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Obama Is Clueless on the Economy

Submitted by asiablues on 09/11/2010 17:16 -0400

By Dian L. Chu, Economic Forecasts & Opinions

On Labor Day, President Obama announced a new $50-billion infrastructure plan next year as a way of a second stimulus for job creations as well as for the faltering economic recovery. However, the plan is expected to be met with strong opposition in the midst of a mid-term election, while many economists are skeptical as to any swift effect it could have on America's $14.3 trillion economy, as well as the troubling labor market.

So, in light of the fact that the Democrats are losing a bunch of congressional seats, and their majority, this new plan would seem more of a last-ditch effort with little substance.

Clueless on the Economy

So far, the Obama administration has demonstrated very little understanding of the economy, markets, and business. In fact, one could say that the policies the Administration implemented are probably close to the worst medicines to help a sick economy recover from a devastating illness.

Much of the legislation passed by the Administration is essentially anti-business, while painting a negative image of corporations. This is further playing a debilitating role for stalling an economic recovery due to the added uncertainty for businesses--“What is coming at us next, cap and trade, drilling ban?" All this does is further undermining the business confidence that is needed to start hiring again on a large enough scale to really make a dent in the unemployment rate.

Hierarchy of Needs

During the passing of the first $800 billion stimulus plan, many recommended that a larger percentage needed to be allocated to infrastructure projects due to the add-on effect of job creation. But they fell on deaf ears of the Administration and the Democratic Party.

Now all of a sudden, they finally came to realize what’s really important-- having a job and a roof over your head, whereas healthcare and financial reforms are on the next level up the hierarchy of needs. So, here comes a new infrastructure spending plan to create jobs, taking a page from President Roosevelt’s New Deal and China’s infrastructure-focused 2-year, $586 billion stimulus package started in 2008.

No Second Chance

Unfortunately, the Administration basically messed up and squandered away the first stimulus package--the only chance to get it right with a proper infrastructure package and real job creation. Cue to the Greek and European debt crisis, there’s no second chance.

Although President Obama indicated the plan would not add to the budget deficit, senior administration officials suggest it could come from closing tax credits used by oil and gas companies and multi-national corporations. So, it is just robbing Peter to pay Paul—a zero-sum game. And 50 billion dollars?? It is definitely a case of too little and too late.

Debunk the Policy-Induced Recovery

The Administration also has pointed to the fact that when they took office we were losing 750,000 jobs a month, vs. the current loss of 100,000 jobs a month, and things would be much worse without their creative solutions.

Well, the numbers were greatly skewed with companies running scared and cutting costs to the bone in the middle of the financial crisis. However, almost 2 years since the Great Recession, most companies have reached a point where they can no longer cut costs and/or personnel. Moreover, if the economy stabilizes due to an inventory rebuilding cycle, and the world isn`t coming to an end, then there will be a natural reduction in the rate of job loss, which has nothing to do with the Obama Administration`s legislative policies.

So, yes, things are better, attributed partly to the natural business cycle, but also because the worst didn`t come to fruition, the stock market assets needed to be reacquired by fund managers who over liquidated their portfolios. In addition, manufacturing was also boosted by the inventory restocking phase, and even failed stimulus packages would provide some sort of floor for the economy.

Nevertheless, none of this can be taken credit for by the Obama administration. It is a natural law of economics, and relative preparedness. That is, if everyone is prepared for the sky to fall off, and the sun still comes out the next morning, the economy will experience a slight recovery all on its own, relatively speaking. But this is nothing to write home about.

Legislative Wins – Don’t Mean Much

One thing that President Obama and the Democratic Party has accomplished is that they have gotten more legislation through Congress, and passed into law than most administrations ever dream of accomplishing.

However, it is more emblematic of having a complete majority in the legislative branch--Republicans were emasculated due to the economic crash happening during their watch, and a literal blank check of unprecedented nature to just fix things that went wrong.

As we have witnessed in the past two years, achieving a lot of legislative wins has not done a whole lot of good for the nation.

