The Top Ten Reasons Obamanomics Won't Work

[GG]

http://www.americanthinker.com/2009/05/the_top_ten_reasons_obamanomic.html

By Mikiel de Bary
A brute inflationary monetary policy of the kind we are experiencing today can hardly avoid leading to a growth in GDP that, after all, is largely a record of consumer spending.  But we cannot judge an economic policy to be "working" simply by detecting such an increase in GDP.  Nor may we say policy has "succeeded" just from increases in government jobs or government-subsidized jobs.  An economy's success, properly speaking, is one that increases long-term levels of production with robust private sector employment.  In short, inflation and public sector growth do not mean a policy has "worked."  As the essence of Obamanomics is easy money and government aggrandizement, there are lots of reasons for pessimism.  Here are ten of them

10.   The Obama economic team really does not know how we got into this mess.  For example, Christina Romer, chair of the Council of Economic Advisors, claims that the "fundamental cause" of the current economic downturn is the decline in asset prices from the levels reached in 2006 and 2007, i.e., from the peak of arguably the biggest and broadest asset bubble in history.  In other words, she believes that the retreat from absurd valuations is giving us problems.

9.    Obama himself follows the scapegoating line initiated by Bush.  He blames both the general asset bubble and its collapse on insufficiently regulated companies, rather than on fiat money and central banking -- the sacred institutions of the failed macroeconomic establishment -- which financed every aspect of the Great Bubble.

8.    Larry Summers and Ben Bernanke consider credit and liquidity to be the "lifeblood" of the economy.  So they will supply untold quantities of it to somehow "restart" financial markets.  They are unaware that economic freedom -- let's call it the "oxygen" of the economy -- makes possible credit, liquidity, and financial markets.

7.    The Administration tries to meddle with private contracts -- see its attempts to pre-empt the bankruptcy courts and undercut the functions of mortgage foreclosure clauses.  For a few cosmetic results, it chills confidence in all future investments.

6.    The federal government burdens what is now left of free markets by raising its own spending and borrowing and, of course, by planning to increase taxes and regulation.

5.    Government creates a new welfare system for union members when it preserves zombie auto companies in order to save "jobs."  It creates a sham "financial system" when it bails out "systemically important" banks and insurance companies -- those that are too embarrassing to fail.

4.    The Administration's efforts to manipulate prices upward (as in the markets for residences and "toxic" securities) are irrelevant, at best, and are more likely to delay a return to normal functioning in those markets.

3.    President Obama apparently believes that increasing taxes on some of us and then redistributing the money to favored groups and promoters somehow "stimulates" the economy.  Who besides macroeconomists (and their former students) believes this?

2.    The Federal Reserve Board has transformed itself into an obedient appendage of the Executive Branch of government.  Few seem aware that it is managing our monetary system more recklessly than ever in its history.  The historic quattuordecupling of bank reserves in the last six months (that's a multiplication by 14) sets the stage for a doubling or more of the money supply.  (The Fed has never before dared to promote annual money supply increases of more than around 10 percent.)  When and if a bogus "recovery" does actually begin under these conditions, remnants of sanity will force the Administration to reverse its easy money policy.  (Reluctantly, to be sure.  Romer recently warned of the dangers of reversing too soon.)  That reversal, of course, will bring on still another economic relapse.  So, American entrepreneurs, are you feeling brave?

And the number one reason Obamanomics won't work:

1.    You can't push off the costs to our descendants.  Many Americans worry that their "children and grandchildren" will suffer the economic hardship of repaying the Bush-bama trillion dollar deficits.  But they won't.  (The little darlings will repudiate the debt one way -- monetary depreciation -- or the other. Explicit repudiation.  They will, that is, if the present generation doesn't do it first.)  The current follies of economic policy are not an extravagance for which we can charge someone else in the remote future.  We are the ones who, passively allowing this conversion to a command economy, will experience the deprivations it supplies to all but the politically connected.  The transition starts now, with the private sector mired in paralysis and Washington, D.C., beginning to flex its muscle in earnest. 

[Cats Cats Cats]

There are several of these that seem to think everything is cut and dry.  On #10 if the "retreat from absurd valuations" didn't happen then we wouldn't be in this mess for a little longer   And if it happened over a longer period of time it would have been absorbed much better.

[joiei]

If all you can do is cut and paste with no comment then your position is null and void.

[GG]

If all you can do is cut and paste with no comment then your position is null and void.

I'm sorry if I offended you.  That was not my intent.       

I post items I find interesting.  There are some great minds on this forum and I have found over the years that a person learns more by listening to what intelligent people have to say on these weighty issues facing our country. 

I started this thread to spark a discussion and to learn from that discussion.   

If you don't like what I post, then simply ignore it.   

We will both be a lot happier in the long run.

   

   

[FOTD]

I'm sorry if I offended you.  That was not my intent.       

