Archive for December, 2009

Obama’s Utopian Economics

Wednesday, December 30th, 2009

This blog post cites Audacity:

Since the start of the finical crisis, banks and insurance companies have been begging for government bailouts. Does the U.S government have the money to save them? No. Now the need is for money from the working-class taxpayers to stay alive.

Along side all this is the fact that middle class America may not be able to survive this kind of finical pressure. What the “American dream” consists of is credit cards and monthly payments. People live large but can’t even afford it. With new high taxation coming from the Obama administration to pay for all the debt, people still spend as if there was no increase taxation. The Economist magazine wrote in May 2009, “Having spent a fortune bailing out their banks, Western governments will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of foreign creditors. Given the political implications of such austerity, the temptation will be to default by stealth, by letting their currencies depreciate. Investors are increasingly alive to this danger”.

Wall street has come back according to Nomi Prins, former investment banker turned journalist, who worked at Goldman Sachs. Prins wrote a book called, Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street. Her book points out that the current crisis did not happen because ordinary citizens were able to borrow money or put money they could not pay back on their credit cards, for example, but because Wall Street converted loans into assets that allowed it to borrow much more than it could afford. Prins does not stop there. In an article called Obama Banking Too Much On Banks, she looks at the problems of Obama’s economic plan and says, “Obama’s reforms do not strike deeply enough”. The article shows that Wall Street has been able to come back but is that enough? No. Prins told Amy Goodman of democracynow.org in an interview that, “Obama is making the grave error of mistaking the health of Wall Street for the health of the American economy.”

Obama said a lot while campaigning for office. He talked about change and hope. But how does that change and hope play out for the people that voted and stood by him, mostly students and youth? On the subject of Obama’s promise to make college affordable, John F. Wasik said in his new book, The Audacity of Help: Obama’s Economic Plan and the Remaking of America, “While Obama proposed an American opportunity tax credit of $4,000 toward free college education, Congress actually adopted that name for the former Hope Scholarship, offering only as much as $2,500/year, just through 2010. Eligibility stipulations include an income limit. Congress also did nothing to simplify the cumbersome financial aid process, which Obama promised to eliminate.”

On a similar note, the United States faces a Zimbabwe-style economic collapse, says South Carolina Governor Mark Sanford. Sanford has compared Zimbabwe’s economic collapse to what is happening to America today. He has said Zimbabwe attempted to stimulate the economy by printing money, exactly what Obama is doing. Zimbabwe even created a $100 trillion bill. The governor has compared America to Zimbabwe’s 11 million percent inflation rate which might be a bit extreme, but in reality, the U.S is going down a hard road if Obama keeps printing and spending money that does not in reality exist. Sanford has said, “What you’re doing is buying into the notion that if we just print some more money that we don’t have and send it to different states, we’ll create jobs,” he then said. “If that’s the case, why isn’t Zimbabwe a rich place?”

Another issue on this topic of the financial crisis is China. China has the U.S in an economic headlock. As a world power, gaining almost all control, China has bought more than 1 trillion dollars of American debt. Barack Obama himself has predicted the possibility of trillion-dollar deficits as he said “for years to come,” which basically means Obama will be taking it in the rear from his counterpart Hu Jintao. Beijing is starting to keep more of its money at home, a move that could have painful effects for American borrowers. China in the last five years has spent as much as one-seventh of its entire economic output buying foreign debt, mostly American which primarily was to finance the wars in Iraq and Afghanistan. Economists have said that huge deficits have raised worries about the enthusiasm of foreigners like China to keep purchasing US Treasury debt. This fret alone has contributed to recent falls in the value of the US dollar.

The United Nations (U.N.) view of the dollar is that it should be replaced with a global currency. The U.N. has planned the largest service of the world’s monetary system since World War two In are port by the The United Nations Conference on Trade and Development (UNCTAD). China is on bored with replacing the dollar as the world’s reserve currency since they know they will not be effected especially since China now has America in an economic headlock because of it’s trillions of dollars in debt. Detlef Kotte, one of the report’s authors, said “Replacing the dollar with an artificial currency would solve some of the problems related to the potential of countries running large deficits and would help stability”. But on the other end of that the deficit nations such as the UK and US would have to take the main burden of adjustment . Of course economists have yet to come up with another alternative and even major institutions, including the G20, are at a loss for ideas. Unfortunately, no one else has come up with another substitute. So now we wait and watch history be made.