On Health Care & Financial Reform

I agree that the health care system in the US needs some major overhauling, but was this accomplished with the latest health care legislation? No, I do not believe this to be the case. But one thing I do know is that it is entirely counterproductive to push through a health care reform bill that is going to create more costs for business coming out of a recession.

Adding more costs is bad for business even in a booming economy (that`s why it has been so hard to get passed all these years,) but it is a complete suicide mission during a tentative recovery phase.

I also agree that to some degree there needs to be some regulatory changes to the banking system, and how Wall Street and the SEC operate. But all this financial regulation, post financial crisis, will only cause major disruptions to the financial industry, and hinder any type of job creation, at a time when the industry is still on shaky ground and worried about building up their capital reserves.

And you see what happened to the financial stocks since the passing of the financial regulation bill after investors realize the implications of this policy change. If financial stock prices are going down, then so are the number of financial jobs, in a sector that is one of the major employers in the economy.

Again, an argument may be made for financial reform, but there is a time and place for this type of sweeping legislation, and it is after the economy has recovered, when unemployment is under 6%, and business confidence has returned enough to sustain this type of exhaustive financial overhaul.

Markets and Business Tend to Self-Correct

I actually think legislation to address problems which already occurred is a little backward looking, and gets you all the extra costs, but little, real bang for your buck. Businesses and markets tend to be self-correcting as nothing hurts business and professionals more and changes behavior faster than losing money.

Nobody, be it bank, insurer, mortgage underwriter, or rating agency is going to continue the same business practices such as sub-prime after losing that type of capital during the financial crisis.

Changes in business practices are already taking place without the business-disrupting new regulations. After all, companies are in the business of making money first and foremost, and nothing changes behavior faster than losing 15 billion in a quarter.

Political Irony

The funny thing is that President Obama`s policies were better suited for the good times, as they might have actually tempered some of the growth enthusiasm, and help check and balance some of the insane leverage utilized by businesses during the Bush era.

Nevertheless, when a country is trying to works its way out of a recession, policy makers need to be pro business to foster a strong business climate, instills business certainty and confidence, and leads to large scale job creation. In the end, the last two administrations were better suited for each other`s tenure, and if we could just go back and switch the two, we would be so much better off today.

Dian L. Chu, Sep. 11, 2010

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Sun, 09/12/2010 - 15:45 | 577053 JimboJammer

Rocky Racoon ...you are right...

It is high time to re-open the 911 investagation..

911 was an inside job...

on youtube look at >> Charlie Sheen's video message

to president Obama

All concerned Americans need to see this and send this

message to your senators....

Sun, 09/12/2010 - 15:52 | 577060 BarrySoetoro

It was bad enough to have you fucking truthers on the 9/11 related threads, but the spill-over is killing any credibility this blog has. I think Tyler needs to clean house, starting with the truthers.

Fucking CHARLIE SHEEN?? Are you kidding me?

Sun, 09/12/2010 - 23:03 | 577638 moneymutt

Hey birthers comment here too, so why not truthers....as far as I can see birthers have less evidence, less analysis supporting their ideas than the truthers do....and I haven't found your comments on this thread to be at a high level of analysis either.

There are commenters and contributors here that have make good points, present evidence and thought-out arguments. While I don't agree with them all, I think Bruce K, GW, Econophile, CD etc..all have interesting ideas, present and argue them well, will respond if evidence or analysis proves them wrong, start good discussions. Many commenters have great info to bring to table and great counter arguments to want blog or contributors present. If truther comments drive you nuts, either argue some sense into them or ignore them.

A wide range ideas does not discredit this blog....all kinds of things that would have seemed like a reach and not remotely believable at the time has turned out to be truth.

