Mitt Romney for President?

Mitt Romney is a qualified contender for the post of US presidency.  He is smart, energetic, and well educated. His performance on the first presidential debate was remarkable. He not only defeated President Obama on the first debate but also made the president look silly. It is even more impressive considering the fact that Obama is widely recognized as one of the most impressive speakers of our time. Would not all this make Romney the superior choice for US presidency?

Here are some facts and thoughts

1. US can not afford to not invest in its infrastructure today. Its roads and bridges are crumbling. Across the country school districts are cutting programs and firing teachers. Mr. Romney says we can not afford to borrow and invest. Another presidential candidate, also a business man made the same argument 90 years ago. Americans are fortunate that he did not win that election. In 1932, if Herbert Hoover had won the presidency we would be in a much worse place today. The choice today is not that much different from that election. We have plenty of surplus labor in the country today.  The world is willing to lend us their surplus capital at record low rates (10 year treasury yields 1.7% as of writing).  So invest is exactly what we should do today if we are financially prudent and really care about our future. Cutting government spending at this time, like Mr. Romney proposes, would depress demand and increase the chance of us falling back to recession
2. Appeasement of voters is the curse of modern democracy. Elections are contested by leaders promising everything to voters without asking them for any sacrifices. Only a true leader can be truthful to the voters and talk about the pain associated with different choices. Mr. Romney promises across the board 20% tax cuts and still a reduced deficit. He says he can do this by cutting the loopholes in our tax system. There are no loopholes or deductions that adds up to 20% of tax revenue.   The non partisan tax committee who looked into this concluded that even if you cut all deductions it would only add up to around 4% of the tax revenue. So if he really wants his plan to be budget neutral then he will have to cut many of the programs that the poor and middle class depend upon. Mr. Romney does not seem to think voters are intelligent enough to figure this out. 
3. In his book, 'No Apology' and in many of his speeches, Mr. Romney talks about American exceptionalism and how it is on the Americans to take control and shape the world.  He joins the neo-conservative crowd who argues that acknowledging any historical foreign policy missteps of US is a grave sin or weakness. According to this theory US could not make any mistake at all.  However the fact is the same 'superior us versus inferior everybody else' view only dragged us and others into many unnecessary global conflicts. This position does not give Mr. Romney the credibility that he has sufficient understanding of the wider world required to assume the commander in chief's role.
4. Mr. Romney wants to get rid off most regulations. He says the regulations are burdens and additional cost to business. Agree. But lack of regulation gave us the greatest financial mess from which we are only crawling out now. Just recently one lone JP Morgan trader (aka London Whale) was able to cause its investors billions of dollar in trading loss. During the 2008-2009 most of us lost most of our 401K and IRA savings due to reckless actions of few. Yes, the lack of regulations helps few but does not protect most. The truth is the rising tide only lifted few yachts to the top. Rest of us are still struggling to stay float on our canoes. We need some protection from all those whales.
5. Finally, did I say Mr Romney is clever? He defeated Obama in the first debate with one very simple trick. Disguise. That is correct!. Obama came to the debate prepared to face off a challenger who has been promising tax cuts, trickle down economics, and repeal of Obama care.  He instead faced somebody who talked like no other but Obama himself. This Romney said everything that Obama supports. Four of his five point plan for America is now exactly what Obama has been selling on his campaign trail. So how could you argue with somebody who agrees with you on most everything? It would not be that bad if we get a president Romney that resembles anywhere close to the person we met on that debate day. The problem is it is too early for us to forget the Romney we saw during the republican primaries. It was also the same Romney who decided to pick Congressman Ryan, one of the most right wing ideologue as his running mate, one of the first major decision of his candidacy. We can not take the chances to have that Romney in the white house. 

India, what do you stand for?

1. PUNE, March 31, 2011: Joseph Lelyveld's Great Soul: Mahatma Gandhi and His Struggle With India is the latest book the Maharashtra government has decided to ban. “If the government of Maharashtra bans the book, it will be a greater insult to Bapu than that book or the author might have intended. I will challenge the ban,”, Mahatma's great-grandson Tushar Gandhi tweeted.
   
   Pointing out that he was against the culture of banning books, Mr. Gandhi said: “How does it matter if the Mahatma was straight, gay or bisexual? Every time he would still be the man who led India to freedom.”
   
   
2. United Nations, Mar 18 2011 India abstained from the voting on a resolution that approves a no-fly zone over Libya and authorizes "all necessary measures" for protecting innocent civilians there from Col Muammar Gaddafi''s forces.
   
