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The Demonization of Barack Obama

October 7th, 2009 Comments off

On November 22, 1963, as a fateful motorcade headed into downtown Dallas, leaflets were circulated throughout the city featuring profiles of President John F. Kennedy and headlined, “Wanted for Treason.”  On the day JFK was assassinated, there were factions from within the extreme rightwing of the American political spectrum expressing the most violent hatred for President Kennedy, accusing him of being soft on communism, a betrayer of anti-Castro Cubans  and an ultra-liberal supporter of civil rights for African-Americans. Before the bullets ricocheted  in Dealey Plaza on that violent day, they were preceded by words of violence. It is that historical context that connects directly with the unprecedented verbal venom being projected at the 44th President of the United States.

Even before the historic election that placed Barack Obama in the White House, crowds at several of John McCain’s rallies openly called for Barack Obama to be “killed.” Since Obama’s inauguration, the rhetoric has far from dissipated. If anything, the vitriolic contempt stemming from rightwing extremists in America has grown more strident. There are the “bithers,” who are convinced that Barack Obama is not a native-born American citizen, and therefore his presidency is inherently illegitimate. Far more ominously, there are those who are not content with just denouncing the “foreign occupier,” as some extremists refer to Obama; at rallies and on talk radio, a noisy contingent has talked about Obama representing tyranny, and have engaged in language that approaches the level of incitement towards violence.

President Barack Obama is not above criticism, as is the case with any politician. However, those who are pouring out hate and contempt towards Barack Obama, on a scale that approaches irrationality, actually drown out and delegitimize those who have genuine, thoughtful criticism of the policies of the Obama administration, especially with regards to the economic crisis and America’s exploding national debt and rampaging deficits.  While wrapping their vituperation in the American flag, these extremists masquerading  as patriots are actually damaging the heart and soul of the conservative movement in the United States, while stoking the flames of violence within America that can prove more destructive to the national interest than the threat posed by any external foe.

While listening to the joyous celebrations that erupted among many forums connected with the Republican Party when Chicago lost its bid to host the 2016 Olympic games, despite the personal intervention of President Obama, I had a feeling of déjà vu. Imagine, supporters of a U.S. political party that claims to be patriotic erupting in paroxysms of ecstasy over the defeat of an American Olympic bid, only because this somehow denigrates Obama. Where have I seen this before?

In France, just before World War II. For a brief period, a left-wing coalition government came to power in France, and for the first time a French Jew, Leon Blum, was that nation’s Premier. The rightwing went ballistic. Under no circumstances would they cooperate with Blum and his government. When Blum’s coalition, known as the Popular Front, reached out to conservative circles in France, they were rebuffed at every opportunity. Extremists attacked the Jewish Premier with violent verbosity, even when Leon Blum went against his own party’s agenda, and actually supported conservative policies on foreign affairs and military expenditures. The rightwing in France chanted in response, “better Adolf Hitler than Leon Blum.” In 1940, thanks in large part to the disunity and political polarization they had sowed, they got their wish, when the nation they claimed to love collapsed in a humiliating defeat.

Before the anti-Obama pathology that has gripped America’s rightwing has gone past the point of no return, are there any conservatives of conscience and civic courage willing to speak out? If not, their collective silence may prove more destructive to the United States than any plot being hatched by Al-Qaeda.

 

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com

How To Shrink the Unemployment Rate Through More Job Losses

August 9th, 2009 Comments off

When President Obama trumpeted the first “decline” in the national unemployment rate in more than a year, I thought for a moment that the 44th U.S. president was residing in an alternative universe. How can you lose a quarter of a million jobs in a month, and simultaneously witness the unemployment rate actually post a  decline from 9.5% to “only” 9.4%? However, on reflection, it is I who reside in an  alternative universe. For if you decide to remove a whole chunk of discouraged workers, those whose long-term unemployment is deemed more or less permanent, from the official workforce count, then you can  absolutely post a reduction in the national unemployment rate while still shredding jobs, courtesy of the statistical wizards at the Department of Labor. Easy as toast.

