The Emperor's New Financial Statement.

I have friends that are taking Mandarin Chinese lessons because they say the handwriting is on the wall: China will own the world. There are so many levels to reject this on. First being that no nation owns the world; A few rich mega billionaires do. We are just allowed feudal occupancy at the foot of the castle walls. You know? Where they dump the slops.

And then there is economics. Sure, it looks as if they have all the bank statements in their favor. We alone owe them trillions. But frankly it is a bad debt. If they called it due at this minute they would only get mere pennies on the yen. And they know that so they just lend us more. World economy is a house of cards. It all rests on the premise that the participants will not say it is all false. Like in the story The Emperor's New Clothes.

And frankly, there is China. So very much could go wrong there: Bird flu, People's Revolution, Mega Earthquakes, massive deaths because of the pollution like what happened in London with the burning of coal. Katrina did not help our economy at all and I doubt seriously another major earthquake or epidemic would help China.

But I seem to be in the minority about my thoughts on China. I wondered, frankly, if I was merely in denial. Then came this wonderful article by the man, James S. Chanos, who heralded the fall of Enron. Remember them? New York Times in its article Contrarian Investor Sees Economic Crash in China, states that Mr. Chanos is warning that China's hyper-stimulated economy is headed for a crash, rather than the sustained boom that most economists predict. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent. "Bubbles are best identified by credit excesses, not valuation excesses," Chanos said in a recent appearance on CNBC. "And there's no bigger credit excess than in China."

One of the things that caught us off guard at the onset of WWII was the lack of munition factories. We even purchased our gun sights from Germany, a practice we continued through part of that war. We had to manically convert auto plants to make tanks and airplanes. It is a credit to the American people that we could do that so quickly. But that was another generation. What do we make for ourselves now? What do we even have the knowledge to make for ourselves?

If the house of cards, that is China, falls what will we have to learn to live without? Anyone for a class on spinning yarn? Or lighting one match fires? Opps, no match fires?

Please Excuse Johnny from School

I, and all the late night comedians, cannot believe that John McCain has canceled his campaign because of the economic crisis. He asked for the meeting with Bush. He also only caused havoc with the bailout plan once he got involved. Currently it looks as if he is willing to deep six a bipartisan agreement in both houses just to prove he is not GW Bush. Or to take credit for the bill that is finally passed?

Or could Johnny just be totally unprepared for the debate? It was suppose to be on foreign policy his strong suit but when he canceled Obama maintained that this was the time Americans needed to see their future leaders. And any future leader ought to be able to walk and chew gum at the same time. So why not change the topic of the debate to economics? Something McCain knows little about per his statement but enough he has to run home to Washington to shape the discussion. Or protect his fat cat friends like he did Keating in the Savings and Loan debacle of the previous Bush?

He said he was canceling all campaigning because of this crisis but all his negative smear ads are still running. He canceled Letterman but did an interview with Katy Curic. He wanted Obama and him to make a joint announcement about the suspension and then jumped the gun and did one on his own without waiting for a reply. In that he said he would continue the debate if an agreement was in place by Friday and it could have been. It looked like it yesterday afternoon. McCain screwed the pooch.

If this whole thing is a campaign ploy or trick because of falling poll numbers it is ill conceived and even the Republicans don't understand what he is doing. And risking the world's financial stability because of a few points in the polls sounds very GW Bush. Very egotistic.

But could there be another explanation. Is Johnny sick? Walter Reed Hospital is in the DC area. I imagine his doctors are either there or in Arizona. Going back home during a crisis plays even less well then going to Washington where until he had Bush call the meeting he was not needed and not even wanted.

Given the concerns about his age and health he cannot call the campaign and the debate off just to stay home sick for a couple days. And while Obama can go to DC to meet with he President and leave Biden to his campaign appearances, John cannot let Palin off on her own. So he obviously does not have confidence in her stepping into his shoes on the campaign trail. How can we believe in her to step into the presidency?

