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In this U.S. Presidential Election year, things are actually happening as they usually do. After Labor Day, the advertising, the debates and all the other drum beating and noises will be waves of increasing crescendos, crashing on people's eyes and ears and any other senses those propagandists can insult. Right now, Sen. Obama appears to be the winner by a nose, but - who knows? - maybe he will forget himself in the din and commit some unpardonable sin. Since the same thing could happen to Sen. McCain, we will not know the likely winner until near Election Day. Will anyone ever figure out what the election baloney had to do with winning or losing? Probably not.

One thing that is different is the popular belief that, this time, it is different. I think that belief is the result of studied ignorance of the facts. The major Presidential candidates - meaning the ones who the pollsters say have the most would-be voter support - have reneged on their promises of a year ago and even on promises made just a few months ago. For example, in a recycling of the Clintonesque "I feel your pain," Senators McCain and Obama have made it clear they will bring down the price of the gasoline Americans put in their Hummers and SUVs. To be sure, Sen. Obama has also promised to help the nearly-bankrupt auto industry to produce about 1 million hybrid cars in the next 10 years, thus reducing the carbon dioxide problem. (Cp.: Recent U.S. auto production is about 15 million annually.) Sen. McCain has promised to assist energy industries in being more efficient and building nuclear power plants during the next 20 years, but, in the meantime, he offers more offshore drilling in order to procure more oil. (So, the climate change problem will not be addressed for decades to come.)

But, there are some things that are not at all different. Both candidates have refused public funds and now receive major donations - millions of dollars - from the usual suspects (fat cats, lobbyists, special interests). What is different is which groups give how much money to which candidates. This sameness and difference is explained well enough by the Principle of Self-Interest aka Individualism, which is a founding idea of American culture. (That idea was made explicit in the 1776 edition of Wealth of Nations, but was only implicit in the "Declaration  of Independence.") Over $1 billion will be spent to elect an American President this year, who will than be held accountable by and to the usual suspects. At the very center of Dante's inferno, Washington politicians are frozen in an eternal pose of struggle, which only seems to change in the flickering, reflected light of the flames all around.

It does not always happen, but there is a strong correlation between poor U.S. stock market performance in the six months before a "change election." This correlation is particularly strong in Presidential election years, although prospective changes of party control in Congressional (Presidential mid-term) election years can also affect the U.S. market. While the "change election" effect is usually negative, it can also be positive or less negative when change is expected to favor Conservatives. All of those phenomena have a simple explanation: the stock market and other financial institutions are playthings of the rich and wealthy who are traditionally Conservative in their outlook and associations. As the exploits of the sitting Administration demonstrate, the upper classes do very well when their friends are in power, at least until the payoffs and robberies are discovered. Unfortunately for the elite classes, 2008 appears to be a "change election" year when power will shift from outright Conservatives to Moderates. (No, this election is not about the Left taking power. Were it so, the Greens would be over 40% in the polls.) Even this tame shift leftwards scares the holy bejeezus out of the monied people, as they see their perquisites and benefits disappearing. Moreover, they believe the new Administration will impose new taxes and regulations on them and, what is worse, crack down on those involved in the corruption of the previous Administration. So what happens in years like this one is a nervous breakdown of financial markets as the pirates flee with their boodle to less threatening foreign shores.

In other words, what is happening on Wall St. is the election; the credit crunch is a secondary effect. What one must know is that the deliberately poorly regulated financial system made certain hangers-on very rich since 2000. The Real Estate industry invented a way to bundle home loans (mortgages) and sell them to suckers as CDOs (Collateralized Debt Obligations), while the right people got a piece of the action all the way from the real estate salesman's office to the bank and thence to Wall St. and beyond. The suckers included small-time investors in various mutual and hedge funds as well as the big-time Chinese, Japanese and other governments. The general effect of the system was to transfer yet more money globally from the poor and working classes to the less rich, thence to the more rich. The world's largest financial institutions were involved because they benefitted mightily while the con game lasted. Now the biggest investors in those same institutions are fleeing with as much money as they can carry to distant non-taxable, non-extraditable shores where they turn their ill-gotten gains into gold and diamonds; i.e., "hard" currency. One may think of the whole process as a series of escalators in which the denizens of the basement place their life's goods on the lowest steps, which then rise through several floors and transformations to the penthouse. At each higher floor, increasingly well fed and clothed porters carry the best of those goods around the landing to the next rise, leaving the least share of the freight on the platform for themselves. Thus, to be polite, turnips are changed into gold.

Will anything be really different next January 20? I do not think so. The pampered upper classes will discover the lack of real change soon enough and return to business as usual. Courtiers and Courtesans are not stupid: they will use different disguises and ruses to accomplish the same ends. The elite beneficiaries of corruption have always been horrified by the French, Russian and Chinese Revolutions for a very simple reason: the revolutionaries actually stopped the corruption (Off with your head!). Unfortunately, revolutionaries are deluded in their zeal to eliminate injustice because it always comes back. When the pig is cooked enough, every carnivore downwind of the sweet smelling meat will seek the source. Recall the old Chinese fairy tale in which the man who discovered roast suckling pig (Ah Ping, I think) taught the whole village to burn their houses down. The ruination due to roast suckling pig may have inspired the later invention of roasting pits and ovens. Now all of us are tempted everyday by fried chicken, hamburgers, spare ribs and stir fry at roadside stands everywhere. As it happens, those ubiquitous, sugared and spiced descendants of roast suckling pig are, often enough, unhealthy foods.

But, then, stump speeches and horrific financial analyses spread thinly throughout the landscape are probably unhealthy too.

Now, to prevent readers from showering me with rotten eggs along with shouts of "Pessimist! Cynic! Skeptic!", please learn the further consequence of the foregoing. After things will have gotten down to business as usual, markets will start going up and the woes of ruination will be forgotten. That usually starts to happens about a year after the "change election." So, please hold onto your pants and your old produce.

Posted 08/12/2008 03:11:24 PM                Last update: 08/12/2008

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