So it is I who must apologize to President  Barack Obama for having committed the heresy of screwing up with logic my understanding of official statistics on employment in America . Of course, it makes perfect sense. Now, let’s just go ahead and save a whole lot of stimulus money by deducting everybody who is unemployed for more than a month from the official national workforce number.

If this pearl of economic policymaking is indeed valid, why not go the next step, and completely solve the problem of our national debt. Even with rising yearly deficits, we can actually reduce the total national debt by just removing a whole category of IOUs that no one seems to be worrying about at the moment. That way, Treasury Secretary Timothy Geithner can withdraw his request before Congress to increase the national debt ceiling to above $12 trillion, or nearly triple the total it was back in 2000. A brilliant solution to the nation’s fiscal imbalance, so it would appear.

But wait a moment. It seems we already are doing that. According to David M. Walker, who served as the Comptroller-General of the United States from 1998 to 2008, if the U.S. were following general accounting rules that are applicable to businesses in the private sector, it would be posting a far higher figure for the national debt. How much higher? According to Walker, there are more than $50 trillion in unfunded liabilities the U.S. government has incurred regarding future Medicare and Social Security obligations.

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com 

 

 

Fortunately, a high official with the Federal Reserve disagrees with David Walker. Unfortunately, that official, Richard W. Fisher, President of the Dallas Federal Reserve, revealed in a speech delivered in May that the actual national debt of the United States, accurately tabulating all the nation’s obligations, is a cool $100 trillion.

Now maybe all this statistical manipulation being conducted by our government officials is meant to serve some useful purpose, such as to artificially boost investor confidence and create a new stock market bubble. Perhaps Obama and his Wall Street coterie of advisors really do know what they are doing, and sceptics such as myself are just panicky doomsayers. However, I really do hope America’s foreign creditors are blissfully ignorant as to the true state of the U.S. economy and its fiscal reality. Heaven help us if they stop believing Washington’s math.

Obama Versus JFK on Corporate Greed: The Comparison is Not Flattering

July 26th, 2009 Comments off

Amid the surreal and boastful bonuses the Wall Street tycoons have been paying themselves after being  rescued by the American taxpayer from their own reckless follies, there is an eerie silence from the Obama administration. That this “they can eat cake” mentality flourishes among the financial elites while the economic catastrophe they engineered through their unmitigated and reckless greed sends the U.S. unemployment rate into double digits is an immoral affront to basic human decency. Yet, except for an occasional sermon on corporate excess in a time of profound economic crisis, President Barack Obama has thus far failed to exercise decisive leadership and put a line in the sand on this defining question. To paraphrase a former Republican presidential candidate, where is the outrage?

In 1962 President John F. Kennedy was also confronted with corporate greed and excess. However, in sharp contrast with Obama, he demonstrated both moral outrage and decisive leadership. Does anyone remember when JFK took on the excess greed of the U.S. steel industry? It is instructive to look back nearly half a century ago.

In the second year of his administration, President Kennedy faced two wars, just as Obama reminds us constantly he is currently confronted with. True, only one was hot, in Southeast Asia, while the other conflict was referred to as the Cold War. Yet the Cold War posed a serious threat to the United States of nuclear extinction, a danger that came perilously close to reality later that year during the Cuban missile crisis. Prior to that, the danger of a military confrontation with the Soviet Union over Berlin was very real. All these factors required compulsory military service for hundreds of thousands of Americans, and  vast expenditures on national defence. This was all occurring at a time of economic crisis, requiring the Kennedy administration to confront both recessionary and  inflationary pressures.  To prevent prices from spiralling out of  control, the President sought the cooperation of both labor and management in key areas of the U.S. economy in order to keep the lid on prices. This was important both in terms of preserving the American standard of living at home, while promoting U.S. exports abroad. A major test case for the Kennedy administration was the U.S. steel industry, where large price increases, should they occur, would have a highly negative ripple effect throughout the U.S. economy.

