Obama's Inability to Solve Problems

A good question to ask is why Obama cannot fix any problem he "tackles". Why is that? Why indeed. The title of Craig Steiner's article at www.finance.Townhall.com is revealing. Schizophrenia? Maybe that IS the right diagnosis for this President!

...By reading economic news, one would think the economy is slowly moving away from the financial crisis of 2008.

The truth is that absolutely nothing is changing in our economy on a day to day basis. Whether it be a tsunami in Japan or a hurricane on the eastern seaboard--or even an earthquake in Washington DC--nothing has changed economically in any significant way.

In fact, the only change since September 2008 is that things have gotten worse.

Our federal government is closer to bankruptcy, as are many of our states, counties, and cities.

Our unemployment rate is higher than it was when Obama was elected, and appears to be going higher.

We have millions of homes in or near foreclosure, and many which are abandoned and falling into disrepair, yet construction companies continue to build new homes.

Obama's stimulus failed to create jobs. So did QE1. And QE2. The Keynesian's are out of tricks.

Even as Social Security enters deficit territory we've created a new unfunded entitlement with Obamacare.

Around the world, individual debts became too much so they were unloaded on banks. The debt of the banks then became too much so they were bailed out and unloaded on the taxpayers. And now sovereign debt is too much and countries are collapsing and the United States has been downgraded.

The reality is that what the unemployed feel--that the recession never really ended--is completely true. Sure, it may have ended from a strictly statistical measure of GDP. But employment never recovered and--just as importantly--the root causes of the financial crisis have never been addressed.

We're not just going to wake up one morning and find that the economy has gotten better for no apparent reason. A month of good car sales or a quarter of increased home prices are just blips on the economic radar. As long as we continue to ignore the fundamental problems in our economy, there's no need to get excited about occasional good economic news. It's nothing more than statistical noise.

The state of our economy will not significantly change until we change our economic policies.

Instead of trying to prevent housing prices from falling, we need to let them fall and find their bottom. Instead of stopping foreclosures, we need to foreclose on homes as quickly as possible and get it over with. Instead of pumping up the stock market with QE1 and QE2, we need to let the market find its true value. Instead of trying to convince consumers to spend more money to spark economic activity, we need to encourage them to complete the process of deleveraging and fixing their balance sheets. Instead of getting in the way of corporate bankruptcies, we need to let those companies fail... READ Obama's Schizophrenic Reality.

The Greatest Economic Calamity of Our Lifetime Caused by Politicians

"Rep. Darrell Issa of California, ranking Republican on the House Oversight and Government Reform Committee, has released a report that every American should read." So writes an editorial in Investor's Business Daily of July 10th. I have copied the first two paragraphs directly from Mr. Issa's report and links to IBD and the report itself. Read this if you're interested in knowing just how corrupt and insane our politicians are.

The housing bubble that burst in 2007 and led to a financial crisis can be traced back to federal government intervention in the U.S. housing market intended to help provide homeownership opportunities for more Americans. This intervention began with two government-backed corporations, Fannie Mae and Freddie Mac, which privatized their profits but socialized their risks, creating powerful incentives for them to act recklessly and exposing taxpayers to tremendous losses. Government intervention also created “affordable” but dangerous lending policies which encouraged lower down payments, looser underwriting standards and higher leverage. Finally, government intervention created a nexus of vested interests – politicians, lenders and lobbyists – who profited from the “affordable” housing market and acted to kill reforms. In the short run, this government intervention was successful in its stated goal – raising the national homeownership rate. However, the ultimate effect was to create a mortgage tsunami that wrought devastation on the American people and economy. While government intervention was not the sole cause of the financial crisis, its role was significant and has received too little attention.

In recent months it has been impossible to watch a television news program without seeing a Member of Congress or an Administration official put forward a new recovery proposal or engage in the public flogging of a financial company official whose poor decisions, and perhaps greed, resulted in huge losses and great suffering. Ironically, some of these same Washington officials were, all too recently, advocates of the very mortgage lending policies that led to economic turmoil. In a number of cases, political officials even engaged in unethical conduct, helping their political allies, family members and even themselves obtain lucrative positions in the mortgage lending industry and other benefits. At a time when government intervention in private markets has become alarmingly common, government “affordable housing” initiatives offer important lessons about the dangers of government efforts to manipulate or conjure outcomes in the market. (Read Issa's report here and IBD's summary here).

