Getting and spending we lay waste our power?

There is growing sentiment that yesterday's market action was a double bottom and the market correction has ended. Richard Russell, who publishes the Dow Theory,was pleased to see the transportation index held above previous lows suggesting demand for goods will entail demand for shipping.

There are also those who believe the Fed'a action of swapping U.S. Bonds for mortgages not backed by government guarantees is evidence of the severe nature of the problem and more shoes are to fall. Certainly the action of the Fed was dramatic.

Bernanke had to make a triage decision when the mortgage meltdown became evident - protect the dollar or take steps to avoid recession. He chose the latter and by doing so the dollar has fallen, inflation has risen and this has put further pressure on the problem he chose to solve , ie. stave off a recession. Our economy does not lack for liquidity, it suffers from the absence of confidence.

For sure we are living in interesting and unique times. George Friedman argues this is not the "big one" yet homes prices are continuing to fall and home equity loans at banks have now become a problem. Homeowner equity has fallen below 50% for the first time since the "big one."

Leverage works both ways and we are now experiencing the downside of excessive leverage which was enabled by Greenspan's policy of protracted low interest rates. Even a nation as powerful as the United States eventually has to pay a price for fiscal profligacy and declining moral standards based on the belief there is a fee lunch. What is more frightening is we could possibly elect another president who wants to perpetuate acts which have brought us to where we are - "...getting and spending we lay waste our power." We also have a Congress that wants to raise taxes to support more spending and populist wealth transference. No the prescription I would think wise.

In time the answers will reveal themselves and I remain an interested observer so stay tuned.

In addition to the above there are also five or six other interesting matters unfolding that quickly come to mind and I am sure more will surface:

A) Will Eliot Spitzer be able to resign without going to jail and be charged with felonious conduct?

B) What does Adm. Fallon's resignation really mean and what effect will it have on GW's strategy regarding Iraq, Iran, Pakistan and Afghanistan? Almost sounds poetic.

C) During this period of domestic economic stress and military transition what will Russia-Putin do? Professor Marshall Goldman will be addressing this when he comes to speak here in June.

D) Will Israel go to war with Hamas and Hezballah?

E) What if anything will come of the Hariri investigation and its impact, if any, on Syria's Assad?

F) Will Democrats be able to select a candidate without an internal battle that will weaken their nominee, who will both nominees select as their VP and of course who will win in November?

Dick