President Kennedy personally intervened in the question over price hikes for steel. His first step was to obtain concessions from the steel unions. He was successful in winning agreement for a new union contract that would have no effect on steel prices, taking into account both wages and productivity. Kennedy expected  management to now do its part. Instead, first U.S. Steel, the nation’s largest steel producer, followed by its competitors, announced a substantial rise in steel prices. This action, if left unchallenged, would clearly have unleashed  a damaging bout of inflationary pressures throughout the economy.

JFK was outraged. He decided to take action, and bring his voice on the importance of the issue directly to the American  people. He conducted a news conference, and in his opening statement he did not mince words. Kennedy said:

 

“Simultaneous and identical actions of United States Steel and other leading steel corporations increasing steel prices by some $6 a ton constitute a wholly unjustifiable and irresponsible defiance of the public interest. In this serious hour in our nation’s history when we are confronted with grave crises in Berlin and Southeast Asia, when we are devoting our energies to economic recovery and stability, when we are asking reservists to leave their homes and their families for months on end and servicemen to risk their lives–and four were killed in the last two days in Vietnam– and asking union members to hold down their wage requests at a time when restraint and sacrifice are being asked of every citizen, the American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility can show such utter contempt for the interests of 185 million Americans. If this rise in the cost of steel is imitated by the rest of the industry, instead of rescinded, it would increase the cost of homes, autos, appliances, and most other items for every American family. It would increase the cost of machinery and tools to every American businessman and farmer. It would seriously handicap our efforts to prevent an inflationary spiral from eating up the pensions of our older citizens, and our new gains in purchasing power…The Steelworkers Union can be proud that it abided by its responsibilities in this agreement, and this Government also has responsibilities which we intend to meet. The Department of Justice and the Federal Trade Commission are examining the significance of this action in a free, competitive economy. The Department of Defence and other agencies are reviewing its impact on their policies of procurement. And I am informed that steps are underway by those members of the Congress who plan appropriate inquiries into how these price decisions are so quickly made and reached and what legislative safeguards may be needed to protect the public interest. Price and wage decisions in this country, except for a very limited restriction in the case of monopolies and national emergency strikes, are and ought to be freely and privately made. But the American people have a right to expect, in return for that freedom, a higher sense of business responsibility for the welfare of their country than has been shown in the last 2 days. Some time ago I asked each American to consider what he would do for his country and I asked the steel companies. In the last 24 hours we had their answer.”

 

The leadership Kennedy demonstrated back in 1962 shamed the senior executives of the steel industry, leading them to rescind their unwarranted price increase. Afterwards, JFK is said to have remarked, “my father told me businessmen were SOBs. I didn’t believe him, until now.”

In the past six months, President Obama has revealed his towering intellect, basic decency and sophisticated world view. However, we have yet to observe the toughness and passion required to take on the forces that drove the U.S. and global economy into a ditch. Except for periodic and overly-mild rebukes, we have witnessed excessive conciliation that is underserved. I hope I will be proven wrong, but despite initial hopes by many that President Obama would become the “Black Kennedy,” more and more I am reminded of what the late Senator Lloyd Bentsen once told Senator Quayle during the Vice Presidential debate back in 1988: “You’re no John Kennedy.”

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com 

 

 

