Since the Obama administration and the hard left which supports it respect neither democracy nor capitalism, they equally hold no respect for the rule law and its corollary corruption free politics, and politics free of indulging crony capitalism. We on Free Republic knew to expect this from Obama since before his election and we in fact posted these expectations. If we could read the tea leaves, or more precisely put, if we were able read the public media, if not the establishment media, and connect these dots as we did, so could much of business especially businesses directly wired into streets known as "K." and "Wall." No one could foresee the depth of the crisis that was breaking upon us at the time of the 2008 election and no one could say precisely how Obama would exploit the crisis-but everyone who cared to know did know that he would not let it "go to waste."
So it is clear that a prudent businessman would take those politics into account. Which, of course, is what I was trying to say in my previous reply to the effect that it is fatal to mix politics and economics. I apologize, schu, for being so inarticulate. What I meant to say is that it is folly to analyze markets through the prism of one's political bent-that is what Marxists do. So looking at our politics, and concluding that the politics were now becoming stronger than market forces, tokened by the shift of power from New York to Washington, a prudent businessman would hunker down. Likewise, the old saw that markets hate uncertainty-and Obama has done nothing but create uncertainty at least as to the extent of his depredations-would cause markets to retract. It is still going on today and the employment figures show it.
We should have a 6 % to 8% GDP growth as a recovery to this steep recession. We are getting 1.6% last quarter. Compare that to Ronald Reagan's recovery. Compare it even to Angelica Merkel's recovery here in Germany whose fiscal restraint has moderated the recession and accelerated the recovery. Here in Bavaria we have about 4.5% percent unemployment rate.
So, Recovering Democrat, yes I think it is fair to say that Barack Obama has both aggravated the financial and economic crisis and retarded the recovery. The market looks at least six months ahead into the economy and the unemployment numbers lag the economy.
Part of the uncertainty with which Obama constricts the economy and the markets grows out of uncertainty about what he will do in the lame duck session, assuming the Republicans take at least the House. There will be contrary forces at play: On the one hand those lame duck Democrats who were voted out of office will know that their political careers as elected officials are over but their future careers as lobbyists, ambassadors, and regulators etc., some of which can be rather lucrative, depend on their retaining the goodwill of the Democrat party. That dispenser of that goodwill can be expressed in two words, George Soros. On the other hand, both Obama in the White House and Harry Reid and Nancy Pelosi in the Congress will have their reputations shattered. They will have very little with which to dominate Congress as they have. Democrats are already running against all three of these individuals and it will be extremely difficult for any of them to maintain party discipline after the election. One can only imagine the depth of bitterness felt by these blue dogs who were thrown under the Obama care bus.
On balance, I think the Democrats will not be able ultimately to continue to act so blatantly in the lame duck session against the will of the people and which so infuriated the nation during the regular session. I think the Democrat coalition, bound so tight until now with the purse strings held by George Soros, will unravel. Their infighting will not be pretty but it will be heartwarming.
Another part of the uncertainty comes from whether Obama wants a recovery or a collapse according to the Cloward and Piven model. Finally, as Danae has pointed out, governments are inclined to choose inflation rather than outright bankruptcy as the more expedient way to default on their debts. This will pose a very sure matter of conscience for the Republican majority in the House. The tendency of politicians would be to let the Fed inflate while they maintain a "who me?" innocence. Republicans will have an even greater challenge, how to restore credibility to the American financial system which means how to get entitlements under control and still retain political power as the Democrats resort to demagoguery and accuse the Republicans of putting grandma on the ice flow and forcing babies to become dumpster divers.
But the story of Japan seems to pose the possibility that our problem is and will remain deflation. I confess I do not understand how this works and can only describe it by way of analogy, we are in an economic black hole and no matter how much money governments push into that hole it simply disappears leaving the country in a deflationary environment as we have seen for more than a decade in Japan. I agree that eventually the piper for inflation must be paid. But it might not be so until Obama is thankfully well out of office.
The ideal way out for the American Republic which will preserve our great constitutional experiment and provide the freedom for everyone to thrive under capitalism is to grow our way out of our debt. That cannot happen with 1.6% growth. We must make the lines cross, that means we must get entitlements under control. That is a matter of political will. If that can be done-and in my view Representative Paul Ryan has made a grand start-the markets just might find confidence enough to buy our debt and keep the interest rates at manageable levels. They might find confidence enough to risk capital and hire labor.
If the Republicans do not win the House, buy guns, buy ammunition, buy canned food and sell everything else short.
