The Sunday night Wall Street tsunami, Part II: Where do we go from here?

This is part II of my analysis. You can read Part I here.

The list of troubled companies is too long to even list and it's spread across almost every vertical market. Wall Street is begging for money, retailers are having their worst patch in decades, restaurants are looking for diners, the airline industry is running out of cash again, Detroit is lining up their own $50 billion taxpayer loan and consumers have stopped spending with wild abandon. If the Fed and Treasury jump in to save another high roller who lost, where would it all end and where would the money come from? As a country and as individuals, we do not have the spare cash because we sold our debt to China, who has their own economic problems coming and who are probably fed up with our lousy debt anyway. This brings us back to this previous post that kicks around the idea of the US going beyond a recession and into a depression. The numbers involved with bailouts and failures are beyond anything we have experienced in a long time so while the odds are still remote, it's not unthinkable.

The question now is where do we go from here? For starters, the 900 pound gorilla in the room (the bad economy) is now going to be impossible for the campaigns to avoid. Obama needs to jump out immediately and make this the critical issue of 2008. It's been sitting there for months on end and he has repeatedly failed to develop a clear and forceful message. This is a serious issue that impacts all Americans and we know that without lying, McCain is unable to deliver a strong message on the economy. Besides not knowing anything about it, his economic advisers are befuddled and were hoping it would somehow go away. Then again, maybe McCain did know it was coming via his economic brain Phil Gramm (who works with UBS), and that's why they chose silly side show topics like lipstick, to divert attention from the economy. Heaven forbid a presidential candidate talks about a serious issue.

Whether we like it or not, Americans are stuck with the burden of the housing bubble, especially since last week's nationalization of Freddie/Fannie. The costs of the war and now the cost of the credit crisis will severely limit spending options for the next President. There is only so much debt the US can accept before the issue of tax increases are forced on the country. Foreign buyers are watching this implosion and are not interested in buying more. Without tax increases and budget cutbacks, Americans are in for a painful reduction in the standard of living made possible by easy credit.

Obama needs to hammer away at this shaky economy and tell us his plan for the future. If we're all going to be in this together - and with our money propping up banks and others, we are - how can our next economic run benefit us as a country? This last economic cycle left a few very wealthy. They walked away unscathed - some even accumulated 12 houses - compared to Americans who have lost their houses, their jobs and their retirement all while watching their income stagnate for decades. (Sure the execs could have made more, but being pushed out with $60 million ain't so bad.) Obama has a short window to make his case to the public before McCain steals away another talking point, like "change". The economy will not suddenly get better and in all likelihood the GDP growth for this quarter (ending this month) will be negative. Obama has doddled long on enough but we can be sure that everyone in America will be listening to this issue today. Whether Obama chooses to lead Americans or stay on the sidelines remains to be seen.