I post items I find interesting.  There are some great minds on this forum and I have found over the years that a person learns more by listening to what intelligent people have to say on these weighty issues facing our country. 

I started this thread to spark a discussion and to learn from that discussion.   

If you don't like what I post, then simply ignore it.   

We will both be a lot happier in the long run.

   

   

Whatever....

Why tend to blame Obamanomics when it is congress that is owned by the banksters.

We print more money and we don't worry about the trouble the great grand kids will have footing the bill.

[joiei]

To create discussion how about giving your opinion of the editorial you have posted?  What do you think about it, how does it effect you?   If you just cut and paste then we have no place to start a civil discussion.   I realize that sometimes civil discussion is hard to find on this board, but if you present a logical and thoughtful position then we have no reason to toss you to guido or FOTB.   I appreciate a good argument well presented.  I might not agree but I do respect the author. 

See, you presented a reason to give an answer to your post, not the original but the response.  Now,  What do you think of the original post, do you agree or disagree?  And why.  What are the weaknesses and strong points. 

I appologize if I offended you with my curt response.  It was rude and uncalled for. 

[joiei]

I can just shake my head at the posting that happened while I was trying to write a civil and meaningful post to answer a very important question by unreliablesource in this thread. 

[FOTD]

Here. Read up! Looking like a long hot summer.

From The Business Insider, May 5, 2009:

http://finance.yahoo.com/tech-ticker/article/241266/Roubini:-Dont-Believe-the-Stress-Tests-or-the-Bank-Rally
Roubini: Don't Believe the Stress Tests or the Bank Rally
"Dr. Doom has an op-ed in the WSJ today. It's basic message is: The rally is an illusion and the stress tests are a fraud due to overly optimistic assumptions. If you thought nationalization or bondholder restructuring were off the table, you were wrong. The banking sector, he says, will lose a total of $3.6 trillion, meaning it's basically entirely insolvent.

He proposes three things. One is a renewed emphasis on getting the PPIP going. He's actually been pretty consistent on this, since the program has such vociferous critics.

True, the program offers cheap financing and free leverage to institutional investors, which will lead to the investors overpaying for the assets. But it does promote price discovery and remove the assets from the bank's balance sheets -- necessary conditions to move forward.

And to minimize the cost to taxpayers, banks must not be allowed to cherry-pick which legacy assets to sell. All the risky loans and securities banks were never meant to hold should be on the block. With enough investors participating in the PPIP program, the prices of the assets should be competitive, and there should be no issue of fairness raised by the banks.

Second, we need to end with the various no-string-attached guarantees and loan programs that are propping up the banks

Finally, he says the Congress must fast track a law that would give the government the authority to unwind or restructure complex financial instrements

And we shouldn't hear one more time from a government official, "if only we had the authority to act . . ."

We were sympathetic to this argument on March 16, 2008 when Bear Stearns ran aground; much less sympathetic on Sept. 15 and 16, 2008 when Lehman and A.I.G. collapsed; and now downright irritated seven months later. Is there anything more important in solving the financial crisis than creating a law (an "insolvency regime law") that empowers the government to handle complex financial institutions in receivership? Congress should pass such legislation -- as requested by the administration -- on a fast-track basis.

The mere threat of this law could be a powerful catalyst in aligning incentives. As the potential costs of receivership are quite high, it would obviously be optimal if the bank's liabilities could be restructured outside of bankruptcy. Until recently, this would have been considered near impossible. However, in 2008 there was a surge in distressed exchanges of debt for equity or preferred equity."

[we vs us]

Re:  the original post:

The author attacks "Obamanomics" (which is really modernized Keynesian economics) from the standpoint of a patchwork of conservative aphorisms, almost none of which have a real leg to stand on other than "Atlas Shrugged," Ron Paul's newsletters, and the Grand Ole Fear of Socialism. 

Some bullet points:

-- Asset price collapse IS a huge problem, especially when that asset is real estate and the securities and mortages reliant on it.  The only options are to let prices crash further or try to lend enough support so that there's a soft(er) landing.  There's simply no evidence that engineering prices for these assets "are irrelevant."

-- While his tax policy isn't particularly redistributionist (oh the horror of returning to Clinton era tax levels!), Obama's idea of making more capital available to people who will spend it isn't a terrible idea.  The alternative is to let more capital be silo'ed in individual fortunes, which might be plowed into the capital markets (long slow effect), rather than into the consumer economy (the most immediate effects).

-- Credit is in fact the lifeblood of our economy.  There's just no way that we recover if cash (or gold, or bunny rabbits) are the only benchmark for investment.  Think about all the purchases that wouldn't be able to be made without credit -- consumer or otherwise. That's an amazing amount of economic forward motion that would just disappear.  Think also about the industries who rely on lending as their primary income streams . . . ie. the entirety of the global financial system. Are we ready for that to dry up and blow away in the middle of a recession?