The CIA straight up assassinated world leaders that were too pro-their own people, like Mossadeq in Iran, and Lumumba in Congo, and an airplane transport companies that worked solely for CIA were proven in court of law to be flying cocaine from Nicaragua to Homestead Air Force base at the same time Olly North and others were illegally supporting contras in that country. Reagan admitted trading arms with terrorists in Iran but said in his heart (in his classic style of denial) that he felt he had not done this. Cointelpro memos prove FBI drugged and murdered Black Panther Party leader Fred Hampton, for his politics.... he was not arrested and tried, he didn't do anything illegal...but they were scared of his political speech, so they just drugged his koolaid, stormed his house at 4am and shot the place up. Again a known fact including govt losing a huge civil lawsuit about it. Google any of these things, while not commonly highlighted on Fox News, CNN or MSNBC....these are facts. But consider those who reported these stories correctly at the time that they were happening were considered crack pots. US murdered world leaders because they increased taxes on foreign oil companies? the govt imported drugs through a military base? Reagan made an arms deal with terrorists? but now we know it all happened.

Let the truthers and birthers and whatever-elsers have their chance to convince us/others... either their stuff adds up or it doesn't, but just because something sounds outlandish, I'm not ruling it out automatically, nor saying the people discussing it are automatically not credible, nor think they should be muzzled.

Mon, 09/13/2010 - 05:41 | 577963 BarrySoetoro

...but can't you at least give me a nod that maybe when Charlie Sheen is cited as source material, it doesn't help much in the credibility department? Maybe? :)

Mon, 09/13/2010 - 05:36 | 577961 BarrySoetoro

I honestly appreciate your reply. I posed many questions to the truthers on GW's 9/11 post and not a single question was even acknowledged, much less answered. I'm not going to go through the trouble of posting some 6,000 word comment (that most won't even bother to read) only to have Seer call me a "dick-head" and tell me that the revolution is coming. I've done my part with those people and asked questions, which, according to them, is the most important thing.

If calling a person who expects the President of the United States to pay for a kitchen remodel isn't a dead-beat, then please tell me what it is. And I am sorry if anybody is offended that I cannot muster a lot of respect for somebody who is waiting in line to get "Obama money." Some things don't require a great deal of analysis.

My only other comment on this thread was a response to a person who endorsed tarriffs. Tarriffs don't work...at least they don't if one's intention is to spur economic growth. If the intent is to throw a bone to unions and garner some populist appeal (i.e. win some easy votes), then I agree they are an excellent idea.

I will look into the cases you cite. In the case of Reagan, however, I have already done so. You and I both know that arms were traded for hostages. But the law is the law, and "technicalities" win the day. The arms were transferred to an arms dealer, not directly to the Iranian government.

Take a look at your newspaper today and see if a murder took place in your city. How would you feel if it became widely reported on the internet by a bunch of vitriolic people that YOU were responsible for it...and their "evidence" was something they read on the internet (posted by somebody who was out to make a buck by selling their newsletter)? Accusing somebody of mass murder is a serious thing, and when people start spreading malicious, unproven, unsubstantiated accusations based on junk science, it needs to be addressed. Asking questions is one thing, smearing people's reputations and destroying people's lives is quite another.

If you are willing to answer some of the questions the other truthers keep ignoring, let me know. You can find those questions (I have more if you'd like) on GW's 9/11 post.

Sun, 09/12/2010 - 14:48 | 577006 laosuwan

I think one should not disccount the possiblitry that obama is not clueless but that he knows exactly what he is doing.

His is satisfying the requirements to tear down america by his financier george soros, he is repaying his wall street campaign contributors by letting them rape the taxpayer, and he is fullfilling his own internationalist beliefs by bringing the US to just another country in a mosaic world where peope are serfs.

I just read an interesting book on this very subject, called THE POST AMERICAN PRESIDENCY.

It is unlikely that someone clueless could get to where Obama is today so its unlikely he can be equally clueless about the economy. it seems he knows exactly what he is doing. he is doing what he is told to do.

Sun, 09/12/2010 - 13:48 | 576952 docj

Obama Is Clueless.

FIFY.

Sun, 09/12/2010 - 13:36 | 576936 Bartanist

Boy howdy! I disagree with virtually every conclusion other than Obama is clueless about the economy.

I think that Obama does not give a damn about the US economy other than from the perspective that making people think he cares about the US economy will get him votes and satisfy his ego needs and his "Manchurian" (as in Manchurian Global, not China) masters.

