Thursday, March 5, 2009

Obama: Architect of Failing Economy

Sarah Palin at age 2 carrying shrimp in each hand

Financial expert Troy Dunn says, "It's like donating blood at a morgue." He's talking about the government's stupid decision to throw more cash at hapless AIG. [Note: Later today I'll be discussing why Sarah Palin should replace Obama as President in 2012.]

In coming days, I'll discuss what's gone wrong with the economy -- and what the Obama Administration is doing to make it worse. The reality is that you'll find much more of value here than you will on CNN and the rest of the mainstream media. The MSM continues to find it difficult to ask serious questions about Obama's policies, which are designed mainly to pay off his voters rather than to benefit the nation. (If you come here regularly, please sign up as one of my "followers" -- scroll down the sidebar at the upper right.)

Economics, my friends, is relatively simple, involving a finite number of variables, including: supply, demand, investments, profits, and taxes. Obama is focusing on demand and ignoring the other components. Worse than that, he's looking for scapegoats rather than solutions. It's a tactic disastrously practiced during the Franklin Roosevelt Administration.

Consider Obama's disastrous plunge into class warfare. Yes, many people love to hate "the rich" (whether they're really rich or not). But consider this: Mayor Michael Bloomberg recently spoke out against soaking the rich people in his city. He explained that high-tax, high-cost New York has eight million residents. But a mere 40,000 of the eight million -- one-half-of-one-percent -- provide city tax revenue totaling a massive 63%.

What if one-eighth of those people -- 5,000 -- moved out of the city? That would do serious damage to the city's capacity to provide services. What if one-fourth of them -- 10,000 -- moved out, which they certainly have the resources to do? It would cripple the city's ability to meet the needs of its people.

Is Obama aware of such a situation? He hasn't shown any sign yet that he is. Sarah Palin does understand such realities, and that's one reason she'd be a much better President than Obama. In Sarah's world, which is also my world, a company that operates efficiently, wisely, and profitably can grow and flourish. Companies that perform poorly will flounder and, eventually, fail.

Not so in the political planet occupied by Obama and people like Treasury Secretary Tim Geithner. They look at companies such as GM and AIG as "too big to fail." Thus, such companies qualify for huge bailouts, which are somehow never quite enough money to change their prospects.

GM says it needs another $30 billion -- with a "b" -- to stay afloat. However, GM is the corporate version of a bottomless pit. Most insightful observers believe the company is headed for bankruptcy. Even that drastic step might not save America's largest automaker. At the same time, the overpaid members of the automakers union seem blissfully unaware of GM's lurch toward oblivion. GM wants to cut nearly 50,000 jobs, but even that probably will not be enough.

GM qualifies as one of Obama's companies that's "too big to fail," but fail it will. "Its auditors have serious doubts about its ability to survive," as one news report just said. Please let it die in peace.

What about insurance Godzilla AIG? So far, it has received a total of about $150 billion in bailout money. Guess what? It will need more, much more. In last year's fourth-quarter, AIG lost a whopping $60 billion. Is it doing better in this year's first quarter? Apparently not.

What's AIG's problem? It insured many of the companies that were up to their eyeballs in the subprime lending debacle. In other words, AIG insured companies that matched it in irresponsibility and bad financial practices. For that, we're supposed to bail it out?

What about the concept that a company like AIG is "too big to fail?" I have news for Obama (and AIG): it is failing. Last fall, its stock price was $20 a share. Today, a share of AIG stock is worth . . . 50 cents. Its terrible performance is one of the reasons owners of shares in all American companies have lost a total of $1.1 trillion -- with a "t" -- in wealth in the past six weeks. Obama is bankrupting the nation.

This morning on FOX News (an island of sanity in a sea of nonsense), self-made millionaire Troy Dunn said this about AIG: "It's not too big to fail." He added, "It has already failed."About throwing additional taxpayers' money at AIG, Dunn observed: "It's like donating blood at a morgue."

If AIG collapses -- actually, when it collapses -- many companies around the world will suffer. Some of the will fail. However, Obama, Geithner, and Bernanke are incapable of saving AIG. They are involved in trying to resuscitate a corpse stiffened by rigor mortis.

Today (Thursday), the stock market is continuing to fall. That's about as newsworthy as saying "The sun came up once again this morning."

Wall Street is sending a message to Obama, who remains tone deaf to the sobering music of the market. Wall Street is saying that it doesn't believe Obama has a clue about how to turn the situation around. In that view, Wall Street is correct.

[Tomorrow (Friday), I'll be writing on how to cure a serious recession, with emphasis on how it's been done effectively in past, specifically in the Administrations of Calvin Coolidge in the 1920s and Ronald Reagan in the 1980s. They did so by taking steps the exact opposite of what Obama's doing. A situation where companies aren't allowed to fail becomes one where companies eventually aren't allowed to succeed.]

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