posted June 25, 2009 11:11 AM
By now, it should be painfully obvious that the O'Bomber economic plan has failed, the O'Bomber Porkulus Bill has failed and almost everything O'Bomber has said about the economic recovery is false. It's going to get even more painfully obvious this twit and the thugs he's surrounded himself with in the White House don't rise to the level of "amateur hour" hacks.
Still, O'Bomber plans to press on with his policies of utter failure until he's totally destroyed the US economy...and put government in total control of Americans lives.
That's the Marxist Socialist model of governments and economies.
Economics is not the deep murky pool most economists screech about...to elevate their own standings. Economics is pretty transparent and straightforward. There are causes and effects and these are known and have been known and followed since the US was opened for business. There are rules of the road. Violate those rules and the nation is in for a rough ride.
Everything that has happened in the US economy was predictable and was in fact predicted. The future of the economy is also predictable...given O'Bomber's utter disregard of economic principles.
Grab another glass of O'Bomber Kool-Aid and buckle up. It's going to be a rough ride as the rest of the economic shoes drop one by one.
In a free market economy there is a fix for every malady. O'Bomber has taken the exact opposite fix than the one called for.
June 25, 2009
Recovery When? How About If?
By C. Edmund Wright
Shhh. Don't let this get around, but Warren Buffet just let the cat out of the bag -- no economic recovery in sight.
Well no kidding. I have long tired of the economists and investment gurus debating "when our economy recovers" and how to position your investments for "when America bounces back" and so on, as if it's a foregone conclusion.
Haven't they heard? The America that always recovers is not in anymore. Any assumption of a recovery fails to consider the idea that we now have a government run by people who ignore American history and who are hell bent on changing America's future.
Obama has done more than apologize for America's greatness and generosity while abroad. He is wreaking havoc on the economy that paid for that greatness and generosity at home. Don't you remember? He is "the one" we've been waiting for to finally do something right around here.
Thus the conviction that Americans always bounce back and bring their economy with them is not necessarily relevant anymore. The rules for business have changed and continue to do so daily. Incentive has been devastated. The reliable motivations of the past do not matter, because most of those dynamics have been targeted as what is wrong with this country and they are systematically being removed at a stunning pace.
In reaction, Atlas is shrugging. And who can blame him (and her).
We cannot be on the verge of any meaningful recovery because we are in a downward swirl of liberal policy consequences -- and we have a government determined to correct this by getting more and more liberal.
Yes, I know the stock market has bounced off the March lows. I admit that history indicates recession is always followed by recovery at some point. There are still a lot of accomplished, respected and even conservative leaning commentators (such as Larry Kudlow) who speak in terms of "when" and not "if."
And yes, some of the trillions that the Obama administration is printing will eventually circulate through the economy to some degree..**(along with raging inflation followed by another economic downturn)**and there will be some stimulative effect at some point. A few auto sales will result from the Cash for Clunkers bill, for instance.
And there is some sort of self fulfilling factor to a macro economy related to the optimism or pessimism of the consumer population, and an all out effort by the MSM to proclaim Obama-nomics a success will spur some activity in the short run.
Nonetheless I see more compelling reasons for discussing this in terms of "if" instead of "when." Obamanomics simply will not work. It is based on a total misdiagnosis of our problems and prescribes precisely the wrong cures.
Consider the following series of events that have led us to our economy today:
1: Energy. While it is conventional wisdom that our economic woes stem from the bursting bubble in the housing market, few consider the needle that did the bursting.
When gas more than doubled in what was just a period of months, household budgets got devastated as trips to the grocery store and the pump took more and more of the limited dollars of the sub prime borrowers' budgets. This led to the next domino:
2: Housing Crisis: People needed to eat and get to work more than they needed to pay a mortgage they had not invested a down payment in, so they quit paying those mortgages in huge numbers.
So the gas domino nudged the sub prime mortgage domino -- which then toppled dominos in both the mortgage market in general and in housing prices. More and more mortgages were in trouble making more and more houses available making those houses worth less which in turn motivated more and more people to default on these mortgages.
