-- Posted Wednesday, 17 December 2008 | | Source: GoldSeek.com
By James West
The tendency towards structuring and implementing economic policy by popular opinion is not only going to forestall the low point in this downward cycle – it will add substantially to its duration and depth.
The foundation of the monetarist Keynesian philosophy that informs the Bush Administration’s developmental role in the over-capitalized global economy also incorporates the Milton Friedman Chicago econmics school ethos of wiping out social programs in tandem – a process that has destroyed the social safety new in America. These twin (and what should now be thoroughly discredited) approaches have limited the options of those now tasked with repairing the damage.
As interest rates flirt with extinction, and real yield on government debt wallows in negative territory, both the nearly pooched Bush team and the nascent Obama crew flounder in search of meaningful remedies to the situation. In the absence of positive and radical change to the structures that engendered the crisis in the first place, measures that appease the notoriously short-term mentality of the general public are spit out of the process as the scant offerings of populist administrations terminally short on vision and intellect.
Bailout talks for the auto industry have now been hijacked directly by the Bush administration since the Senate has sent a clear message that its willingness to pass anything approaching even half of the requested $25 billion is weak and contingent on too many covenants to make passage realistic. The solution, in George’s thinking, is to remove the debate from the legislative process and move it into a process where congress and the senate are bypassed.
As the expression goes, a man has two reasons for doing anything. A good reason and the real reason. George’s good reason is that he can’t do nothing, so must do something. His real reason for taking a personal interest in the welfare of the auto industry is legacy. He doesn’t want to be the remembered as the president who destroyed the auto industry in America.
His reasons for so gleefully pumping up the banks are similarly dualistic and ultimately self-serving. He can’t do nothing because the bankers are his friends, and knowing the incestuous nature of business and government, there are likely countless other “real” reasons cloaked in secrecy.
Obama’s concerns are far more current in their temporal imperative. Fatuously obsessed with making the right impression, he’s surrounding himself with the unfortunate architects of modern economic theory and therefore disaster. The solution to keep the printing presses rolling at maximum capacity and worry about the aftermath afterwards is stupendously naïve, and inadvertently underscores the man’s inexperience and lack of confidence. No miracles or flashes or genius are anticipated from this quarter.
This is why, at first blush, it appears the Obama administration appears to be populist leaning, and the great hope of Obama is eroding like just like the confidence in the banking system. To announce that he’s going to reverse Bush measures relative to abortion at a time when that issue is way down the list for the vast majority of Americans demonstrates also an absence of sensitivity and sense of timing. There are so many bigger fish to fry today.
Obama is silently yet vigorously praying that the auto bailout issue is resolved by Bush before Christmas. He hopes that Bush will commit the required funds to keep the companies going for a few more months, and he hopes the automakers will continue drastically paring down the workforce in the meantime. He wants the lost jobs to be hung the Bush administration, and not his own new one.
With an eye on the period beginning in 1933 that marked Franklin Roosevelt’s infrastructure and social program-heavy “New Deal”, Obama seems keenly attenuated to the comparisons being drawn between Delano’s success and Obama’s opportunity. So far, he’s using the same play book.
What will be interesting to see, and where perhaps one of the outstanding opportunities for truly great leadership exists, is in the reform of financial markets, regulation and fiscal policy.
With the Madoff incident dominating headlines, it would appear that a beneficial side effect of the financial crisis is that it is going to force the collapse of all the major Ponzi schemes now in play. The fact that Madoff’s is the first major one and biggest fraud in history is testimony to the size and maturity of his particular iteration. The chances of many more houses built of cards on Wall Street coming to their inevitable end are pretty good.
The regulatory agencies that oversee Wall Street are revealed now to be grossly ineffective and riddled with nepotism. If Obama was smart and agile, he would announce an audit of all regulatory agencies (CFTC, FDIC, etc.), and mandate an independent examination of all investment companies with assets in excessive a certain minimum, say $5 billion. Secondly, he should task an investigative group with subpoena powers with identifying conflicts of interest and nepotistic relationships within the industry.
And finally, a scintillating administration’s advent should not be complete without new rules to vastly increase transparency of trading, beneficial ownership in, and short selling across all asset classes.
These measures would serve to both demonstrate decisiveness and inspire confidence, attributes that never accrue in the long term to populist government.
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-- Posted Wednesday, 17 December 2008 | Digg This Article
| Source: GoldSeek.com
