Barack Obama Drives the Economic Clown Car Off the Cliff
By Larry Johnson on March 4, 2009 at 11:18 AM in Current Affairs
Let’s start with the “good” news. We may see the U.S. stock market surge as much as 1000 points in the next week. Why? No good technical reason, although there are some bargains to be had, but, after talking with a buddy of mine who is a broker, he indicated there is a crazy psychology that may lead to a temporary rally. But it will not be long lived and the stocks will dive again.
Remember Barack’s speech in February where he said:
My administration inherited a deficit of over $1 trillion, but because we also inherited the most profound economic emergency since the Great Depression, doing little or nothing at all will result in even greater deficits, even greater job loss, even greater loss of income, and even greater loss of confidence.
This is why I call this clown clueless–”doing little or nothing will result in even greater deficits.” Huh? So you prescription, Mr. President, is to propose a budget that quadruples the budget deficit? So deficits are good? Jesus Christ!! The man is so busy playing the political cards and saying the things that sound terrific on the stump that he is not able to offer a coherent vision of what he wants to do for the economy. So if we do little or nothing we get greater deficits and that is bad? Okay, but then he proposes a budget that produces the largest deficit ever in the history of America and somehow, magically, his deficits are swell? This is an economic policy bordering on nuttiness.
We are in the early days of a global depression. No, not recession, DEPRESSION. Demand is collapsing around the world and it is cascading. What do I mean? Think of a boulder rolling down a rock strewn mountain slope. As it picks up speed it also kicks loose other rocks and the size of the slide grows.
The U.S. has been insulated, so far, from the worst of the effects. Why? Because wealthy people in other countries–China, Brazil, Saudi Arabia, etc–are buying up dollars in the person of U.S. Treasury bills. They are seeking safety and stability. There will come a point when the surfeit of dollars will collapse. Not my opinion, that is a warning from Warren Buffett:
Warren Buffett, whose Berkshire Hathaway Inc (BRKa.N) (BRKb.N) sits on $25.54 billion (17.8 billion pounds) of cash, said worried investors are making a costly mistake by buying up U.S. Treasuries that yield almost nothing.
In his widely read annual letter to Berkshire shareholders, the man many consider the world’s most revered investor said investors are engulfed by a “paralyzing fear” stemming from the credit crisis and falling housing and stock prices. Treasury prices have benefited as investors flocked to the perceived safety of the “triple-A” rated debt.
But Buffett said that with the U.S. Federal Reserve and Treasury Department going “all in” to jump-start an economy shrinking at the fastest pace since 1982, “once-unthinkable dosages” of stimulus will likely spur an “onslaught” of inflation, an enemy of fixed-income investors.
“The investment world has gone from underpricing risk to overpricing it,” Buffett wrote. “Cash is earning close to nothing and will surely find its purchasing power eroded over time.”
“When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s,” he went on. “But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.”
The problem with Barack and his team is that none of the top economic advisors have done anything of significance in the private sector. Timmy Geithner has suckled at a government tit for most of his career. Larry Summers? Academic and government bureaucrat. Not a entrepreneur or business owner in the lot. And Barack? Until he wrote his book he had no money and has spent most of his life as a politician or “community organizer.”
In the midst of a deflationary collapse the last thing you want to do is raise taxes. Yet the Barack budget makes clear that hefty tax increases are on the way. He might be able to get away with that if he was proposing to reduce the Federal deficit and impose some fiscal restraint on government spending. But when you raise taxes and you still expand the deficit? That is insanity and the subsequent slide in the stock market reflected that judgment.
More to this point where CNBC’s Jim Cramer’s comments the other day:
Finally, is there any one out there who has recorded the questioning of Tim Geithner by the House or Senate budget committees? I would love to get a clip of him talking about the need to go after corporate “tax cheats” who are using legal shelters overseas. How about let’s go after ignorant-ass Secretary of Treasury who forgot to pay his taxes until nominated for a big time Federal job? Just asking.
by Ronald Scott
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