U.S. Economy Risks Hellish Prospect of Hyperinflation

May 24th, 2009 Comments off
The global financial and economic crisis arose out of radical deflation in the U.S. housing market, as the real estate asset bubble split asunder. With the collapse in housing prices came the contraction of another asset bubble; equities. The ongoing demand destruction has also deflated commodity prices from their recent peaks, giving rise to a collective view among economic policymakers that deflation represents the single greatest risk to the global economy.
In itself, deflation is a dangerous economic phenomenon. Historians of the Great Depression often refer to deflation in the 1930s as a contributing factor to the prolongation of that epochal downturn in the world’s economy. Looking closely at the dynamics of deflation, it is not difficult to see why this is a dangerous economic state to be in. When prices of major durable goods, especially homes, continue to decline, this inserts a strong dose of uncertainty into the human decision-making process. Not many consumers are likely to take out a mortgage on a home that they believe will actually decline in value right after the legal papers are signed. Or so the classical economic theory goes.
However, though not downgrading the danger of deflation, I believe policymakers are ignoring other factors regarding this economic and financial condition. Furthermore, the U.S. government and Federal Reserve in particular, are taking steps to “cure” deflation that will inevitably lead to hyperinflation, which in the long-term may prove far more destructive to the long-term health of the U.S. economy.
History demonstrates that deflation is not a permanent condition. Market forces, unencumbered by fiscal and monetary intervention, eventually restore pricing equilibrium. At a certain point prices of major durables such as homes are low enough to encourage new categories of consumers to enter the marketplace. As demand is restored, prices stabilize and then resume their upward ascent. It is all a question of time. However, key decision-makers in the United States are not paragons of patience. They want deflation cured immediately, which explains why the U.S. Treasury and Federal Reserve are hell-bent on policies that are guaranteed to be inflationary. The question is how bad will inflation ultimately be.
Massive quantitative easing by the Fed is pouring trillions of fiat U.S. dollars into the money supply, essentially conjured out of thin air. This is being done without transparency, the rationale being that frozen credit markets require a vast expansion of the money supply in an attempt to get the arteries of commerce flowing again. Similarly, the U.S. government is spending vast amounts of money it does not have, with the Treasury Department selling unprecedented levels of government debt in a frantic effort to fund the wildly expanding U.S. deficit. These two forces, quantitative easing and multi-trillion dollar deficits, are the core ingredients of an explosive fiscal cocktail that I believe will ultimately lead to hyperinflation.
What exactly is hyperinflation? Economists disagree on a common definition, so I will offer one myself. Double-digit inflation extending over a period of at least two years would arguably be a hyperinflationary period. It can get much worse, witness Weimar Germany in the early 1920’s and Zimbabwe at present. The most recent experience the United States had with this unstable economic condition was in 1981, when the annual CPI rate exceeded 13%. The cure was draconian; Federal Reserve Chairman Paul Volcker engineered a severe economic recession that created the highest level of U.S. unemployment since the Great Depression-until now. The federal funds rate, currently near zero, rose to above 20% under Volcker’s harsh discipline. Eventually high inflation was purged out of the system and economic growth was restored, however the monetary regimen was punitive for several years.

The current monetary and fiscal policies being enacted by the key economic decision-makers in the United States are laying the groundwork for a far more dangerous inflationary environment than anything encountered by Paul Volcker. The explosive growth in the money supply and government debt is simply unsustainable without severe inflation. It must be kept in mind that the Federal government is not the only public authority engaged in massive deficit spending. Throughout America, state, county and municipal governments are faced with imploding tax revenues and lack the ability or political flexibility to cut services to a level commensurate with revenue flows. Both the Fed and the public sector are engaging in a reckless gamble; borrow like crazy in the hope that this overdose of economic stimulation will restore growth to the economy and normal tax revenues, leading to a decreased and sustainable level of public sector indebtedness.

If one believes that the policymakers running the Federal Reserve, Treasury and Federal government, the same architects of the Global Economic Crisis, are smart enough to now get everything right, perhaps we may escape the worst consequences of their turbo-charged fiscal and monetary policies. However, there are growing indications that global investors and the broader market are beginning to reach a far more sobering assessment.

In an interview with Bloomberg News, Bill Gross, co-chief investment officer of PIMCO (Pacific Investment Management Company) suggested that the coveted AAA credit rating U.S. government debt now benefits from will eventually be downgraded. “The markets are beginning to anticipate the possibility of a downgrade,” Gross said.