Learn How We Got To This Financial Meltdown

Richard Salsman writing for The Objective Standard's Spring 2009 edition explains how we arrived at this economic abyss. And you probably won't believe the answer - but think about it and look back on history and you will see the truth. And President Bush helped this mess by giving it a big push. Here is an excerpt to wet your curiosity but go to the article itself it's free and accessible at www.theobjectivestandard.com.

...The above interpretations ignore the plain fact that America today does not enjoy a free-market system—let alone a free-market financial sector—nor has it enjoyed one for most of the past century. Only through a profound misunderstanding of what constitutes a free-market system could anyone honestly blame capitalism for the financial crisis. For decades the American politico-economic system has been a mixed system—a combination of some freedom of choice and action offset by large (and growing) coercive interventions. It was precisely these coercive elements—the regulation, taxation, and subsidization—that caused today’s financial crisis. Washington’s recent and massive interventions did not follow from free-market “failure”; they followed from the market distortions caused by prior government intervention in the economy. Government interventions have both instigated and aggravated the latest financial crisis.

By surveying the government interventions that caused the latest turmoil and wealth destruction in housing and banking, this article will demonstrate that the current financial crisis was caused not by a return to free markets or pro-capitalist policies in the past decade, but by a tragic progression toward socialism. More importantly, it will demonstrate that altruism—the notion that being moral consists in sacrificing oneself for the needs of others—is the basis for this government intervention, and thus the root cause of the crisis.

Of course, in order to recognize that capitalism is innocent of the latest charges against it, we must bear in mind what capitalism is. Capitalism is the social system of individual rights, including property rights, in which all property is privately owned.11 Capitalism upholds the rule of law and equality before the law, forbids government favors to any person or group (including businesses), entails the complete separation of state and economics, and thus leaves each individual free to act on his own judgment for his own sake. With that in mind, let us consider the relevant facts surrounding the financial crisis.

...Perhaps no single U.S. government intervention has destroyed more capital or wasted more taxpayer funds in recent years than the establishment of “Fannie Mae,” “Freddie Mac,” and “Ginnie Mae”—“government-sponsored enterprises” (GSEs) that for years have been used by politicians to secure campaign funds and votes by promoting artificially cheap home mortgages and “the American dream of home ownership.” The quaint, disarming nicknames for the GSEs actually stand for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Government National Mortgage Association. Read more if you want to know the history and reason for why we are where we are today.

Americans Must Demand a Gold Backed Dollar

Brian Simpson writing in Capitalism Magazine explains why we need our money to be backed by gold: to make politicians toe the line about spending. Our money right now is backed by nothing except the productivity of Americans but it allows politicians to spend money we don't have by creating it out of thin air.

Many blame capitalism for the current financial crisis. Even Alan Greenspan, who at one time was an advocate of the free market, blames capitalism. He recently testified in front of a congressional committee that "A critical pillar to . . . free markets did break down. I still do not fully understand why it happened." The first thing that Greenspan and most other commentators on the crisis must do to understand why the crisis occurred is to learn that the free market did not cause the crisis because the U.S. is not even close to being a free-market economy. Massive government interventions in the market in the form of myriad regulations and financial irresponsibility on the part of the government are really to blame. This makes the "solution" being imposed doubly absurd: more government controls, borrowing, and spending to solve the problems created by government controls, borrowing, and spending.

But this isn’t surprising. Ayn Rand observed decades ago that "one of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary."

The real solution to the financial crisis is not more financial irresponsibility and government controls, but forcing the government to be financially responsible and abolishing the controls. This means we need to establish a free market in our financial system. As a part of the move to a free market, we need to establish a full-fledged gold standard--one that the government must be prevented from breaching. This is something we have never had in this country...(READ)