The "masters" have set out to build a global empire and the US is only a part of the world. I believe that every single action needs to be vied from that perspective and not the US alone. Large corporations (and even many small corporations) are global in nature. They do not think in terms of "how will we make the US better". They think in terms of "if the US is down, then where should we be allocating our assets to get the biggest bang for the buck.

US jobs mean nothing for the global corporations because the entire world is the labor pool. It is all about maintaining a persona of growth and funneling money to the executives ... nothing else matters these days (unfortunately).

If a small company becomes successful in the global economy, what happens is that larger companies take control either through financing or outright purchase (sometimes with what would be considered "stupid" amounts of fiat... if fiat had any intrinsic value).

If any US leader seriously wants to change US employment then they need to change the cultural focus of US businesses from one of a global business, to one of a national business. We would have to pull together as a country and our business would have to support country prosperity, the way China does. Decreasing taxes to corporations does nothing to help the US. It will not change the way corporations invest in the US when the culture and labor pool is global... and without a culture imperative (as in China) the US will remain uncompetitive, until the total cost of delivering product from the US is lower than from elsewhere in the world.

Sun, 09/12/2010 - 13:58 | 576957 michigan independant

I have to respectfully disagree. Food for thought...

It will not change the way corporations invest in the US when the culture and labor pool is global... and without a culture imperative (as in China) the US will remain uncompetitive, until the total cost of delivering product from the US is lower than from elsewhere in the world.

http://www.swfinstitute.org/

The arbitrage between grain prices in China and the United has been closing rapidly, although wheat prices in China are 2,000 Yuan per ton, which is about 8.3 dollars per bushel. That is compared to current prices of 7.5 dollars per bushel in the United States.

China has indeed been printing a lot of money for a long time in order to keep the Yuan low which befitted their export sector. As a result of their policy they accumulated massive foreign exchange reserves, and had giant trade surplus. Since China over one billion people and since most of them where farmers up until the 1990's the money printing didn't cause wages to rise dramatically. (Money flows to places where supply is tight and China had abundant labor)
So the money went in to commodity, real estate, and stock prices in China. But now something totally different is happening. China trade surplus is gone, food prices are rising and wages too. This combined with weak exports, a weak euro is killing China Corporation’s margins and we have a classic wage and price spiral.

The price of wheat in North China Huang-Huai region is still higher than the new minimum purchase price. In order to stabilize the minimum purchase price of wheat the government decided to outlaw the purchasing and storage by company acquisitions. Since these acquisitions are the reason for the reduction of supply in the market. “
We all know how regulation of food prices end, and it should be clear to Chinese government as well, but I guess they will need to find out the hard way.

? Are there now 10 zones and what are the consequences to this from a secular view

http://israelfinancialexpert.blogspot.com/

Sun, 09/12/2010 - 13:42 | 576875 michigan independant

The article is fine from Dian and we all know what is going on until you realize no one has the solution to make life paradise. We all know when they try they will run out your money as they have done as we watched with there weapons in your face as taxes beyond there needs in truth. What I wish to say is the Consumer will decide who grows or diminishes in the long run. I think you need to truly realize most Americans simply do not care since you need to understand how many decades we have waited for this event. As conveyance did indicate "Clueless on the Economy " only covers as small percentage of the reality.

http://cytec.com/careers/taleo.aspx?tl=searchall

Assumming you wish to assist a Customer there are a few people here who may or may not care about issues we all know about, but since we all know a few things

I myself learn something new every day. As for myself, I vote with my pocketbook on needs and not wants. A key words to remember since party's never solve but enable waste.

Nimrod, and when all things are the same you know its over. The system we have moving to Independance or the system which will fail since we are not meant to have one system over all but checks and balances of the individual of something to many deny.

What do we mean by the revolution? The war? That was no part of the revolution; it was only an effect and consequence of it. … [T]he revolution was complete, in the minds of the people, … before the war commenced in the skirmishes of Concord and Lexington on the 19th of April, 1775. … This radical change in the principles, opinions, sentiments, and affections of the people, was the real American Revolution."

John Adams

Sun, 09/12/2010 - 11:13 | 576820 DR

Obama and company have done their job. They have bailout and backstopped the elite banking system and have transferred private debt onto the public balance. Now is the time to degenerate him to assure that a Republican will gain office and push forth a “fiscal” agenda to pay off these newly socialized debts. VAT tax, SS to 70 years, taxes raised on working people.

Someone is going to have to pay off the debts and it ain’t going be the top 1%.

Sun, 09/12/2010 - 10:15 | 576768 pachanguero

Sorry but I don't buy it. Obama is crashing the economy for a reason. To let the international Banksters rape us.

He is a tool of the NWO. Just as all the CFR crooks have been. Bush included.

Sun, 09/12/2010 - 06:07 | 576649 williambanzai7

WALL STREET KLEPTOCRACY (THE GAME)

http://williambanzai7.blogspot.com/2010/09/wall-street-kleptocracy-game....

Sun, 09/12/2010 - 04:05 | 576613 wardslog

This is about as good a piece on why Obama is doomed to one-termness as you'll find anywhere, he opined humbly.

It's particularly lucid on the QE and healthcare fiascos. And Barack is indeed economically (and fiscally) illiterate. He'd like to be incontinent too, but China and the GOP won't let him.

Too tentative, too late, too laid-back, too many vacations. Also - his big mistake - he's not a crook. Now our very own EU is an entirely different kettle of fish...

http://nbyslog.blogspot.com/2010/09/exclusive-norways-investment-in-club...

Sun, 09/12/2010 - 09:41 | 576736 Mitchman

The link doesn't work.

Sun, 09/12/2010 - 02:50 | 576594 BarrySoetoro

I don't think he is clueless at all. All of his lunacy plays right in to what his followers want. Don't you remember the dead-beats and ne'er-do-wells who were packed into and fainting at his rallies, eagerly anticipating their goodies like cars and remodeled kitchens? Anybody but me remember the fat slob in Detroit who was in line to get her "Obama money" from "Obama's stash?"

It's a great business plan: give other people's money away to get elected, and spend a lot of time golfing, travelling, throwing parties, eating $200 steaks, and basically living the good life. When it's over, you get a nice book deal, free office space, pension, and all sorts of other goodies. You and I pick up the bill.

Sun, 09/12/2010 - 01:18 | 576547 palmereldritch

Whether he is clueless or not is a moot point. More nuance for speculative narratives.

Deeds speak and his actions are either nonexistent or silently cloaked by a secrecy not unlike his recently documented past that statistical analysis says doesn't add up with the official story....

http://www.voltairenet.org/article166741.html

http://www.voltairenet.org/article166759.html

http://www.opinion-maker.org/2010/08/special-report-the-story-of-obama-a...

Sun, 09/12/2010 - 01:05 | 576535 Fred Hayek

The bizarre thing is his combination of cluelessness and vanity. What a perfect product of the ivy league.

Sun, 09/12/2010 - 00:36 | 576498 knukles

(Drum Roll)
And now, with a goodly number of the votes in....
(Balloons released)

The envelope, Please!
(Audience Gasps!)

The opinion of 98.23% of the comments are ....
(Kate Smith Breaking Out in God Bless America)

http://video.search.yahoo.com/search/video?p=kate+smith+god+bless+america

(A Thousand White Doves Released to the Heavens)
(Clouds Part, Sun Shines Brightly on My Old Kentucky Home)

http://www.liveleak.com/view?i=2d6_1186193669

(Trumpet Blare)

He's Clueless!

(Place goes Wild. Thousands Running About Screaming, Crying, Giving Praise, Epiphanies from Heaven, Mass Hysteria, Psychological Relief for Every Man Woman and Child, All Doubts and Suspicions Confirmed, After the Fact Onset of Deep Clinical Depression, Mass Suicides Begin)

Sat, 09/11/2010 - 23:37 | 576459 onlooker

When a company or football team or whatever has a leader that does not do the job, he is fired. Pretty simple. Fire Obama AND his father. Lets move on. Two more years will not be forever, it will only seem that way. Lets get another "yes we can" and see if he or she can really boogie or only talk the talk (shuck and jive as it were).

Sat, 09/11/2010 - 23:33 | 576456 Korbin Dallas

"insane leverage utilized by businesses during the Bush era" - oh yes, before and after Bush there was no hubris or greed. We are in a moment of ... bliss.

Sat, 09/11/2010 - 20:29 | 576225 JimboJammer

Obama is a Muslim , and he is a puppet of the NWO

The Jews don't like him.. the Jews don't trust him..

He likes Iran more than Israel...

Sun, 09/12/2010 - 10:37 | 576787 RockyRacoon

Obama is a Muslim , and he is a puppet of the NWO

The Jews don't like him.. the Jews don't trust him..

He likes Iran more than Israel...

Come on, is that the best you can do? Surely there are more effective knee-jerk comments and labels that can be applied. A gut-punch Archie Bunker style rant will do nothing but get you junked. Put some meat on those bones!

Sat, 09/11/2010 - 20:59 | 576275 ZackAttack

As many times as Israel has fucked up, I'm starting to like Iran better too.

At the very least, you have to grant that Iran played its limited hand very well. Pwned the moron Bush into footing the bill for destroying their only natural enemy in the Middle East. Now the standard of evidence for WMDs is so astronomically high, the US public wouldn't back a war against them if they detonated a test device.

Sat, 09/11/2010 - 22:14 | 576367 obamaphobe

Keep in mind the speed and "transparency" in which they passed the 781 billion destimulus package. Our so called representative govt has a tendency towards knee jerk reactions. The US public does not have a vote.

Sat, 09/11/2010 - 22:36 | 576407 moneymutt

I can't keep up, Obama is radical, liberation theology Christian who is very close to his radical Christian pastor, he is a pathetic Christian community organizer, but also a muslim; an indonesian; a kenyan; shiite, persian iranian supporter, a sunni arab supporter; planned all along to be manchurian candidate but in their infinite wisdom to get him elected president they sent his Mom to Africa just before he was due to have him born in US and gave him the name Barak Hussein Obama because they were sure that would get him elected......get some consistencies in your hate...

The only consistent ideological people are people, and there are many on both sides of aisle and in other parties, that criticized the deficit when W was in office, a deficit created by massively expensive Medicare part D, arse kiss to Pharma and the tax cuts to rich, which did an amazing job of making economy better (sarcasm). I, and many other sane, consistent people criticized the deficit W and the all Repub Congress from 200-2006 created and criticized TARP when it was W and Paulson advocating for it just as I know criticize deficit now and TARP now...my critcism is not based on the personality of the person in charge but their freaking polices...anything less is pure emotional BS...stick to facts and actual policy and be consistent regardless of party affliation....If you think the country was all clean, uncorrupt, and economically sound with all the great deregulation stuff Repubs did from 2000-2006 and think we were on the right track, the track that lead right to 2008 crash and all will be better if we just get rid of Obama, you are beyond hope

Sat, 09/11/2010 - 23:10 | 576439 nmewn

All libertarians & fiscal conservatives were against TARP, the CRA, deficit spending, pills for seniors etc. Just as much as they were against shovel ready jobs (stimulus) to government, unions, cash for clunkers, cash for caulkers etc.

All of it.

It was neo-Keynesian's and "progressives" (whatever the hell that is) that were pro the above.

And I personally don't think the "Rev" Wright is a Christian anymore than the dude saying he's going to burn the Quran. Prolly just me though.

Face it...the dems sucked at vetting a candidate for the long term health of the country when that was precisely what was needed most after compassionate conservatism (whatever the hell that was).

Sun, 09/12/2010 - 13:49 | 576955 docj

Perfectly said.

And NUTS to the schmuck who junked you (and will almost certainly junk me).

Sun, 09/12/2010 - 01:03 | 576534 Fred Hayek

Well said.

And the whole point of any sensible sort of conservatism is to NOT be short term compassionate.

Sun, 09/12/2010 - 00:05 | 576485 knukles

Sat, 09/11/2010 - 20:49 | 576257 Shiznit Diggity

Better a Muslim than one of the whack-job Christians running amok in the good ole US of A.

Sat, 09/11/2010 - 20:13 | 576203 Market Analyst

great article, w/o all the antibusiness legislation and corporate bashing we would probably be putting in 5% GDP quarters, considering we are doing as well with all the damage he has inflicted from a policy standpoint. Just compare the Clinton economy where things were 10 times better, there was no credit contraction like today, and he knew that passing a cost burdensome healthcare reform would be a suicide mission, and he moved to the center, and he got it "its the economy stupid!"

Sat, 09/11/2010 - 21:31 | 576293 chrisina

It's much easier to stuff more credit to an economy which has the equivallent of 220% of GDP worth of Total debt (begining of Clinton term) than to one which has 370% (today).

You can't pile on more debt on an economy that has reached its credit limit. When that threshold is reached you get a credit contraction, a "Minsky moment", which happened in 2008. Ponzi borrowers are bankrupted first, then speculative ones, while creditworthy borrowers are forced to deleverage. Govt tries to stop the contraction by piling on more debt and Fed printing the corresponding QE. But this is only holds the credit contraction temporarilly, and makes the need for private deleveraging even bigger as the private just sees his future taxes going up and needs to accelerate its deleveraging.

This causes the total level of credit to fall off a cliff before it can stabilise and the economy can start growing again, from 370% to somewhere around 150% of GDP. This means that during the years to come, approx. $30 trillion worth of debt is going to have to be purged from the system by hook or by crook either via pay back, restructuring, or liquidation. Assuming it's done over ten years, that's $3 trillion per year of negative change in debt per year, amount that gets substracted from aggregate demand.

So during "leveraging times" we had

Aggregate demand = $14 trillion + $5 trillion (positive change in debt) =$ 19

during "deleveragng times" we are going to have

Aggregate demand = $14 trillion - $3 trillion (negative change in debt) = $ 11 trillion

That means the economy is going to be running at roughly 60% of the capacity it had bult during leveraging time.

We're talking of a tsunami of excess debt of $30 trillion that's going to come down, against a $50 billion Govt stimulus. Guess what will happen...

All Obama and Bernanke can do is build little dikes of sandbags that won't hold for very long. They are completely powerless. They just want to maintain the illusion that they can do something about it but the simple truth is that they can't. This is the most gigantic tsunami of debt in the history of mankind.

Blaming Obama who is neither responsible, nor can do anything to stop this tsunami of debt, is pointless. Clueless? That's a word I'd use to describe his key economic team, Geithner, Summers and the gang of ignorant monetarists at the helm of the Fed.

Advice if you want to live : start . running . now

Sun, 09/12/2010 - 11:30 | 576839 DR

Very good-we have to de-lever. There is no way to grow out of this debt. The politics of the next decade will be centered on who gets paid back and who doesn’t. I’m afraid the middle class will get the short end of the stick..

Sat, 09/11/2010 - 19:54 | 576167 Paul Bogdanich

This goon still believes ina free self-correcting efficient market. Give me a break. As long as we are pulling strings here why not some of the ones that impose a little pain on the people and corporations that got us into this mess?

Sat, 09/11/2010 - 19:51 | 576163 digalert

First thing in 2009 Obama said he wanted a stimulus bill. Shazam, and Pelosi pulls a thousand page $787 billion bill out of her ass. They rammed it through, unread and Obama signed it. If you haven't figured out by now, that stimulus bill was 20 years worth of democrat social spending projects that had been shelved. It didn't work and Bernanke has proven that money isn't the problem.

I've seen a number of CEO's state that the problem is Washington and more specifically Obama. America is still going through debt consolidation and belt tightening. No one knows what the hell is next to come out of this punitive government, much less what it's going to cost. Now Obama and democrats are adamant on increasing taxes on those making over $200 grand. Just bitchen, that happens to be nearly every small business owner that make up 70% of the businesses in this country.

Not giving bastard republicans a pass, they are equally responsible for this mess. The current regime has merely slammed on the accelerator. We the people need to take this country back. Remind those assholes that we are the boss and we hold the checkbook.

"government is not the solution, they're the problem"

Ronald Reagan

Sun, 09/12/2010 - 04:24 | 576618 Hunch Trader

A freespending liberty hating socialist is always the problem.

Modern USA is basically a socialist tax hell, previously without health care, now maybe with universal health care. But a socialist tax hell anyway.

Sun, 09/12/2010 - 00:03 | 576480 knukles

Sat, 09/11/2010 - 19:43 | 576150 tom

So sad, but so true. I'll probably get junked for this, but being an old-school liberal I had a lot of sympathy and hope for Obama. I don't buy the line that he's a statist, and trust me, I know statists. But he has blown it so badly. He's completely clueless on economics. Surrounded himself with a bunch of Keynesian yes-men. He's toast in 2012, that's obvious.

Sat, 09/11/2010 - 19:52 | 576165 Hulk

tom,tom,tom....

Sat, 09/11/2010 - 19:30 | 576130 Waterfallsparkles

I think the answer lies in Real Estate. I remember in the 80's when the FHA gave Investor loans for 15% down and you could finance your closing costs. They also gave accelerated depreciation of 15 years. Investors gobbled up all of the extra inventory of homes. I do not know who that plan was under but it worked great.

With Real Estate it affects many business's and employes tons of people. Think about it. With Real Estate your have Carpet Manufacturers, Drywall Manufacturers, Lumber Companies, Tile Companies, Bathroom fixture Manufactures, Roofing Manufacturers, Window Manufacturers, Pipe Manufacturers, Wire Manufacturers, Appliance Manufacturers, and many more. You have all of the people that work for these companies.

These companies need equipment from Copy Machine Manufacturers, Paper Manufacturers, Office Space, Desk Manufacturers, Phone Manufacturers, etc. Plus, all of the people that work for those companies.

You need Real Estate Agents, Home Inspectors, Mortgage Officers, Title Companies, Surveyors, Electricians, Plumbers, Carpenters, Builders, Carpet installers, Drywallers, Landscapers, etc.

This helps the local County and States thru the Transfeer Tax an Stamps. Higher property taxes for the County and States as the assessments will be on the purchase price and not on a possible reduced assessemt for a long time Owner occupied property.

I have just scratched the surface as to the amount of stimulus Housing goes into the Economy. But, in my opinion, Real Estate is the answer to stimulate Jobs and the Economy.

Sat, 09/11/2010 - 19:40 | 576146 Hulk

You left off the sarcasm tag...

Sat, 09/11/2010 - 20:03 | 576179 Hulk

Thanks, I knew that wasn't sarcasm! just baitin

Sat, 09/11/2010 - 19:29 | 576128 sbenard

Superb article on Forbes' website today on how Obama thinks, based upon his own declarations, writings, and the "dreams" from his father. I thought I was scared before, but this sends chillls up my spine:

http://www.forbes.com/forbes/2010/0927/politics-socialism-capitalism-pri...

Sun, 09/12/2010 - 14:34 | 576995 nmewn

Update...DNC trying to contain the fallout from the article you linked to...

"This is a person who is fundamentally out of touch with how the world works, who happened to have played a wonderful con, as a result of which he is now president," Gingrich added.

"I think he worked very hard at being a person who is normal, reasonable, moderate, bipartisan, transparent, accommodating -- none of which was true," Gingrich continues. "In the Alinksy tradition, he was being the person he needed to be in order to achieve the position he needed to achieve. ... He was authentically dishonest."

http://www.huffingtonpost.com/2010/09/12/gingrich-obama-kenyan-worldview...

The DNC press secretary has nothing to say on the points being raised in the article...just attack the messenger until the bosses get back Monday...eggscellent ;-)

Wed, 07/27/2011 - 23:04 | 1500222 claudcarter

"Update...DNC trying to contain the fallout from the article you linked to... "This is a person who is fundamentally out of touch with how the world works, who happened to have played a wonderful con, as a result of which he is now president," Gingrich added."

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Sat, 09/11/2010 - 22:11 | 576365 nmewn

Good article...very telling.

No need to mention his mentor Frank Marshall Davis, it all fits.

Sat, 09/11/2010 - 20:34 | 576233 Waterfallsparkles

What a great Article. Thanks. It really explains a lot.

Obama Is Clueless on the Economy

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