Posted on 09/25/2009 5:07:19 PM PDT by sickoflibs
As another G20 meeting rolls around, this time on home soil, the time comes once again for the economically curious but politically unconnected to wonder what is really happening behind closed doors. But while admiring the pageantry, chuckling at the awkward group photos, and parsing the joint communiqués like newly found Dead Sea scrolls, the overwhelming majority of observers will miss the meeting’s dominant theme: hypocrisy.
Everyone agrees that the principal agenda item in Pittsburgh will be the need to rein in the ‘global imbalances’ that created the late economic crisis. Everyone also agrees that these imbalances involve too much spending and borrowing by Americans and too little of both by the Chinese and other developing nations. In his remarks this week at the United Nations, President Obama used his peerless rhetorical skill to frame the issues clearly and plainly. Noting that a return to pre-crisis economics is impossible, the president assured the world that his administration will pursue policies to increase savings and decrease spending at home and challenged his Chinese counterparts to enact measures with the opposite effect in their own country.
While this is roughly what needs to happen, President Obama is actually doing everything in his power to prevent it. In point of fact, every policy move undertaken by his administration has exacerbated the very imbalances he supposedly wants to curtail. To so seamlessly profess one goal while simultaneously undermining it is an impressive piece of political theater. Unfortunately, this particular drama is likely to have an unhappy ending – and the ticket price will be staggering.
What exactly are the federal fiscal stimuli other than deliberate, but clumsy, efforts to get people, companies, and governments to spend money they don't have? Programs like tax credits for new homebuyers or ‘cash for clunkers’ are intended to encourage consumers to spend money that they otherwise might have saved. Grants to municipalities allow them to hire workers and spend money locally that they otherwise would have forgone.
Federal intervention in the mortgage and credit card debt markets, where they are now nearly the sole buyer, has been specifically undertaken to keep interest rates low and financial firms solvent – so that Americans can keep buying homes and using their credit cards. While the Fed will continue to hand out free money to any and all borrowers for an “extended period,” the abysmally low interest on deposits that such a policy creates disincentivizes personal savings even further.
In 2009, despite the tilted playing field, the American people have heroically managed to increase their savings (although clearly not as much as they would have in a free market). But President Obama’s runaway deficit spending is undermining their efforts. The simple truth is that government debt is our debt. So if a family manages, at some cost to their lifestyle, to squirrel away an extra $1,000 in saving this year, but the government adds $20,000 in new debt per household (each family’s approximate share of the $1.8 trillion fiscal 2009 deficit), that family ends up owing $19,000 more than they did at the beginning of the year!
So much for our end of the bargain. How about on the other side of the Pacific? Will the Chinese restore balance by increasing their spending? How can they while they are lending us all their money? Remember, any money the Chinese spend is money they cannot loan to us. So, if China really wanted to spur domestic consumption, the best way to do so would be to stop buying our debt. Even better, they could sell Treasuries they already own and distribute the proceeds to their citizens to spend.
However, the Obama administration is heavily lobbying the Chinese to get them to step up to the plate and buy record amounts of new Treasury debt. Obama cannot have it both ways. He cannot claim he wants the Chinese to spend more, but then beg the Chinese government to take money away from Chinese consumers and loan it to the United States Treasury.
In the end, Obama will get precisely what he publicly claims to desire but privately dreads. The Chinese government will come to its senses and stop buying Treasuries. This will cause the U.S. dollar to collapse, but it will also allow Chinese citizens to fully enjoy the fruits of their labor.
Once the Chinese begin consuming more of their own products, those products will no longer be available to Americans. Once they start spending more of their incomes on themselves, those funds will no longer be available for us to borrow. Unfortunately, that is when our real economic crisis will begin. The worst part is that the longer these imbalances are allowed to continue, the larger they grow and the more painful the ultimate adjustment process becomes.
But for now, it’s all pomp, circumstance and hypocrisy in Pittsburgh. Why yes, Madam Finance Minister, I'd love another of those crab cakes!
If you realize both parties in Washington think our money is theirs and you trust them to do the wrong thing, this list is for you.
If you think there is a Santa Claus who is going to get elected in Washington and cut a few taxes and spend a few trillion and jump start the economy, and get our lost money back, this list is not for you.
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Are the rest of the G8 leaders as stupid as just over 50% of the US voting population? There is no mathematical way to “decrease spending” with any of the current legislation that HE IS PUSHING. In fact, even the CBO is basically calling him a liar by showing numbers for the proposals that would exponentially raise government spending (and deficits).
Only Peter Stiff...errr...Schiff could word it this way & demonstrate his repressed desires to spoon with the jOker.
Yep! Complete rhetoric! No substance.
Everything else Schiff said was very critical of Obama. Schiff simply let the “devil have his due”. Read in context, Schiff called Obama a hypocrite, who is doing everything wrong.
Credit card interest rates are not low, unless you consider 25% low. The ONE thing government could have done to help credit card users to pay down their debt was lower these outrageous interest charges more in line with high risk loan rates the banks charge.
But if credit card companies feel these rates are justified, then too bad if people default when they get in over their heads, they can eat these defaulted credit card debts. It;s the risk they take giving unsecured credit to anyone with a mailing adress.
lololol.....The man sounds like a complete idiot every time he opens his mouth.
I couldn't stand listening to President Bush but Obama makes Bush sound like a Steely-Eyed Missile Man.
And that's exactly what is going to happen. It's only the USA and many of the overspending high deficit running Europeon economies that have serious bank debt problems, that only can be resolved by a serious attempt to cut spending and reduce deficits.
The rest of the world will go on, and already is. Their "recession" is over. While they will definitely feel a stagnant recovery with the loss of US and Europeon consumerism, and their unemployment rates will remain high only going down slowly over the next few years as local economies grow, Something else will develop as well, a shift in trading direction, and this shift will permanently lock us out of their markets which will be rebuilt to serve the new direction of trade, up and down the Asian pacific rim instead of the east west direction trade has gone for the past 200 years.
Is this the Peter Schiff who is going to run in the GOP primary in CT, hoping to unseat Chris Dodd? He might be able to do it, but CT is the home of the hedge funds. Schiff is a bond man, not “an easy money, borrow-from-the-fed-window and leverage 30 times to buy tech stocks on margin” kind of guy.
And Satan smiles a bit more broadly.......
Ping!
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