China, the major purchaser of Treasuries and holder of $1 trillion of U.S. government debt, is already on record as expressing concern for the integrity of its American investments, and has begun actively exploring alternatives to the U.S. dollar as the primary global reserve currency. These moves by China are not based on fears of expropriation of its U.S. assets, but focuses on the specter of hyperinflation destroying much of the value of assets denominated in U.S. dollars. No doubt China’s economic experts are well aware of the growing number of economists who are convinced that the U.S. will be unable to service its rapidly expanding debt burden without significant inflation. Inflation in monetary terms means the erosion of the intrinsic value of the American dollar.

What is most frightening about the policy moves being enacted by the Fed and Treasury is that their actions may not be a reckless gamble after all. They may have come to the conclusion that only hyperinflation will enable the United Sates to avoid national insolvency. In effect, they may be pursuing the exact opposite course undertaken by Paul Volcker in the early 1980’s. If that is their prescription for the dire economic crisis confronting the U.S., then one must conclude that Ben Bernanke, Timothy Geithner and Larry Summers have learned nothing from history Once the spigot of hyperinflation is tuned on, it becomes a cascading torrent that is almost impossible to switch off, and which in its wake inflicts inconceivable levels of economic, political and social devastation. Before it is too late, President Obama should put the brakes on his economic team’s dangerous gamble with the haunting specter of hyperinflation. If he fails to act in time, a hellish prospect may be his economic and political legacy.

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com 

 

 

 

 

 

 

 

Why Barack Obama Cannot Prevent America’s Next Great Depression

May 19th, 2009 Comments off
Barack Obama, America’s 44th President, is one of the most brilliant, hard working and innovative politicians to occupy the White House. If the current economic crisis were a typical post-war cyclical recession, there is no doubt that President Obama would be up to the challenge, and lead the United States to renewed growth and prosperity. Alas, we are in different times, with a uniquely devastating and dangerous economic disaster of worldwide scope. Not even as gifted a leader as Barack Obama, I fear, will prove sufficient in arresting the rampaging Global Economic Crisis.

No one can accuse Obama of not recognizing that the U.S. faces a severe economic recession. Most of his administration’s initial activity has centered around crafting policy responses to the recession, primarily involving the unprecedented expenditure of borrowed money in an attempt to revive growth. However, the very character and essence of his administration’s economic policymaking reveals the lack of comprehension of how dire and unique the Global Economic Crisis is on the part of President Obama. At his core, Obama believes that the American economic system is basically sound, but slid into a severe recession because of irresponsible behavior on the part of some actors within the financial oligarchy. Hence, by restoring growth through deficit spending and enacting a new regulatory regime to restrict the destructive greed of some Wall Street tycoons and bankers, we can return to the happy economic days of yore. In effect, Obama is acting like a nostalgia buff, hoping that the correct policies will recapture the solid economic model of pre-George W. Bush America. Unfortunately, this view of America’s political economy is mythological. The U.S. economy was unhinged under the presidency of Bill Clinton as much as it has been under Bush, yet Obama has chosen Clintonites to serve in the most important economic policymaking positions in his administration. Cheerleaders for a failed model will not lead America to a new economic Jerusalem.

A major part of the problem Obama is facing is philosophical. He is following a conventional view of counter-cyclical economics; when a recession occurs, the sovereign can go into debt and use borrowed money to artificially increase demand and thus arrest the decline in growth. Once the recession is arrested, government fiscal policy can return to a more prudent policy of balanced budgets, as restored economic growth eliminates the need for the government to maintain demand. Sounds simple, as this has been enshrined as the recession-fighting bible created by economist Maynard Keynes. The only difference, the Obama administration would argue, is that this recession is much bigger than previous economic downturns, and therefore requires much more significant deficit spending. Otherwise, the Keynesian model remains unaltered.

This perspective by the Obama administration, in my view, is myopic. Like many contemporary politicians and economists, President Obama and his senior economic advisors have misread Maynard Keynes. Contrary to public perception, Keynes was no economic radical, but a centrist in dealing with the challenge of managing economic cycles within a capitalist system. Though Keynes did believe deficit spending was justified as a means to stimulate economies in deep recession, he also advocated budget surpluses during times of relative prosperity. In effect, Keynes believed in “rainy day” economics; in times of plenty you put away a little fiscal cushion that can then be spent during a recessionary period to enable the sovereign to maintain economic demand during a time of private sector contraction and declining tax revenues. This is actually a conservative philosophy that many farmers are familiar with.