Sources:

Economist Magazine-A New Global System is Coming Into Existence

Nomi Prins, It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street, Publisher: Wiley (September 22, 2009 http://www.amazon.com/Takes-Pillage-Bailouts-Backroom-Washington/dp/0470529598

Motherjones.com, Nomi Prins, Obama Banking Too Much On Banks, Mon Sep. 14, 2009 http://motherjones.com/politics/2009/09/obama-banking-too-much-banks

Democracynow.org, September 15, 2009

http://www.democracynow.org/2009/9/15/nomi_prins_obama_banking_too_much

John F. Wasik, The Audacity of Help: Obama’s Economic Plan and the Remaking of America, Publisher: Bloomberg Press; Original edition (August 26, 2009)

http://www.amazon.com/Audacity-Help-Economic-Remaking-America/dp/1576603563

johnQIII

Audacity Reviewed by California Bookwatch

Tuesday, December 29th, 2009

This is from California Bookwatch:

THE AUDACITY OF HELP covers the basics of what the new president has promised and how Congress is thwarting his plans, offering chapters clear on ‘what Congress passed’ and ‘who benefits most’ on all Obama’s issues. Obama wants more shared responsibility on all levels–something Congress isn’t willing to allow. His success or lack thereof reflects how much Americans really wish change, and is analyzed in The Audacity of Help.

Obama and Copenhagen

Tuesday, December 8th, 2009

Yes, We Can Copenhagen!

“I love the smell of carbon dioxide in the morning. It smells like…victory.”

Have you wondered what’s going on in Copenhagen? Are the usual suspects hopelessly protesting and government officials pining for some global accord that will only protect the Maldives and Banglasesh? What’s it all about, Alfie?

It’s about capitalism. Oh, remember that nasty thing that supposedly was killed by the greed of investment bankers, real estate brokers, hedge fund managers and mortgage companies?

Yes, that thing. It’s still alive and kicking, infused with the vigor of climate change steroids. One argument is that climate change treaties and regulations will snuff economic growth wherever it’s implemented. The other side will tell you that no, climate change is good for business. Let’s start with the killjoy side.

Climate Change Will Depress Economic Growth. Well, yes, it will cost industry more to reduce carbon dioxide production. That’s bad news for coal-fired power plants, steel, cement and transportation, among many others. But it’s not a zero-sum game. More growth will be created in the Eco-Tech sector, that is, industries that clean up dirty enterprises like diesel engines or coke ovens. Ultimately, a clean-tech national policy creates jobs. For every job making solar panels, there are 8 to 10 jobs produced for workers who install them. So mandating clean energy is going to spin off capital investment and jobs on a scale we haven’t seen since the Internet boom (which is still going on by the way).

Climate Change Will Boost Economic Growth. I’m backing this horse. Once you create a market for something, capital flows to it like rain. The Obama Administration has committed$11 billion to modernize the US electrical grid. That will enable electrons generated by wind power in the Plains and solar energy from the Southwest to go to population centers. Another $8 billion in loan guarantees and tax credits are going into clean technologies. That could generate some $60 billion in investment, according the The New York Times. For every innovation in a solar cell or wind tower, jobs and opportunities are created.

Of course, the climate change agenda will be stuck on commitments to carbon reduction. Nobody really knows what is possible because we’ve never sat down at a table with everyone from China to Bolivia to hammer out such a massive agreement. I’m not saying it shouldn’t be done; it should be broken down into pieces.

1) Carbon should be taxed directly. The proceeds should go into Eco-Tech trust funds to build up clean technology infrastructures. Part of that money should go into re-training grants for displaced workers and into elementary and secondary education. This isn’t just about reducing global warming. We have to warm up everyone’s brains to the possibilities and rewards of reducing all of the garbage going into the air, water and earth.

2) Every nation needs a national renewable energy portfolio standard. I think Al Gore’s US goal is 20% from renewable energy by 2020. It’s ambitious, but doable if all levels of government from the Department of Energy to local school boards are required to reduce carbon dioxide production.

3) Every country needs green buildings and transportation. Most of the carbon dioxide generated comes from these two sectors. Implement green national building and zoning codes. Stop building developments away from public transportation and creating “spurbs” or sprawling urban areas only reachable by highways. Revise zoning codes for mixed-use development and higher-density housing. Start a massive campaign to convert buses, trains, ships and trucks to non-diesel engines — or at least clean up the emissions from those engines.

Climate change is good for business! Once the major commercial powers realize this, global climate change reforms will be as simple as eating a Danish pastry. Well, maybe not, but at least it will be a sweeter business proposition.

For more ideas, see my book The Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream (www.culdesacsyndrome.com)