An inherited budget deficit of over $400 billion will tie the hands of whoever is elected president this November.

However, Money Morning’s Martin Hutchinson says a McCain victory would boost defense and Big Pharma stocks. And McCain’s VP choice, Sarah Palin, is a strong advocate of more drilling for oil, which is encouraging for domestic oil stocks.

On the other hand, McCain would likely hold onto Ben Bernanke as Fed chief. This would mean an extended period of low interest rates and painful inflation down the line.

“But this time it’s different!!!” Any time you hear that from a financial analyst, you should run. Or better still, take the other side of his trade! If you’re numerically oriented, you know that patterns tend to revert to the mean.

The U.S. has wasted the last decade trying to boost its influence Central Asia, when it should have been getting its own house in order. That’s the view of James Howard Kunstler, writing in The Daily Reckoning. He says the solution to the West’s energy crisis will not be found in the Caspian Sea. And the U.S. still has no real influence in Russia’s backyard. As a result, says James, while Russia oil-rich economy is alive and kicking, America’s banking system is effectively dead…

With President Bush no longer threatening a veto, the subprime mortgage and Fannie Mae (FNM) and Freddie Mac (FRE) “bailout” bill sailed through Congress. In anticipation of its enactment, Congress had the foresight to raise the national debt limit to $10.6 trillion. Who says that politicians don’t plan ahead?

Who’s to blame for the collapse in the credit markets? The Federal Reserve? President Bush? The Treasury Department?

Rick Pendergraft in Investor’s Daily Edge says the real culprit is an obscure law known as the Gramm-Leach-Bliley Act. This allowed commercial banks, investment banks and insurance companies to operate under one roof.

Had the financial service industry been kept separate, we might have avoided the worst of the worst of the credit crisis. More from Rick…

US foreclosure filings have more than doubled in 2Q from a year ago, reports Bloomberg.

According to RealtyTrac, 1 in every 171 households was foreclosed on, received a default notice or was warned of a pending auction in the quarter. That’s up a massive 121 percent from a year earlier – and 14 percent just from 1Q.

The housing housing market has yet to bottomed out, says Louis Basenese. But this doesn’t mean you shouldn’t consider a play in real estate.

Does the term ‘hemorrhaging money’ mean anything to you?

It should, says Kate Incontrera in The Daily Reckoning.

Because the housing bill approved by Congress yesterday will cost taxpayers $25 billion in fiscal years 2009 and 2010, according to the Congressional Budget Office. And it could wind up costing up to $100 billion in the long term.

The bill is also a major threat to privacy, according to Desidooru Saloon’s Dave Gonigam… 

President Bush has lifted the executive ban of offshore drilling, a move which John McCain has ludicrously linked to the recent drop in crude oil prices.

The Republicans are trying to reach the voters with a simple message: “Drill, drill, drill.” And energy expert Byron King says the message is a powerful one. It’s going to be one heck of a winter, especially when Americans have to fill up their heating oil tanks in the fall – right before the elections.

If Congress lifts its own drilling ban as well, it’s going to create a huge opportunity to profit…

It’s difficult these days to avoid comparisons between now and the 1970s. Then and now we have the specter of stagflation, an unpopular president, fallout from an unpopular war and a general disgust with government and politics.

But Dave Gonigam points says US voter turnout is actually increasing as the economy worsens.

For better or worse, it looks like more people will seek solutions to their economic woes at the ballot box come November than they ever did during the disco decade…

The US economy is on the skids, says Bill Bonner. Wall Street banks made their money by peddling debt to people who already had too much. And that couldn’t go one forever.

The global financial system is falling apart, and the world economy is slowing down. American consumerism is also slowing down – and no one knows what to make of that.

What would happen if Ben Bernanke actually gave it to Americans straight? At the moment, says Bill, the truth is the last thing anyone wants to hear – but they’ll have to face up to it sometime.