In the United States, even during times of sustained economic growth, massive government deficits have been de rigeur during the past nine years, in the process doubling the national debt. There is no rainy day fund to speak of, so the staggering deficits that are now being enacted by the Obama administration are, in my judgement, fiscally unsustainable. Already, the projection for the current fiscal year’s deficit has risen by $200 billion to a stratospheric $1.8 trillion; my own estimate is that it will top $2 trillion. Looking into the future, the current Obama fiscal agenda foresees annual deficits of $1 trillion or more for several years into the future, gambling that the recession will be short-lived, with growth returning as early as the last quarter of 2009, leading to increased tax revenue and declining deficits.

But are we in a recession? The current downturn is already the most protracted and destructive since World War II. However, there is another ingredient that has been added into this toxic economic stew: globalization. We are in a Global Economic Crisis in which synchronized contractions across the world create multiple negative feedback loops that reinforce the underlying negative causation. The subprime collapse in the United States crippled banks in the U.K. and devastated Japan’s export machine; the Eurozone economic contraction is now impacting America’s export driven manufacturers. When China’s exports to America decline, commodity exporters and peripheral economies that supply value-added components to China’s export goods get whipsawed. This phenomenon is occurring at an accelerating pace, despite attempts by the Obama administration to portray minor statistical anomalies to the prevailing trend as “rays of hope” and “green shoots.” Reading tealeaves is no substitute for critical analysis.

The ongoing Global Economic Crisis has proven to be so severe, sustained and virulent that if it is not yet a global depression, it is embarked on that dangerous trajectory. However, another flaw in the Obama administration’s approach is its failure to recognize that a substantial part of the financial system is rotten to the core, and not merely a fundamentally sound system with a few bad applies populating it, who can be restrained by improved regulation. More importantly, the Obama economic team seems to have convinced themselves that “mind over matter” is the best palliative for the nation’s stricken banking system. When a sovereign’s private banks are essentially insolvent and not engaged in normal loan activities, this is another manifestation of an economic depression. Rather than admit the truth, the Obama administration cobbled together a make-believe series of bank stress tests, which supposedly show that America’s banking system, with a few minor problems, is essentially sound and fiscally healthy. This conclusion is an utter fraud, designed to artificially create a climate of economic confidence. It won’t work, and by delaying an honest approach towards the nation’s crippling level of bank insolvency, the policymakers are insuring that the final cost of the inevitable day of reckoning will be far more costly to the taxpayers.

The economist Hernando de Soto has captured the essence of the Global Economic Crisis as few others have. In his view, the Western world, and principally the United States, who have for so long railed against Third World inefficiency and corruption, have created the largest, most toxic shadow economy in the history of human civilization. More than one quadrillion dollars in unregulated financial derivatives paper, according to de Soto, has destroyed inter-bank and financial counterparty trust to such an extent, credit flows have largely frozen despite unprecedented levels of taxpayer-funded borrowing to bailout the global financial system. Nothing short of an honest accounting of the true value of the toxic assets underlying these colossal derivatives products, which equal twenty times the entire world’s GDP, can put the global economy on the road to recovery. Until these unregulated “unknown unknowns” become fully transparent, all other government interventions, including Obama’s massive borrowing binge, are doomed to failure. Sadly, as the bogus bank stress tests reveal, President Barack Obama and his Clinton-era economic advisors have financial transparency as the least important objective on their agenda.

