Obama and Ben Bernanke Have Us Facing the Abyss
If the congressional midterms, gubernatorial races, and various state and local electoral contests result in the large-scale repudiation of the left so many are expecting, it will represent only the barest of beginnings towards a genuine long-term national economic recovery.
Only now is it beginning to dawn on many American just how deep our short-term and long-term holes really are. Many others, including politicians who appear to be on their way to key positions after the elections, still don’t seem to get it. This column will focus on the near-term economy — because if we don’t get a handle on a quickly mushrooming mess, and soon, there may not be a long-term.
This nation’s government just completed its second fiscal year with deficits of well over a trillion dollars, a number that was unthinkable just two years ago. Despite claims to the contrary, true cash flow from federal government operations during fiscal 2010 was more negative than the previous year. It only looks better because of increased receipts from the Federal Reserve (more on that in a bit) and cleverly manipulated non-cash accounting entries that arbitrarily and artificially reduced this year’s reported outlays. Net tax collections are still about 20% below where they were two years ago, and are only showing bare signs of turning upward.
After separating several stakeholders from billions of dollars to which they were legally entitled during its bankruptcy and creating a new entity with $30 billion of “fluff” known as “Goodwill” on its balance sheet, the government is finding itself saddled with an investment in a giant but shrinking car company which it may be unable to unload, even in part. Uncle Sam is also having a hard time unwinding its “investment” in Citigroup, the bank former Clinton Treasury Secretary Robert Rubin helped bring down, without disrupting the markets.
You’ll have to excuse me for doubting that the Obama administration really wants out of either situation. That’s because they are deliberately diving into the ownership game even further. One example: Almost no one knows that the alleged “small business lending” bill which recently whipped through Congress requires government “capital investment” in participating banks as a precondition for their involvement in the program. Their real objective isn’t small business lending; it’s enlarging the scope of the state’s control.
Speaking of enlargement, has anyone noticed what Ben Bernanke’s Federal Reserve has been up to?
Mr. Bernanke is second only to Obama for our financial mess. This man has been consistently wrong on his decisions since he was appointed by Mr.Bush.Look they don’t call him helicopter Ben for nothing.He won’t see any inflationary pressures until it’s too late… buy commodities now!
Good article.
The falling dollar and the huge upswing in the buying of commodities, especially gold, should also alarm everybody. The falling dollar will also make the price of oil go way up, which means the price of gasoline will go way up, which means that inflation will also eventually go way up. People are frantically buying commodities because they’re probably the only things that will be worth anything in the coming years. It certainly will NOT be Treasury bonds, which are falling in value as we speak.
Throwing the far-left and the Obama team out in November will help, but unless we stop A LOT of spending IMMEDIATELY, our economy is bound to collapse. Also, a lot of the smaller banks may face obliteration next year because of the home foreclosure crisis, which nobody seems to be addressing. The big banks may be too “big” to fail, but nobody seems to care about the thousands of smaller banks that are about to go bust.
We are headed for dark times, America. But if we start doing something about it in 2010 and 2012, it may not be too late. Seems to me, if this country could survive Jimmy Carter, we can survive just about anything.
You are quite right Libertyship, but I think it is already too late, the decline is just starting. This is going to be ugly.
I’m trying to maintain a positive attitude too. I’m hoping that one day we’ll look back and rejoice that the Obamanation occurred because it woke our country up and reinvigorated its core values. Of course, right now this is merely a hope for a change.
“…creating money out of nothing…”
The possibilities for creating catastrophe are endless once you’ve gone off the gold standard.
Precisely. Yet traditional conservatives neglect (or refuse) to examine the fact that the current monetary scheme — which is a single, closed system churning out money as debt that must therefore prop itself up by intentionally and proportionally increasing that debt — is fundamentally insolvent. All previous systems like it have failed through time.
This monetary system is inherently Socialist. It is the single greatest threat to classical liberalism there is. It reaches into our lives and homes and takes us by the throat. This is not natural; this is symptomatic of the cancer of this style of banking system.
This system is an independent, monolithic, international system with its interests in mind, not ours. It will consume us simply because there is no other way for such a predator to behave. We already act as its servants.
True conservatism demands that this scheme be outed and made to stand the harsh light of national scrutiny. Why isn’t it?
http://www.financialsensearchive.com/fsu/editorials/2005/1212b.html
http://www.youtube.com/watch?v=vVkFb26u9g8
How do we know this is a global cancer eating us alive?
