The bail-out deal has fallen apart. And it was the Republicans that did it. The republicans have nothing more to loose with the economy right now.
When a democrat was last in the White House--the economy was doing well and there was a budget surplus. And it has all gone to pot with Republicans in charge.
People who can put two and two together will probably vote for Obama.
But there is plenty of blame to go around. There is an economic term called the velocity of money. It is not like velocity in physics. It is based on the savings rate. I spend $1. The person who I give my dollar to is going to save a certain amount and spend the rest. The velocity of money is 1 minus the savings rate. If there are no taxes, and the savings rate is one percent then the dollar that I spend will last until it moves between about 450 people before the last penny is put in the bank.
But what if the savings rate is negative. Right now the savings rate in the United States is negative 3 percent. That means when I spend 1 dollar, the store keeper will borrow 3 cents and spend 1.03. If you do this, it appears that that 1 dollar will never wear out. But that 3 cents has a cost, and it is interest. So that store keeper is not adding three cents to the economy for every dollar that I spend, but it is three cents minus interest. Over the years, the interest will catch up. That is where the economy will crash. That is where we are now. That is the danger of a negative savings rate.
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