It seems that President Obama, despite his obvious leadership gifts and towering intellect, has chosen to place his faith in a team of advisors who are tied to the Wall Street oligarchy by an umbilical chord than cannot be severed. In a sense, Obama is following the path of the last Soviet leader, Mikhail Gorbachev, who also sincerely wished to resolve his country’s economic problems, but believed that the system was fundamentally sound and only required a modicum of reform to correct its distortions. Only after the collapse of the USSR did Gorbachev conclude that the system itself was unsustainable. Now it appears to this observer that President Obama may be fated to travel the same path as Gorbachev, and like him end up as a valiant failure.

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com 

 

 

 

President Barack Obama Confronts The Global Economic Crisis

January 27th, 2009 Comments off
As the global economy implodes, there remains the “audacity of hope,” or rather the author of the best selling book with that title, now 44th President of the United States, Barack Obama. If anything, the whole world, not just the U.S., is placing its hopes-and bets-on President Obama to provide the change in leadership believed necessary to bring the raging Global Economic Crisis under control. Will these global hopes in Barack Obama be realized?No doubt, President Barack Obama is an exceptionally intelligent man. He has a flexible mind and superb communications skills, essential for inspiring confidence in times of crisis. However, it must be recognized that the global financial and economic catastrophe that began in America and is now consuming the globe may be of such virulence and persistence, it is beyond the powers of any single mortal man, no matter how gifted, to vanquish.

We must remember that not even Barack Obama walks on water, though a miracle worker is perhaps the only human being that can terminate the Global Economic Crisis with rapidity and no further pain. The approach adopted by Obama so far in confronting the economic crisis, though manifesting a clear realization of its seriousness, is also impeded by a conventionality that may be his biggest obstacle.

As with the other boilerplate responses from political leaders across the globe, the Obama administration is proposing a massive stimulus package, dubbed the “American Economic Recovery Plan,” financed with borrowed money. This follows a previous injection of borrowed money, $700 billion for TARP, supposedly essential for rescuing the banks. It is now clear that the $700 billion TARP spending frenzy was a fiasco. As has since been admitted by top Treasury Department officials, Hank Paulson, former Treasury Secretary, pulled the $700 billion out of thin air, because he wanted a “big number” to impress the markets. Such a cavalier attitude towards stampeding Congress into borrowing a staggering amount of money, equivalent to roughly $2,500 from every American man, woman and child, without any strings attached on the part of the banks receiving the money, explains its total failure to resuscitate the clogged arteries of the U.S. credit system. This example is not an encouraging harbinger for another dose of heavy deficit spending in a hurry by Washington.

The Obama Plan envisions $825 billion in borrowed money for a variety of projects and tax cuts. Though Obama promises a much higher level of accountability with his stimulus package than with TARP, that is not even the most crucial issue. It is the whole premise of Obama’s economic plan. What are the parameters and assumptions that led to a figure of $825 billion? On top of the already ballooning federal budget deficit, can the U.S. government raise another $825 billion from largely foreign credit markets (e.g. China), and at what interest rates? What if the Obama Plan has no significant impact on rapidly eroding macroeconomic indicators, while the exploding national debt and structural deficits remove any other fiscal options from consideration?

The proper context for President Barack Obama to view the Global Economic Crisis is not just as a catastrophe for the U.S. and world economy, but also as the gravest danger to American national security. If the Obama administration had a broad enough intellectual horizon to comprehend that the erosion in American geopolitical power that would inevitably result from the implosion of its economy is a far greater threat than what emanates from a non-state actor with a few thousand adherents, namely Al-Qaeda, it would review the irrationally excessive U.S. military budget.

The question Barack Obama should be reflecting on is if the U.S. should continue to spend a trillion dollars a year on its military establishment, and hope that the global credit markets will finance unfunded government liabilities in other categories in perpetuity. Ultimately, the global economic and financial tsunami cannot be combated by bloated military budgets. It is critical that there is a radical restructuring of U.S. budgetary priorities, or else Imperial overreach will finish what is left of U.S. economic power, after the meltdowns on Wall Street and Main Street have added their unique contributions to the deconstruction of the U.S. economy

 

For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, http://www.globaleconomiccrisis.com 

 

 

 

 

 

 

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