Simple. http://www.usdebtclock.org/world-debt-clock.html
Inflation is theft by dilution. The Austrian economist Peter Klein, in a lecture at a Mises Institute function on the Federal Reserve earlier this year said that the Keynesian theory that urges printing vast quantities of air-backed money was widely accepted because it gave an intellectual justification for what supporters of big government yearned to do anyway, which was to grow government as much as possible.
see:
Did Keynesian Economics Win the Battle of Ideas?
Jekyll Island, Georgia; 26 January 2010.
http://mises.org/media/4634 and
Keynesian Economics: The Beast That Won’t Die
http://mises.org/media/4074
For a while, people think low interest rates are great, because they are supposed to stimulate investment, job creation, yadda. But with the government piling millstones around private enterprise’s collective neck every five minutes, this virtuous result is unlikely to materialize. Bernanke knows this but can’t think of anything else to do but keep interest rates low. But what about the people the system should be rewarding, those with the $$ who are not up to their eyeballs in debt, the people who put aside $$ for their own children’s college fees, retirement, whatever. Well, of course, those people are getting quietly screwed. Scared to put money in the stock market, they are about to earn negative returns on bank or CD savings as the $$ crashes against other currencies. Lately–check it out!–unless you own gold or Euros, your purchasing power has dramatically shrunk. This is a BAD THING for the economy because more and more people are getting ready to retire and their savings will not yield enough money for them to live on. Once prudent people who conservatively assumed a yield of 4% on their savings retire, they will be living on less, and spending less, and so on. Younger people saving for retirement will have to save more, i.e., spend less, too. Artificially low interest rates, far from helping the economy recover, will push us deeper into a downward spiral, just as they did in Japan. Remember Japan, Ben, those guys who were going to take over the world??
No, I won’t excuse you “for doubting that the Obama administration really wants out of either situation.”
Nothing says “whiny, dishonest and useless” more than right wingers commenting on the state of the economy. It had been driven over a cliff and in free fall when Obama took office, and he’s been systematically dealing with it, including seeking out the best minds for advice and guidance.
including seeking out the best minds for advice and guidance.
… Which explains why these “best minds” have fled and are fleeing the sinking ship after spending time inside the Obama House of Horrors.
Given the fact that Obama and Congress have given the green light to INCREASING government ownership of private enterprises (in the case discussed, smaller banks), and that they have in effect by their negligent fiscal conduct forced Bernanke to double down on QE or see what’s left of the economy collapse (and pin the blame on him, when it belongs to them), the burden is on you to prove me wrong. You can’t, and all of your tired blather won’t change that.
BC,
You invalid turd. His “best minds” have left the building! Summers and Roemer are leaving. Summers drove the HArvard Endowment into the ditch so he was a clown anyhow. Can you name ONE policy that Obama has offered that has helped our economy? Just one! Cash for Clunkers? Epic fail. Home tax credit? Epic Fail. Re-nominate Helicopter Ben? Soon-to-be-mother-of-all Epic FAils. Small business lending bill? Businesses want customers, not more credit! Epic Fail. Raising taxes on the productive class? Epic Fail. Healthcare “reform?” Perpetual Epic Fail. Dude, you live in your mommy’s basement and hack away at your Apple II computer all day long while eating bags upon bags of Cheetos – at least that’s what your FBI profile says.
‘Nothing says “whiny, dishonest and useless” more than right wingers commenting on the state of the economy.’
OK. Thanks for bleating out the masturbatory BDS take from the progressive sheep fold. Good to have that out of the way. Now then, first understand that conservatives consider progressive views on the state of the economy as little more than promoting confiscatory theft by government fiat. Second, FOAD you delusional twerp.
BC write your BS elsewhere. This is a serious discussion for grownups, not a discussion for morons believing in fairy tales. This is a discussion about actual factual facts happening in real life.
Only an idiot believes the MSM created meme that Bush caused the financial crisis.
CONGRESS writes the laws and the budget NOT the president. Congress has been democratic for 8 years now. Even when your moronic party of collective suicide mongers has the majority, you still claim that the evil Republicans is at fault.
Obama is fixing nothing. He is doing the exact same wrong things that caused the current mess. And he is doing it even more.
JL wrote This is a serious discussion for grownups, not a discussion for morons believing in fairy tales. This is a discussion about actual factual facts happening in real life.
Hmmm….let’s see now…apparently by your definition of a “serious discussion for grownups,” “actual factual facts” don’t actually matter, and neither does context, history, nor even evidence, no matter how hard it bites you in the butt; whereas “fairy tales” are anything that disturbs your disturbed idea of a serious discussion.
Only an idiot believes the MSM created meme that Bush caused the financial crisis.
OK, so it’s, ummm, ok to trash Obama for not fixing the economy right away (even before he took office), but as far as poor Bush goes, he was just a poor helpless schmuck in a tree house during all of his 8 years, eh?
