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The loss of $8 trillion in stock market wealth in a matter of months is no small thing. The dive will have a major impact on people's spending and investment decisions.

A new economic forecast of 52 leading economists shows most expect the U.S. economy to shrink in the third and fourth quarters, plus the first quarter of 2009 — the first time in nearly half a century that the economy will undergo three quarters of contraction.

In short, we might be in for a brief, yet brutal, recession.

But talk of a depression and other apocalyptic possibilities are way overdone. One investment house last week called this the "death throes of the old economic order." The Washington Post, in a front-page article, asked plaintively if this episode marks "The End Of American Capitalism?"

Sorry, but such Euro-gloating aside, this crisis won't last. We won't even be close to a depression. And when it ends, fundamentals will reassert themselves — namely, population and productivity growth, the two engines to long-term economic success.

This is the U.S.' edge — and it's not going away soon.

Since 1980, real per capita GDP has expanded 69.2% in the U.S. vs. 65.6% for the EU 15. Why? Our productivity is greater. In just the last 10 years, U.S. productivity has expanded 2.5% a year, with Europe growing nearly a full percentage point less.

During the Great Depression, U.S. output plunged 27% in four years; unemployment neared a third of the work force. Real private investment shrank 87% in three years; personal spending plunged 41%. We're not close to that. Nor are we likely to be — unless we foolishly pursue high-tax policies that would kill growth.

It's easy to give in to excessive pessimism these days. But the U.S. model — based on productive labor, free trade, fewer rules, lower taxes and rewards for entrepreneurial effort — is still sound. We'll soon emerge stronger, and better, for our current tribulations.

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And right now it looks like the U.S., which built the mightiest, most prosperous economy the world has ever known, is about to turn its back on the free-enterprise system that made it all possible.

It isn't only that the most anti-capitalist politician ever nominated by a major party is favored to take the White House. It's that he'll also have a filibuster-proof Congress led by politicians who are almost as liberal.

Throw in a media establishment dedicated to the implementation of a liberal agenda, and the smothering of dissent wherever it arises, and it's no wonder panic has set in.

What is that agenda? It starts with a tax system right out of Marx: A massive redistribution of income — from each according to his ability, to each according to his need — all in the name of "neighborliness," "patriotism," "fairness" and "justice."

The businesses that create jobs and generate wealth are already discounting the future based on what they know about Obama's plans to raise income, capital gains, dividend and payroll taxes, and his various other economy-crippling policies. Which helps explain why world stock markets have been so topsy-turvy.

But don't take our word for it. One hundred economists, five Nobel winners among them, have signed a letter noting just that:

"The prospect of such tax-rate increases in 2010 is already a drag on the economy," they wrote, noting that the potential of higher taxes in the next year or two is reducing hiring and investment.

It was "misguided tax hikes and protectionism, enacted when the U.S. economy was weak in the early 1930s," the economists remind us, that "greatly increased the severity of the Great Depression."

We can't afford to repeat these grave errors.

Yet much of the electorate is determined to vote for the candidate most likely to make them. If he wins, what we consider to be a crisis in today's economy will be a routine affair in tomorrow's.

WSJ: Put Dodd on the witness stand

CNN: ACORN fraud and ties to Obama

ACORN may face new charges in PA; Update: Video added

Video: Subprime loans “affirmative action” - Andrew Cuomo

Another lengthy video attempts to highlight the beginnings of the subprime loan disaster, and it’s well worth watching.  Andrew Cuomo, then Bill Clinton’s HUD Secretary, held a press conference on April 6, 1998, explaining a settlement reached with a major bank on a lending discrimination case based presumably on the CRA.  Cuomo brags about how “this administration will enforce the law”, but he also makes a very telling admission about the $2.1 billion in subprime loans that the bank would offer as a result of the settlement:

They would not have qualifed but for the affirmative action on the part of the bank, yes.

He then admits that there would be “higher risk”, and a higher default rate, on the loans the Clinton administration forced this bank to make. He also admits that the action forced this bank to lower its standards on loan qualification as a remedy to supposed discriminatory action in the past by relying on income and equity requirements. Cuomo describes everything wrong with subprime lending and reveals the government’s efforts to distort private lending markets to force “fairness” in outcomes.

The financial world did not collapse because of 15,000 loans from this one settlement, but this case did not exist in isolation.  Cuomo held this press conference as a warning to all lenders that the Clinton administration intended to enforce the CRA broadly with all lenders, and in fact he explicitly stated this.  When that didn’t free up credit as quickly as Clinton desired, he and Congress mandated Fannie Mae and Freddie Mac to purchase more subprime paper — which Cuomo baldly admitted was riskier and would have a higher rate of failures — and to turn them into mortgage-backed securities, which they marketed as low-risk investments based on implicit government backing.

This did what the heavy-handed enforcement of the CRA could not: it made lenders enthusiastic about subprime lending.  Why?  They could make short-term profit on every mortgage regardless of the borrower’s ability to repay, because Fannie and Freddie would buy them anyway.  With the risk removed from lending, subprime loans became quick-buck rackets for all lenders, predatory or not.

The second half of the video relates what we already know about Barack Obama.  He sued Citibank to force more subprime lending, and his ACORN partners did the same elsewhere, initiating actions like the one Cuomo heralds here as a great breakthrough in affirmative-action lending.  Obama bears responsibility at the edges for the beginning of this disaster, and more for his inaction while in the Senate as Alan Greenspan warned them of the coming collapse.  Most of this falls on the Clinton administration and Congress in 1998-2000, who set this brush fire alight and then kept the firefighters at OFHEO at bay by calling them racists.

See it all here

Tax Year 2005

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Despite his storied investing prowess, Buffett is a liberal who sees eye-to-eye with Obama on economic policy. That's why he's contributed $4,600 to Obama's campaign — along with $28,500 to the DNC — and not a dime to John McCain or Republicans during this election cycle.

During the Nashville debate, Obama put forth an ideological litmus for the Treasury job, a post that has taken on even more importance amid the financial meltdown. He said he would want to make sure the next secretary shares his views on improving tax fairness and income redistribution.

The world's richest man thinks other rich should pay more so the government can make the right investments with their money. Those investments include most everything Obama's proposing, from universal college and health care to urban redevelopment.

"The market isn't so good at making sure that the wealth that's produced is being distributed fairly or wisely," Buffett told Obama. "Those of us who've benefited most from the market should pay a bigger share." News flash: You already do. According to IRS data, the top 1% of taxpayers paid about the same amount of federal individual income taxes as the bottom 95%.

And nothing is stopping Buffett, if he wants to pay more, from cutting checks directly to the poor as he squirms uncomfortably and apparently guiltily atop his mounds of billions. This would be far more efficient than having government tax and spend his money. But no, he prefers that Obama redistribute your income, too.

Buffett, a registered Democrat who opposed the Bush tax cuts, is also mad the president repealed the death tax. "When you get rid of the estate tax," he told Obama, "you're basically handing over command of the country's resources to people who didn't earn it."

House Financial Services Chairman Barney Frank has suggested that linking the banking crisis to the high-risk bank lending mandates of the Community Reinvestment Act and the 'affordable' housing goals set by Congress for Fannie Mae and Freddie Mac constitutes a Republican effort to scapegoat poor, minority households that took out such mortgages.

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