Thursday, March 05, 2009

US Disaster Coming

Clueless and Classless
The election of Barack Obama was hailed as a great opportunity to restore America’s respect in the world. Yet, his diplomatic efforts so far have been clueless and classless. One of the first things Obama did when he took office was return a bust of Winston Churchill that had been given to President Bush by British Prime Minister Tony Blair after 9/11. As Britain stood by our side during the wars in Iraq and Afghanistan, the Churchill bust stood in the Oval Office throughout George W. Bush’s presidency. Needless to say, many Britons were shocked when Barack booted Winston from the White House.

This week, Obama had an opportunity for a “redo” when Prime Minister Gordon Brown visited Washington. Unfortunately, President Obama again snubbed our ally with behavior that one British columnist described as “very odd and, frankly, exceptionally rude.” First, the White House denied the prime minister a formal press conference. Only once in more than a dozen meetings with Tony Blair did George W. Bush not grant the British prime minister such an honor, and that exception occurred during a hastily arranged visit after the 9/11 terrorist attacks. Instead, Obama and Brown sat briefly together in the Oval Office in what the Washington Post described as “a chilly reception.” But the worst was yet to come.

It is customary for heads of state to exchange gifts when they meet, and Prime Minister Brown presented President Obama with a pen holder carved from the wood of the HMS Gannet. The Gannet was engaged in anti-slavery and piracy missions for a time off the coast of Sudan. She was the sister ship of the HMS Resolute. The wood of that ship was used to make the Resolute Desk, which was a gift from Queen Victoria to President Hayes in 1880. It is instantly recognizable as the magnificent desk that currently sits in the Oval Office.

Clearly, considerable care and thought were given to the gift Prime Minister Brown would present to President Obama. What did our president give the prime minister in return? Here’s how the U.K.’s Daily Mail put it: “For despite being leader of the world’s most bountiful nation, President Obama handed over nothing more thought-provoking than 25 classic American films on DVD. It was the equivalent of receiving a pair of socks from an unfamiliar aunt at Christmas -- and a less-than-glowing affirmation of the UK-US bond.”

Obama’s War On Energy
On Monday, hundreds of global warming protestors came to Washington, D.C., to demonstrate against Capitol Hill’s coal-fired power plant. The same day, Speaker Nancy Pelosi was scheduled to address the environmental activists at a Capitol Hill rally. Evidently, Mother Nature didn’t get the memo. A major snow storm forced the cancellation of Pelosi’s flight back to Washington, and temperatures hovered around freezing throughout the day, well below the average for early March. On the same day, Discovery News reported that yet another study found that “global temperatures have flatlined since 2001.” The scientists are stumped. Kyle Swanson of the University of Wisconsin said, “This is nothing like anything we’ve seen since the 1950s. Cooling events since then had firm causes… This current cooling doesn’t have one.” The study’s author suggests that the cooling trend “could continue for up to 30 years.”

This is particularly noteworthy because Treasury Secretary Timothy Geithner was on Capitol Hill yesterday testifying in defense of the administration’s planned tax hikes, including its $650 billion carbon cap-and-trade tax scheme intended partly to combat global warming. During his testimony, Geithner attacked the energy industry for causing global warming and said that the Obama Administration wanted to “change incentives” (manipulate tax policy) for the good of the country.

Because it is a tax on energy production, Obama’s carbon cap-and-trade scheme will produce additional costs that will ripple throughout the economy. The Detroit News published an editorial yesterday warning, “President Barack Obama’s proposed cap-and-trade system on greenhouse gas emissions is a giant economic dagger aimed at the nation’s heartland … [This tax] will drive up the cost of nearly everything and will amount to a major tax increase for American consumers.”

Dr. Margo Thorning, chief economist of the American Council for Capital Formation, told Fox News this week that the Obama carbon tax will cost between “$700 to $1,400 per family, per year…” Where’s the logic in imposing a massive new tax on hard-working families and struggling businesses based on temperature variations that scientists can’t explain?

Coming Next Year: Inflation from Obama
By Dick Morris
Published on on March 3, 2009

In the last five months, according to the Federal Reserve Board, the money supply in the United States has increased by 271 percent. It has almost tripled.

Have car sales tripled? Home purchases? Consumer spending? Corporate investment? Not only have they not tripled, they have all declined more sharply than they have since at least the recession of 1981-82, and perhaps since the Great Depression.

So where is the money? If it isn't being spent, where is it?

It is being parked, squirreled away. Consumers are using it to pay down their credit card balances, pay off their mortgages, reduce their student loans, make the payments on the car sitting in their driveway -- not the one in the dealer's lot. Businesspeople are buying T-bills, investing the money and saving it. They aren't spending, either.

But one day this recession -- despite Obama's best efforts -- will end and things will begin to look up again. Then we can expect all of this money to come out of its parking space and get back on the highway of commerce. All at once. The inevitable result will be double-digit hyperinflation.

Since the spending and borrowing splurge is not confined to Washington, but is being mimicked all over the world, the inflation will not strike just one country but will be global in scope. The first global inflation in our history (except, perhaps, right after World Wars I and II), it will confront our policymakers with yet another unprecedented challenge and send them back, once more, to their economics texts. There, they will find that the only remedy for global inflation is global recession, a la Paul Volker. Having just emerged from a ruinous depression, nobody will be in the mood for more unemployment, but that is just what will have to happen to cool off the inflation and break the inflationary psychology that is likely to set in.

The point of this gloom and doom is that all this pain is entirely preventable. It will be caused by Obama's excessive spending and trillion-dollar-plus deficits. This spending, of questionable utility in overcoming the current recession/depression, is so far out of line with what the economy can handle that it will do more harm than good when the inflation hits.

Proof that his spending will have little impact on the depression is the vast increase in money supply with no commensurate improvement in the economy. Providing money, via spending hikes or tax cuts, does not guarantee that the money will be spent. Tax cuts can be saved and spending increases, while surely spent once (on the initial project), can rapidly lose their multiplier effect as wage-earners on the government payroll bank their money just like those who get tax cuts will do. Getting out of this economic mess depends on consumer and business confidence, a faith that Obama is eroding with his looming tax increases as rapidly as he tries to kindle it with his excessive spending.

None of this should come as any news to Obama. He likely knows all this. But he is determined to pass his agenda of bigger government, nationalized healthcare and vastly greater spending even at the price of inflation and subsequent recession. He puts ideology first and the economy a distant second.

The stock market has figured out his priorities and is responding accordingly. One can only hope that voters also eventually realize what is going on.

No comments: