8 Reasons Why the Obama Administration Will Not Solve this Crisis by the End of 2009
March 17th, 2009
17 March, 2009
In response to US Federal Reserve Chairman Ben Bernanke’s assertion that this global crisis will bottom before year-end, here are 8 reasons why the Obama administration will not pull America and the world with it, out of its current economic throes. For one, every major response of the Obama administration to counter this global crisis to this point has only served to exacerbate the current situation and has accomplished virtually nothing in attacking the root cause of this global crisis – an unsound monetary system. Secondly, it is next to impossible to solve a problem that has been decades in the making by implementing the same plan that created the crisis.
So without further ado, here are 8 reasons why the Obama administration will not end the crisis this year:
(1) Consider that President-elect Obama voted FOR the horrible $700 billion bailout plan that accomplished less than zero in fixing the global economy while only transferring wealth from people that were struggling the most to the unethical financial executives that created this problem. These were my exact words in October, 2008, verbatim, about the eventual effect of the bailout plan: “Don’t believe the media spin. This will fix nothing. Even if and when the government overpays Wall Street and US banks by 300%, 500% and 1000% for their toxic assets, this temporarily recapitalizes these financial institutions but only creates A MUCH BIGGER PROBLEM for the future.” If I understood why the bailout plan would most definitely fail, as I blogged here, and the next President of the United States could not, that is a scary thought. On the other hand, if President Obama understood that the bailout plan would likely accomplish nothing but the transference of wealth from hard-working citizens to corrupt financial executives and still voted for the bill, then this action needs no further discourse.
(2) The problems afflicting the global economy still have not yet been addressed by any Central Bank or government in any intelligent manner and thus, are not on the path to recovery. No single man, no matter how competent and no matter how much goodwill he possesses worldwide, can fix this current crisis without severely overhauling the current fiat monetary system. There has been zero evidence thus far, that the Obama administration wishes to address the root problem of this crisis – an unsound monetary system.
(3) This crisis is being misreported by virtually every finance journalist in the world due to an education system that teaches an unsound Keynesian economic model at every top university in the world. From the Obama administration’s actions thus far, it is clear that he is taking a Keynesian approach in his attempt to fix the problem, which is to spend your way out of an economic meltdown. The only problem is that any “fix” that may result from such an approach will be 100% illusory and only result in further destruction of wealth by ensuring future devaluation of the world’s major currencies.
(4) President Obama’s cabinet appointments. Thus far, President Obama’s cabinet appointments do not reflect, in the slightest manner, the enormous change that he spoke of during his campaign. On the contrary, his talk of change, quite honestly, appears to be 100% rhetoric. A clear example of this is President Obama’s appointment of Timothy Geithner, the former President of the New York branch of the US Federal Reserve, to the US Secretary of Treasury, and his appointment of Paul Volcker (Chairman of the Federal Reserve Board, 1979-1987; Chairman of the New York investment banking firm, J. Rothschild, Wolfensohn & Co.; Chairman of the Board of Trustees of the Washington-based financial advisory body, the Group of Thirty; founding member of the Trilateral Commission; and Chairman of the Board of Trustees of the New York-based International House) to head his economic advisory board.
A further inspection of Obama’s economic advisory board reveals a who’s who of executives from the institutions that created this current mess: William Daley (Midwest chairman of JPMorgan Chase; secretary of commerce, 1997-2000); William Donaldson (chairman of the SEC, 2003-2005); Robert Rubin (chairman and director of the Executive Committee at Citigroup; secretary of the Treasury, 1995-1999); and Roger Ferguson (president and CEO of TIAA-CREF; former vice chairman of the Board of Governors of the Federal Reserve)
Furthermore, Volcker was highly instrumental in ensuring one of the worst decisions in economic history, the US decision to suspend gold convertibility in 1971 that subsequently allowed a 100% fraudulent monetary system to spread globally, and consequently almost resulted in the collapse of the US dollar in the late 1970s. Obama’s cabinet appointments are perhaps the most damning evidence that he is strictly about maintaining the status quo and not at all about change when it comes to Wall Street.
(5) For a historical example of how the Obama experiment is likely to turn out, please research the election campaign of Mexican President Vicente Fox (Mexico’s President from 2000-2006). Vicente Fox was largely perceived as a savior among the Mexican general masses because he was the first opposition candidate to defeat the PRI (Institutional Revolutionary Party), a party that had ruled Mexico for more than 70 years. Fox’s election campaign, full of slogans like “Vota Alianza por el Cambio” (Vote for Change) and “Ya!” (Enough!), could have served as a blueprint for Barack Obama’s masterful election campaign. By the time Fox’s six years of Presidency had expired, he was widely regarded as a huge disappointment for failing to implement almost every major plan of change he promised during his campaign and doing very little to change the status quo.
(6) Don’t let President Obama’s professed anger regarding the $165 million of bonuses slotted for AIG executives fool you. There’s a Taoist principle that states if one tries to do something, then his intent is not pure or sincere. If one’s intent is pure, Taoist’s state that one would forego all the talk about “trying” and merely “do”. The US government clearly changed security laws at their whim last year by making short selling of financial stocks illegal for periods at a time to artificially force financial stock prices higher and thus, help out financial executives, with little opposition. Thus if the President and US Congress’s anger about these bonuses are real, it seems to me that they would just implement new laws to end fraudulent bonuses. They would just “do” instead of keep “trying.”
(7) Why wasn’t the expressed outrage of the Obama administration regarding $3.6 billion of bonuses that Bank of America paid to Merrill Lynch executives, a figure that dwarfs $165 million, equivalent to the outrage being expressed over the AIG bonuses? Something tells me that because AIG is not a pillar of Wall Street, that AIG is receiving harsher treatment. I’m not arguing against this harsher treatment by any means. I’m merely illuminating that the hypocrisy in these different standards is an indictment that Wall Street firms’ ties to the US government are so strong that they are still being favored despite the rhetoric.
(8) Remember when former US Treasury Secretary Hank Paulson’s original $700 bailout bill was a 3-page document and he promised that no money would be spent without extremely close supervision? Remember how this 3-page bill mysteriously morphed into a 450-page $850 billion bailout, and loopholes galore were snuck into this new bill last minute so that billions of the bailout money could be allocated for executive bonuses although Paulson promised us such shenanigans would not occur? Remember that Obama voted for this bill.
Many of you may view this criticism as very harsh of an administration that is not even two-months old. However, this is the truth as I see it for now, and the truth is rarely popular. In fact, if you review my articles at Seeking Alpha, you will discover that rarely have my articles been received very positively, although the future has revealed a good deal of them to be very accurate. In the end, I really wanted to script an article about hope, but my digging beneath the surface disallows it.
Technorati Tags: monetary crisis, economic crisis, new bull market, AIG
Entry Filed under: Financial Crisis, Dollar Crisis, & Recession Proof, Politics and stocks
11 Comments Add your own
1. Rik | March 19th, 2009 at 7:37 am
I’d like to know how Volcker was instrumental in President Nixon suspending gold convertibility.
Anyway if not for that, the Fort Knox would have been emptied and the USA bankrupt by … 1975?
2. vivek | March 19th, 2009 at 8:46 am
Well written… the US policies are more about transfer of wealth from one section to another. Less tax on top rich class which Buffet himself claims. Very little dis-incentives for wall street — they still get their bonuses, but common folk may lose their homes!
3. sheeple123jump | March 20th, 2009 at 2:41 am
I believe you are correct in your assessment. the more I learn and discover thru research,guided by your thoughts and point of view,the more I realize the ‘global economy’ is a rigged game, and only the elite insiders know the key information to enable them to stay in power,wealth,and control…and if we are smart and have the right knowledge,to see the manipulations, and figure out the game, we might stay just one or two steps behind, and save our personal wealth, and maybe even make some profit playing their game.
I believe your frame of mind is correct,and I trust your integrity.
4. sheeple123jump | March 20th, 2009 at 3:00 am
and to add a thought ,from the most recent example of the game….march 18 ,Fed action to blast off the ‘recovery’… to see it for what I think it is…. (I’m no expert…yet…) but I suspect the timing has to do with waiting as long as they could after march 1 to see how the market sentiment is going….seeing that its not moving forward as they want… knowing that more downward spiral is likely, they have to make a move now, before april 15 (tax day)…. jumpstart the fake recovery, and hope for the best in the next 4 weeks… then, when the “high” wears off, if the timing coincides with a top in gold at 1000….crash gold down and ….hope for the best… etc etc…then, what next…. more dog and pony show to create public opinion, …and after that…something agressive politically/military threats maybe…. to keep other countries in line…. etc etc…. is this the kind of thing we have to learn, how the game is played. ??
Today, after many hours of study, I garnered the insight, that what is happening in this “Global Economy” is something like…. the playing out of World War 3…..as an economic war instead of a military war. I would like to hear you comment on this idea.
Politics ,military brinksmanship, terrorist acts,economic alliances, central bank actions, etc…..are All interconnected…and the Elite powers in control of this Game….are actually cooperating to keep it in some form of balance…but struggle at times,of power imbalances,disagreements that cause skirmishes and frustrations,threats and minor disasters,body blows like a kick in the groin,(vis. the Mumbai Terrorist event) to keep allies in line,etc….very complex puzzle game…not just a simple issue of ….”Investing”….its more like the Critical Balancing Act of Economic war/brotherhood,for the 21 st century….because this is what passes for modern ‘evolution’….because the alternative to this kind of conflict (economic)….is military, and the destruction of the whole world.
what a fun game to play….. how do I get in on it ??
5. Debra J Frank | March 22nd, 2009 at 11:37 pm
J S Kim…you are straight on – RIGHT, about everything!! I have been troubled by the GCC unpegging from the US Dollar & Kuwait already out. Nobody I talked to seemed to care or view it as a problem?? I can see now, by your post how the USA could try to run down the oil price. Makes perfect sense. Saudi ’s just made a huge play on gold in Dec 08, I think…
From one LONGHORN to another,
Thanks so much,
Debra
6. VR | March 23rd, 2009 at 6:35 am
Those aren’t “8 reasons the Obama Administration won’t have solved the crisis by the end of 2009″. Take #5, “Vicente Fox in 2000 had slogans that were similar and he really sucked. I think Obama’s likely to turn out the same way.” Newsflash: every candidate from a nonincumbent party ALWAYS runs on change as a slogan! The implied analogy that governing Mexico is somehow similar to governing the US is just silly on its face.
#6 is silly, too. Maybe there are good reasons why they can’t just stop the bonuses? For example, there are news reports that AIG’s CDS contracts go into default if they default on any commitment >$25m. If you’ve decided AIG can’t go under without taking out the US economy, then you may have to do some things you don’t like as part of the larger goal.
On #7, first off, your statement of fact is wrong–$3.5 billion in bonuses wasn’t paid to “executives”, it was paid to the rank and file employees. More importantly, it was part of a franchise (the Merrill Lynch Brokerage Division) that was an acknowledged asset–it’s a self-contained profitable unit of Merrill, and could have been sold off separately at any point. This AIG Financial Products group, on the other hand, should be bankrupt.
One senses someone just doesn’t like Obama.
7. Katherine Granucci | March 23rd, 2009 at 9:26 pm
Until I see Obama investing in a recurring income strategys & not just throwing money at a problem & draining our reserves in the meantime that could be put to better use, I will continue to worry that we are still headed toward a DEPRESSION.
I don’t see Bernanke qualifiying any of his statements – he’s just giving the cries of the USA a pacifier for awhile.
They need to stop playing games & simply give everybody a 4.5%fixed rate on their homes & if that’s not good enough – you deserve to loose the property — PERIOD. That way no one can say they didn’t get a fair deal & it would save the banks in the long run because they wouldn’t need the modification departments any more. The employees could handle all the sales coming in, while the foreclosures dried up. A fresh start!
They got us into this mess, they could then get us out of this mess…they owe us that for allowing the terrible strategys in the bad loans to begin with.
They should of known this would happen – Greenspan should have his assets seized & liquidated to pay for part of what he allowed.
Deregulation was just plain STUPID! Whoever signed for that including Bill Clinton, should have their assets seized & liquidated to pay those that lost their homes because of this.
Franklin Raines who provoked Clinton to deregulate & now works for Obama should be out of a job. Taking 100M for himself & giving Obama 100M too — we the people are in big trouble.
8. J.S. | March 24th, 2009 at 3:13 am
Just a quick note to you VR. I welcome all criticism because only a fool does not listen to opposition viewpoints. However, you marginalize your credibility when you cite portions of my article in quotation marks that clearly I did not state, i.e. “Vicente Fox in 2000 had slogans that were similar and he really sucked. I think Obama’s likely to turn out the same way.”
I will only say that if you had taken just half an hour to read the hundreds of articles on my blog you would have discovered that I have criticized the Bush administration and the Clinton administration in the past when appropriate as well. You have missed the whole point of my article, which was to open up minds by pointing out things that people do not see on the surface. If the Obama administration was taking the right steps to fix this crisis I would gladly praise Obama. This is not about my political affiliations but about my hope to institute a sound monetary system.
Lastly, I would counter another of your points by saying that Mexico, as our neighbor to the South, has a huge impact upon the political and economic state of the United States.
JS
9. James Jadrych | March 24th, 2009 at 11:34 am
Are we all going to continue to just sit here and watch as this man and his “Brown Shirts” put a stuccatto end to the great experiment that was The Unired States of America?
10. J.S. | March 24th, 2009 at 12:44 pm
By the way, here is another good link for everyone where Nobel economists Joseph Stiglitz and Paul Krugman are highly critical of the Obama administration’s continuation of the foolish Bush administration and Clinton administration policies here
http://georgewashington2.blogspot.com/2009/03/krugman-slams-geithner-et-al.html
and their criticisms are the same as mine. no solutions addressing the root of this problem are being implemented. You can not solve a problem by continuing the very same policies that created a problem…
11. Merry-will-go-round | March 29th, 2009 at 8:52 pm
Excellent analysis. Thank you for speaking out. Such a shame that only a few Americans are actively seeking out such alternative sources of information, in lieu of more accessible, but horribly corporate-tilted mass media messages.
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