Well, I’m glad you clarified your position.
It’s a ‘can’t see the forest for the trees’ problem.
Traditional republicans can only see obamacare and cap and trade and think if we get rid of those notions, we’ll have capitalism again.
They are missing the big picture that we are already screwed and there’s virtually nothing that can be done about it.
Just prepare your ship for the sinking. It’s going down.
Bingo. This crisis has been festering under a cloud of malregulation and social engineering for decades. Our choices are now to get it over with quickly (2-5 years)and painfully or continue denial and money-printing which will draw out the misery for years and years. Here’s the current roadmap: currency debasement> trade protectionism> economic misery> forced austerity > resource grabs > WW III. Enjoy. Be sure to thank a “progressive.” (they come elephant AND donkey-shaped).
With the QE program and POMO pushing treasuries into the Fed balance sheet, the US is becoming the largest holder of its own debt (behind China and Japan).
When a country is self financing its own bubble and has the ability to print its own money, the temptation to monetize the debt is far too great.
This is the situation where Japan finds itself today, unable to find its way out of a 25 year era of stagnation.
Yep. And Japan is an export country and basically holds its own debt. Not so for us. Also, JApan has had consistently high savings rates unlike us who are only now beginning to sock money away (or at least begin to deleverage). Winter’s coming, prepare accordingly. We have maybe 6-12 months to make our personal get-away plans. Use time wisely.
The Keynsian story is that we shouldn’t worry about the debt since we owe it to ourselves. Well, we have a national debt of about 13 trillions and an overseas debt of about 12 trillions. It has to be paid. How did it get so high. It was because of all the deficits we have run. How to make it smaller? Run budget surpluses. That means raise taxes. A bad idea. Of course, we can default in various ways including inflation. The last was tried in Germany around 1923. It wiped out the bondholders and anyone else who were holding marks. In other words it wiped out the middle class. People didn’t know who they were anymore. Hitler provided a substitute identity. The British after the Napoleonic wars were stuck with a debt that was about three times their GNP. They paid off the interest but left the cash with the people who were expected to do something with it. This went on for a century or so. The debt didn’t decline much but the economy grew through the 19th century. The debt eventually came down to reasonable proportions with respect to GNP- about 25%. I think we should do the same.
That dark day in the possible future history of the U.S.A. comes when the I.R.S., like the state of California has already done, issues tax returns in the form of I.O.U.s. America defaults when it can not pay its debts, principly the interest on its debt and its credit rating at Moodys slips anything at all. This would be a slow motion train wreck because other extreme measures are available: print more, borrow more at a higher interest rate, cap commodity prices to hedge inflation, futher eroding the key indexes of confidence and stability, sell assets to foreign governments, legalize dope so that no one notices the demise…
Watch how the left coast of California to see how goes the nation. “Austerity hell no, not in the fool’s gold Age of Entitlement.”
I wish people would start referring to these people to what they are, criminals. Just because they sit where they do, does not make what they are doing, legal. They should be investigated, and many should go to prison.
No matter who wins in november,the nation is finished as an economic/ world power.Thirty years of destructive new world order economic policies dedicated to enriching a left-wing/rino plutocracy through globalized de-industrialization and real estate speculative bubbles,will make recovery impossible.In this catastrophic context,the abyss will be salvation. let’s organize to push these virulent elites down the abyss,for only then,can we rebuild our nation.
Although the problem is far from silly, it does seem silly to try to blame either GWB or Obama, PARTICULARLY for our collapse. I certainly agree with the people who point out that electing Repubs will not solve the problem, but the Dems are sure not accomplishing much. Had McCain been elected, we would undoubtedly still be in deep do-do, but it would be the Dems screaming that the end of the world was near. Such things we do, or should, know.
There is a certain level of wealth, security, and leisure that Americans of most political stripes have come to expect. How dreams and ambition get down-sized, only time will tell, and the bigger the ship, the more slowly it turns. I heard the expression, “rearranging the deck chairs” at least four times from last night’s talking heads…so will will avoid discussing the iceberg, hoping that it was only a large whale and we are drifting, rudderless, but not sinking.
I don’t see how we can avoid having serious inflation, not hyper inflation; but at least, then interest rates will rise for our bank accounts etc.
DWIGHT You are not very BWIGHT are you?A trillion spent buying union votes;A fed Chairman printing paper to revive the economy:Tax cheat Geithner devaluing the dollar;while The O’Hole pushes discredited Keynsian socialism and gets ready to kill off the Bush taxcuts;and you have trouble seeing how the Obama regime is damaging the economy? Your liberal head is as thick a a hunk of reinforced concrete.