Why Barack Obama’s Economic Policies Will Likely Fail
February 22, 2009 Leave a comment
ATLANTA— Just came across this video while reading another blog called American Socialism for the Rich, a site set up to discuss the more discouraging aspects of America’s series of bailouts.
In the above video, Jim Rodgers, an internationally renowned investor, states in very simple terms my entire view of this economic crisis and how the government should have addressed it.
I was stunned as I watched him speak, because he expressed the same exact viewpoints we have been expressing on this blog since we started last August. Basically, the government should be letting the big companies and banks fail. Sure- it would be miserable in the short-term. But as Mr. Rodgers expresses so clearly above, it would be better in the long-term: we would get through this crisis more quickly.
The way George Bush and Barack Obama both have attacked this crisis I am convinced will lead to extended misery for us down the road, just like similar policies have played out for Japan. I am afraid these bailouts of individuals and corporations will only encourage more foolish behavior in the future. Further, I strongly believe big-time inflation is only just around the corner
Mr. Rodgers makes an excellent link between Alan Greenspan bailing out Long-Term Capital Management in the late 1990′s and the crisis we face today. LTCM was a major hedge fund started by two Ivy League educated economists that dabbled in risky derivatives trading. Their fund quickly became overly complex and overly leveraged. When it faced collapse in 1998, the Federal Reserve made steps to perserve it and make the collapse less disruptive to the markets. It seemed liked a brilliant move at the time. But it taught the markets that if you take on too much risk, the government will be there to support you should you fail. Mr. Rodgers states this mentality fueled the excesses of this decade.
If you believe the current crisis is a result of deregulation, then this story and Mr. Rodgers talk above should give you pause. The most heavily regulated industry in America, the banking industry, is at the forefront of our crisis. I will continue to believe that it was the implicit backing of government moreso than ”deregulation” that helped spur the excesses of this decade.
And I believe the more libertarian method of addressing this crisis, with limited or no government involvement, would be better for our financial health in the long-term. I am afraid Mr. Obama’s stimulus package, his mortgage bailout, and his forthcoming bank plan will all be disastrous failures, just like every other economic policy the government has tried over the last year. Let’s hope I am wrong!