We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
Obama's 'solution' for what ails us is to utilize two common political treatments for recessions. First, the standard Monetarist 'Easy Money' solution by lowering interest rates. Second, the Keynesian 'Stimulus'. The unfortunate situation we face is really only getting worse because he cannot do the second without the first — there simply isn't enough money interested in supporting more debt. The solution? Print more money, a concept I discussed in an earlier post.
The printing of money allows banks to purchase Treasury Debt, which funds the deficit, which they then sell back to the Fed in order to keep their reserves intact.
Europe has taken a remarkably different approach. The Eurozone wants to emerge from its difficulties in economically healthy fashion, rather than saddled with massive debt. Some European nations have such huge debt that the only sensible track to follow for other Euro nations that are growing modestly is to manage with restraint. They've been backed into a corner, but it's a good corner to be backed into.
If Obama was the head of a sports league having economic struggles, BALCO would still be in business. His steroid policy would put individual players at risk in order to keep interest in the league high based on new records. Like Barry Bonds' records, people will soon wonder how things got to this point. Will Congress review Obama's steroid policy and chart a new course?
The problem is we're not in (business cycle) recession...we're in a generational debt-deflation (londonbanker.blogspot.com/2008/07/fishers-debt-deflation-theory-of-great.html). The solutions germane to a business-cycle recession are like pissing-on-a-forest-fire in a debt-deflation. The debt that has been 'destroyed by its betrayal into hopelessly unproductive works' (whether private or public) needs to be written off and losses distributed before any true recovery can occur. And despite the herculean efforts of the governments and central bankers, they will be written off eventually. The only question now is: Orderly or not. The longer the can gets kicked, the more likely it's dis-orderly.
Soviet of Washington
Ron Paul ("Default Now, or Suffer a More Expensive Crisis Later" -- Bloomberg.com on July 22, 2011) has been saying this for many moons.
Michael Lewis is also discussing this topic in "Boomerang, Travels in the New Third World," his newest book, and on several talk shows. Default back to prosperity seems to be the mantra for both Europe and the U.S.
As those who know me will attest, I am a Ron Paul supporter. I'm well aware of what he's been predicting for years, and much of it is coming to fruition (as anyone with a solid grounding in Economics would have guessed).
Schumpeter once wrote that Capitalism would end not due to internal contradictions (as Marx or even Adam Smith suggested), but due to governmental influence and emphasis on unproductive activities.
de Tocqueville more or less said the same thing.
What I found intriguing about Obama was, upon coming to power, his very public discussion of "debt driven recession", which this clearly is. But his solution was to add more debt, which just boggles the mind.
I saw Michael Lewis on "Morning Joe" today, and after reading (and seeing) "Moneyball", I definitely want to read his new book.
Barry O is from Chicago Politics. The ends always justify the means. He had a willing media in the beginning, but they are beginning to turn on him. He'll be gone in the blink of an eye, but there are more just like him waiting in the wings.
I have to admit, with my medical background, my husbands financial and economic background; I can't see how we can ever dig out of this bi-partisan mess of $15 trillion of T-bond debt, and the $125 trillion of medicare debt. We are currently taking in less than $2 trillion in taxes and tariffs (and FICA with holdings), and still have to borrow to make our budget. I hate to be a pessimist but let's reduce these numbers to thousands of dollars and ask yourself how any business or household could dig out?
Even if we deprive the Baby-boomers of their medical care (which would essentially be what Hitler, and Mao did), I still don't see a way out, regardless of one's economic views.
And to add insult to injury if we passed some legislation whereby we found a way to drill our own oil and commit the proceeds to paying off the debt; this would take 40 years and there is no way you can tell me that we can hog-tie congress for any period of time to a balanced budget and the repayment of the debt.
The only way out is to file BK as a nation or issue perpetuities that to put off the principle repayment of the debt until a miracle comes our way. BTW I don't blame anyone person viz. Obama but all of congress over the past 40 years.