Tuesday, January 29, 2008

It's Judgement Day For Rudy's Strategy

Polls have opened in the Sunshine State and the fate of the Candidacy of Rudy Giuliani may hang on the outcome (Florida and hang mentioned in the same sentence ... where is the word chad?).

Rudy attempted a new strategy in this election cycle ... one never tried before ... and one probably never to be tried again. He started as the front-runner, and then didn't start running till the Florida primary. He lost all the momentum he had prior to the election season, but hoped that he could win all the "Big States" and therefore the nomination. What ended up happening was he was left out of all the election excitement and all of his supporters started checking out other candidates.

Now why would the initial "front-runner" choose an unproven strategy? I believe there are several reasons:

  1. He felt he did not have enough money to run a National campaign and thought to put the money where he would get the most bang for his buck.
  2. He knew that Mitt Romney had unlimited personal finances and hoped that other candidates could stop him in the early contests (or at least slow him down ... and that has played out for the most part)
  3. Like most people from large states (myself included), he felt that too much power was placed in Iowa, New Hampshire and the rest of the "early voting States" and wanted to reduce the power of those States.

Yes folks, I believe it is unfair that a minority of voters in these little States set the agenda for the rest of the country. By the time I get to vote in March, the field has been dramatically cut, and I don't get to vote for my first choice ... yes, I actually resent that the Religious Right in Iowa and the liberals in New Hampshire get to winnow down the field before I get a chance to vote. Maybe I have just been sucking on sour grapes for too long, but we had 9 candidates when this race started and by the time March rolls along and I get to vote, I might have to choose between just two.

The primary system goes back to the same time as the electoral college and needs to be changed. We need a national primary day where everyone's voice can be heard. And the best part of having it all done on one day ... it will be cheaper for the candidates that won't have to sell their souls for votes in the early States. If Romney spent $20,000,000.00 in Iowa and received 29,949 votes, that means that each vote cost him about $667.80. Quarter 4 finance reports are not in yet, but I think the $20 million is probably a conservative estimate. We have over 100 million people of voting age in the US. That kind of spending extrapolates out into billions of dollars. How can we have an election free of the influence of special interests when so much money is needed to run under the current system. The people who set up the current system could not have foreseen such excesses in spending. When the primary system was set up, It was assumed that the time between primaries was needed in order to allow the candidates to travel by horse drawn carriage and meet with the voters in the various town halls. I say we get out of the 19th century and into the 21st and revamp the primary system.

So Rudy, though your strategy may have been flawed ... I understand where you are coming from.

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Tuesday, January 22, 2008

Fear Of Recession Prompts Huge Rate Cut

The Federal Reserve Board, prompted by a global stock sell off amidst fears of an impending recession, cut the federal funds rate by 75 basis points (3/4 of a percent) from 4.25% to 3.5%. The Fed is also cutting its' discount rate (the rate that it lends banks by 75 basis pts). Banks have responded by cutting the prime rate from 7.25% to 6.5%.
Now for those of us that do not have a degree in economics, what does this mean?
Well, on the positive side, for those of us that have credit cards with interest rates based on the prime rate, we will have lower monthly bills (for those of us smart enough, we can pay the same amount and actually reduce our debt faster). For those in the market for a new car, interest rates will be lower (meaning that if you finance $30000.00 for 72 months, your payment will be about $11.00 lower with the new rate). Though $11.00 doesn't sound like much, it comes to almost $800.00 over the course of the loan. A lower interest rate allows the federal government to refinance its' publicly held debt at a lower interest rate, saving taxpayer money, that would have been used to service the debt. Finally, for those that are in ARMs (adjustable rate mortgages), there should be quite a bit of relief there.
On the negative side, this looks like a desperation move, and is likely to affect consumer confidence. When consumer confidence goes down, people don't buy as much and retail outlets and manufacturers start laying people off. Lower interest rates have a direct corollary effect on the strength of the dollar. As interest rates fall, so does the value of the dollar. While this is great for American exports (a weak dollar means our exports cost less overseas while imports cost more over here), we are an import addicted nation. While we can switch to domestically produced textiles and automobiles, we still have to import the majority of our oil. If oil is pushing $100.00 a barrel now, I would hate to see it in 3 months.
So, is the Fed rate cut a good thing, or a bad thing? If it succeeds in keeping the US out of a recession, it is a good thing ... but only time will tell.

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