TO THE BACK OF BEYOND

Once I finish writing this, I'm off to conduct the VIP trip discussed in Good News From Bulgaria.  Next I'll be in Albania for a meeting with Prime Minister Berisha, followed by speaking at a conference in Tbilisi, Georgia along with TTP's Richard Rahn.

After that, I head into the back of beyond.  The phrase became popular in the 19^th century referring to mysterious lands that were unknown and remote.  I can't be more specific, as I don't want to telegraph my presence there in advance.

You'll be getting a report from me whenever I get a secure Internet connection, which I hope will be often.  There will be a few times in the coming weeks when I'll have to be incommunicado. 

I'll be back just after the election, and the scary question is:  will America by then have become a country that is back of beyond?

We are in a chaotic situation right now, politically and economically.  That is always a bad combination, but to have it come on the eve of a presidential election is calamitous.  It means the Democrats have a vested interest in making it so, for if the economy falls off a cliff, so does John McCain's election chances.

Here's one example of the incredible danger our entire economy is in – indeed, the entire economy of the world:  $62 trillion (yes, that's a ‘t') of liabilities called "credit default swaps."

They are insurance policies against the failure, or default, of corporate bonds, ‘mortgage-backed securities,' and the like.  One way to define them would be "default-triggered put options."

You buy an insurance policy for your car, you pay the monthly premium, the insurance company incurs a liability to pay if you have an accident.  If you don't have an accident by the time you sell your car, the insurance company's liability vanishes.

Thus the key word in the definition above of credit default swaps is "triggered."  If there is no default, the trigger isn't pulled. 

So – what Treasury Secretary Henry Paulson is trying to do is spend $700 billion to prevent the default of securities with liabilities of $62 trillion.  He estimates that it will cost $700 billion to save $62 trillion, to make that $62 trillion of credit default swaps vanish.  He really is the smartest guy in the room.

Trouble is, the other guys in the room, Democrats in particular, are the ones who created the problem in the first place – and whose primary goal is not to fix the problem but to fix the blame for it on Republicans.

Worse, McCain isn't smart enough to comprehend or deal with the crisis.

A little while ago, the Dems were panicking over Palin and Obama cratering.  It may not yet be our turn to worry as Obambi doesn't know what to do either.   Yet McCain going around the bend saying he'd replace Chris Cox with Andrew Cuomo — a Democrat who is as stupid as he is corrupt — is very scary.

The Wall Street Meltdown is too complex for voters to understand and there are too many culprits who caused it.  Sure, Chris Dodd, Barney Frank, and whole corrupt Dem crowd engineered it.  But Bush was asleep at the switch, the oligopoly of rating agencies like Moody's were criminally negligent, and Wall Street got drunk.

There will be no easy fix, any outcome is going to cause amazing economic pain, voters are going to be in a state of rage and fear.  Who do you think they will lash out at?

It's still late September, instead of late October.  If voters perceive the Dems are refusing to solve the crisis or aggravating it for political gain, then the whole thing can turn around.  I'd have a lot more confidence that it will turn around if I had more confidence in McCain.

If Obambi wins the presidency, it will be a disaster for our country, politically, economically, and culturally, of unimaginable consequences.  We can only pray that McCain somehow regains his footing.  I'll be doing a lot of praying while I'm in the back of beyond, and hoping that's not where our country will be when I come home.

Ps:  The absolute best book to understand the Meltdown is A Demon of Our Own Designs by Richard Bookstaber.  He's the math/compuer wizard who created many of the "structured products" Wall Street used to create the current situation.  He is thus in a unique position to explain the incredible financial danger we're in.