--  The "Federal government shouldn't be meddling" argument is old and busted.   I'm not saying our entire economy should be planned, soviet style, but in times of trouble -- especially in times when private capital markets are so scared they're immobile, like now -- the government is in a unique position to get things moving again. 

-- Also, hey, it looks as if several huge cataclysmic trends are converging right about now, and Obama has decided to try and address them (because, let's be honest, we've been kicking the problems down the road now for a couple of generations).  Health care, infrastructure rot, alternative energy investment -- all of these things need to be attacked, and the cost won't be cheap.  The good news is, we won't just be pushing the costs on to our children, we'll also be handing them the fruits of these investments. 

Just my $0.02.

[Crash Daily]

Bush was the the bullet and Obama is the gun. The gun is aimed at the Constitution of the United States of America. These "crisis", we are now constantly in, are hoped for and expected to last as long as he can drag them out. "A good crisis should never go to waste". That's exactly what all dictators use to strengthen their position. I don't know if Obama plans to take total power though. I think he's building this empire for a consortium, with the Dim's heading up the American branch.

Obama's policies will collapse this nation and he will still be blaming Bush. Wemay already passed the point of no return. I never expected any single person to be able to so blatantly get away with the level of destruction he is trying to bring to this nation without being put to a firing squad for treason. He wants the nation to collapse and the United Socialist Republic of America to rise from its' ashes. No sane person can think we can spend like this without eventually collapsing under the weight.

Obama and all his sick followers disgust me. This country WILL get exactly what it deserves for voting this monster to power. Unfortunately, McCain was not a viable option, but the hero worship and most forgiving hand offered towards any President in history is where the true undoing will come to this nation.

To bad those of us who are not blind stupid fools will have to also pay the price. With the type of system he's trying to usher in, we'll be shoved to the front for the train wreck. Don't worry though, just because we will be eaten by the monster first, doesn't mean the rest won't suffer an even worse fate, well deserved for their willing blindness.

I just hope we can some how put a stop to this idiocy in the 2010 congressional elections. It may be to little to late. One day, when the table has been set and the world is in utter turmoil, it will be ripe for a new leader. If that leader can ease the pain and bring hope and change, the people will say, be he God or Satan, I will follow him. I think Obama is not this leader, but he sure knows how to set the table. I'm also certain he's not setting it for God.

[Hoss]

Bush was the the bullet and Obama is the gun. The gun is aimed at the Constitution of the United States of America. These "crisis", we are now constantly in, are hoped for and expected to last as long as he can drag them out. "A good crisis should never go to waste". That's exactly what all dictators use to strengthen their position. I don't know if Obama plans to take total power though. I think he's building this empire for a consortium, with the Dim's heading up the American branch.

Obama's policies will collapse this nation and he will still be blaming Bush. Wemay already passed the point of no return. I never expected any single person to be able to so blatantly get away with the level of destruction he is trying to bring to this nation without being put to a firing squad for treason. He wants the nation to collapse and the United Socialist Republic of America to rise from its' ashes. No sane person can think we can spend like this without eventually collapsing under the weight.

Obama and all his sick followers disgust me. This country WILL get exactly what it deserves for voting this monster to power. Unfortunately, McCain was not a viable option, but the hero worship and most forgiving hand offered towards any President in history is where the true undoing will come to this nation.

To bad those of us who are not blind stupid fools will have to also pay the price. With the type of system he's trying to usher in, we'll be shoved to the front for the train wreck. Don't worry though, just because we will be eaten by the monster first, doesn't mean the rest won't suffer an even worse fate, well deserved for their willing blindness.

I just hope we can some how put a stop to this idiocy in the 2010 congressional elections. It may be to little to late. One day, when the table has been set and the world is in utter turmoil, it will be ripe for a new leader. If that leader can ease the pain and bring hope and change, the people will say, be he God or Satan, I will follow him. I think Obama is not this leader, but he sure knows how to set the table. I'm also certain he's not setting it for God.

I vote this post for tinfoil hat post of the week.

[guido911]

There are some great minds on this forum ...

Thank you.

Here is Tapper's take on the monumental 1/2 of 1% budget cuts Obama is proposing:

http://www.eyeblast.tv/public/checker.aspx?v=yd6UZuqG8z

Cutting $17B in a $3.6T budget, that's the sort of change I can believe in.

[Conan71]

Thank you.

Here is Tapper's take on the monumental 1/2 of 1% budget cuts Obama is proposing:

http://www.eyeblast.tv/public/checker.aspx?v=yd6UZuqG8z

Cutting $17B in a $3.6T budget, that's the sort of change I can believe in.

As I've said for over a year, Chump Change was coming to Washington.

[guido911]

Great news, unemployment up to 8.9%. More change we can believe in.


http://www.cnbc.com/id/30638052

I know, it's Bush's fault.

[Townsend]

Great news, unemployment up to 8.9%. More change we can believe in.


http://www.cnbc.com/id/30638052

I know, it's Bush's fault.

Are you implying that it's someone else's fault?