And how is Johnny's health? I think not good.

What I Do Know About the Economy

I know very little about economics even though for several years I worked as a cost control engineer for a major construction management firm on projects ranging to two billion dollars. But I figured this experience would help me to understand what is currently going on. One thing is clear at this point: Money and economics seem to have little to do with each other. Economics and debt do have a close relationship unfortunately.

Other things are also clear to me. ONE - The first President Bush presided over the savings and loan debacle and bail out. And now GW, son of Bush, is presiding over the investment bank debacle and bail out. Coincidence? I think not. Both of them were against regulation of corporations (including credit cards companies, mortgage lenders, investment banks, and savings and loans) and both said the economy was substantially sound until we were all treading water in debt.

TWO: Continuing to do the same thing and expecting different results is a really good definition of insanity - AND unstable economic policy.

THREE: You cannot plan for just two years. I found this out with cash flowing a three year construction project. And it had a beginning, middle and end. The economy of the world does not. It goes on. And decisions made today effect the future 10, 20 or 30 years down the road. Economic policies don't fare well in quick change mode. It makes investors uneasy and that makes them do stupid things as we have seen in the last week.

FOUR: Presidents are elected for four years and begin running for re-election in two if we are lucky so we could say that 50% of their job is running for office. Senators are elected for six and Representatives (the US House of Representatives is where all money bills originate) are elected for only two. Ergo they are always running for office ant it can be said that is their job.

FIVE: Only economists understand the economy and get four of them in a room and you will get at least eight opinions. They spend lifetimes understanding this stuff so what chance does any of the above in number four have of getting a handle on it when it is at most 50% of their job.

SIX: You cannot fire the SEC head Senator McCain. He does not serve at the pleasure of the president. If you are running for the office you might at least learn that much about it. The Presidency does have control of the Secretary of Treasury but maybe it shouldn't. Maybe that ought to be independent too so we can go for the long view needed in economics and not the short view needed in politics.

SEVEN: It is tax and spend. Not spend and tax. That, like credit cards for us lowly citizens in these perilous times, is doomed to failure.

EIGHT: No problem, be it economics or citizen unrest or an infection in your foot, goes away by ignoring it. In fact, continuing to say,"the underpinnings of the economy are strong," just makes people nervous. (see number three).

NINE: We are in a global economy and so what is bad for the United States is bad for everyone around the world. Supposedly the G8 meet and discuss some of these things yearly (or more) but there is not an economist among them. They make decisions for the world based on their view and interests.

And last but not least, TEN: WE ARE IN THE DEEP SHIT. And all in the same boat, up a creek without a paddle. With only a hoped for quick fix and no long range plan. (see two and three).

Bottom of the Food Chain

I think artists are at the bottom of the food chain. Art is the one thing all consumers feel they can delete from their budgets in times of economic upheaval.

So we are frequently the first to know the economy is not strong like GW maintains. And the last to see the effects of any turnaround. I personally think everyone ought to give up ESPN before art.

At this last weeks big New Mexico Arts and Crafts Fair there were a moderate amount of viewers but a dismal amount of buyers. Which means that us artists are returning home with empty fuel tanks, plenty of inventory and doubts about whether or not to continue to create.

We spent much of the slower moments of the show talking alternatives to art shows as a way to peddle our wares and other things to do to make money. Most of us have day jobs we have not quit but they are generally marginal and getting more so. I am thinking of putting on some workshops in my new studio. But do people have money to pay for art lessons and, heaven forbid, art supplies?

So I returned home to make an agonizing appraisal of expenses, delete two other possible shows from the calendar, and hope the next show is better.

I suppose any plea I made here to support your local artist would fall on deaf ears. But it is not just artists. Think of what you are deleting from your expenses and the people connected with that. I am not getting the house stained because of the poor show so the painter is probably not putting any money toward his kid's college fund. It is the trickle down theory at work.

Someone call Bill Gates and tell him to go out and buy art and have his houses painted.