead to further bumps in the road. Hold on and strap in because its still the economy, stupid.

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