3. A U.S. diplomatic cable obtained by WikiLeaks says that a political aide told a U.S. embassy official that India's ruling Congress party officials paid some members of parliament $2.2 million each to get them to back Prime Minister Manmohan Singh's government in a 2008 confidence vote.
   
4. Wednesday, March 9, 2011 - TEHRAN -- India’s National Security Adviser has said many of the predictions that Iranian President Mahmoud Ahmadinejad had made about the developments in the world are proving correct.
5. More than 40 U.S. Embassy cables classified from New Delhi and Yangon, spread over the period from 2003 to 2009 and accessed by The Hindu through WikiLeaks, confirm the reality that in diplomacy, national ideals are no competition to that thing called “strategic interest.”
   India had no problem dumping old friend Aung San Suu Kyi (‘ASSK') to romance Myanmar's generals.
6. India has overtaken China to become the world's largest importer of arms, a Sweden-based think tank says.
   
   A report by the Stockholm International Peace Research Institute (Sipri) says India accounted for 9% of all weapons imports between 2006 and 2010.

Recession 2008

What exactly caused the current economic recession? It was not a single incident or a specific action by any one regulatory body. Instead it was a sequence of events that triggered the economic downfall. Let us start with Sept 11, 2001.

1. US was attacked by terrorists on Sept 11, 2001. This was a serious blow not only to US but also to the world economy. In the US, the stock markets remained closed for the next 6 days after the attack. There was huge uncertainty spreading across the globe. People everywhere put a break on their discretionary spending. Businesses investment slowed dramatically.
2. The central banks of the world decided to act with the most powerful tool that they have in their belt. They reduced the interest rates. In US the rate was reduced all the way to zero. This made borrowing easier for businesses and consumers. Slowly money started flowing to lenders and then to consumers triggering a consumption based economic growth across the developed nations.
3. During the same time, Chinese and other Asian economies experienced very impressive real growth, mainly due to increased demand for products from US and other developed countries. Also globalization allowed companies in developed countries to move their manufacturing and service jobs to lower cost countries. This gave great opportunities for countries like China and India. The saving rate in these countries started to move up.
4. However the governments and entrepreneurs of these developing nations did not have much faith in their local currencies. The only stable investments that they could think of were the currencies and treasury notes of the developed countries. More and more money started flooding into US and European countries.
5. With more money coming in the governments and people of the developed countries consumed more and more on credit. Their economies seemed to grow mainly driven by higher consumption (It is true to some extend that the Chinese were funding Americans to buy Chinese goods...)
6. This would have been the time when the central banks of the world needed to act again and tighten the money flow by increasing the interest rate. This did not happen this time. In America, the Fed under Greenspan decided not to end the party in the middle of a presidential election and two wars.
7. With free money all around, the banks started devising new ways to utilize them and maximize their profit. They soon found ways to lend money to anybody, however bad their credit history, and still make a lot of money. They discovered CDO, a credit default swaps, where by lenders can package a loan and sell it to investors. This allowed them to pocket the profit the same time they wrote the loan.
8. The CDOs were promoted everywhere as the low risk investment. Many of the businesses including the investment banks like Lehman invested heavily in these CDOs.
9. The New Bush administration considered financial regulations as an intrusion to economic progress and decided against introducing any regulations against all these new mortgage backed securities. They believed the banks and Wall Street would regulate themselves and do the right thing. They also promoted home ownerships among minorities and low income families. Demand for homes started to outstrip the supply. Everybody saw their home prices shooting off the roof. Soon US and other parts of the world were in a clear housing bubble.
10. Like all bubbles, the housing bubble had to break. People realized such high home prices can not be sustained on a weak economic foundation. Soon the market value of the houses in many parts of the country started to fall below their loan amount. These home owners had no other alternatives but to walk away leaving the home keys with their lenders. As a result the CDOs started losing their value and whoever held it started realizing the risk associated. The mad rush to the gate began.
11. Major banks like Lehman had to write off a large part of their assets held in CDOs as worthless assets which eventually resulted in their crash. Many other banks who      held on to sub prime loans in their books also were in big troubles. Banks in US and other countries started to fail. Lending slowed. Credit for consumers and even businesses became difficult to come through. This resulted in the chain reaction of business cutting payroll, reduced consumer confidence, lower spending, and finally shrinking the overall economy.

Now is recession that bad? It is clearly an effective medicine to increase saving and improve production. It may taste bitter when forced on us but it is still the only medicine that works… Anyway that is a topic of discussion another time.