It makes sense. If you have a 250 thousand dollar mortgage with no down payment, and that house is suddenly only worth 175 thousand dollars, why in the world would you worry about paying the mortgage since your gas and groceries are suddenly taking all your money to begin with? Well, many did not and still are not bothering to pay those mortgages. This led to another domino that very few saw coming:
3: Wall Street and Banking Meltdown: The massive mortgage defaults literally crashed the value of so much investment wealth thanks to the leveraging effect of credit default swaps and all manner of derivative investment instruments. Entire books will be written on this, but suffice it to repeat the little analogy that "my neighbor defaulted on his doublewide and the next thing I know the government of Iceland is broke." That's not as far off from the truth of how leveraged investments are inter-related as you might think. Bottom line, the next couple of dominos were nudged:
4. Consumer spending: with the crash of investment instruments, many Americans saw their 401 K and other investments lose something like 50% of their value. The nest eggs were cracked. To make matters worse, the other big nest egg -- the value of their homes -- was also diluted by something in the 20 to 40% range depending on location.
Millions of average families saw net worth losses of several hundred thousand dollars in a matter of months. Naturally -- and wisely -- those families stopped spending money. This of course pushed the dominos of all of those companies they normally spend money with:
5: Retail: Obviously when consumers stop spending, retailers are hurt. Actually, most businesses of any kind are hurt. Some big retailers like Linens N Things and Circuit City disappeared into bankruptcy. When business is hurting, they quit paying rent and they start laying people off.
5B: Autos: Consumers stopped buying autos as well of course. This pushed an industry, already bruised from unsustainable union labor costs, over the abyss.
5C: SUVs: Naturally, the SUV sales almost ground to a halt with the four dollar gas issue. The SUV was responsible for most of the profit margin the union dominated auto industry did generate.
6: Commercial Property and Mortgages: this is easy to understand and works a lot like the housing and mortgage bubble, but on a much larger scale. (See the bankruptcy filing of mall giant General Growth Properties.) Why would a bank that is likely already in trouble re finance billions of dollars of General Growth mortgages when General Growth's customers -- retailers -- are not paying rent and going out of business? Well, they would not. Prepare for this bubble to continue to burst.
7: Un-employment: all of the above have led in part to the massive unemployment figures. Of course, this includes union autoworkers. And of course, massive un-employment will just start the cycle of mortgage defaults and cascading housing values all over again as a new wave of folks quit paying their mortgages.
7B: Energy AGAIN: And now, to make matters worse, energy prices are creeping back up. Many on Wall Street and in the financial punditry welcome this as a sign that things are bouncing back. This is the Metro and limousine academic set from the DC-New York corridor that still misses the fact that oil was the first domino to begin with.
So we start this all over again and ‘round and ‘round we go.
All of which in my equation all but guarantees we are not on the verge of any meaningful recovery. Quite the opposite perhaps. The downward swirl of liberal policies continues to build on itself.
It is beyond debate that liberal policies have led to most of these dominos that are now toppled. Liberalism in power has prevented this country from using much of our own energy. It has prevented the building of any refineries since before the days of Microsoft. It has prevented us from building nuclear power plants. It has dominated most production and labor policy for the Big Three automakers. It dictated that people who could not qualify for home mortgages should have access to them anyway.
Liberal cronies were in charge of Fannie Mae and Freddie Mac, which were liberal enterprises to begin with. Liberal government has run Michigan for decades.
In fact, liberals have been PROUD of all of these beliefs as they have fought these battles one by one. In the childlike mind of a liberal utopian, the dots just never connect. In reality, those dots always connect - and they connect long before most people can visualize the lines. Thus an economic meltdown that hit us with breathtaking speed.
And the Obama cure? More of the same. More quashing of America's energy complex. More government interference into labor. More government interference into lending. More government interference into healthcare. More changing of contract law. More taxes on business. More incentives not to work or pay your mortgage or invest. More and more and more government - all because we need to solve things that government screwed up to begin with.
Recovery? Maybe. Maybe not. But no time soon.