What I Think Tank

Posts Tagged ‘Recession

Here We Go Again! Recession 2.0 = A New Great Depression

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A Little Historical Afterthought

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Time: 1995. Place: Washington. Event: 104th U.S. Congress, 1st Session, Vote# 98

Fronted by the Republican Party in 1995 as part of the Contract With America, a vote had passed in the House of Representatives for an amendment of the Constitution that would require the federal government to keep a balanced budget unless it was sanctioned by a 3/5 majority vote in both houses of Congress. It were to be rejected in the Senate, where the amendment was 2 votes short of the 2/3 majority vote needed.

What do I think? 33 Democrats voted against the amendment out of spite after the Republican landslide of 1994, and 2 Republicans voted against the amendment out of political stupidity. With a federal government literally unable to issue deficit spending budgets, this amendment could have kept the Bush administration from waging expensive undeclared wars and could have kept the Obama administration from introducing gross economic interventions. This means that a coming depression likely worse than the Great Depression of the 1930s could have been avoided had it not been for 35 individuals in Washington. Thanks.

Will President Obama Serve A Second Term?

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Official presidential portrait of Barack Obama...

Two term President Barack Obama?

Political debates and forecasts are as heated and “in the air” as never before, and one question surfacing is whether or not President Obama will be elected for a second term in 2012. It’s an interesting question both in terms of political strategy and economic policy, regarding the troubles and toils America is faced with, not to mention the distress among people animating itself in Tea Party rallies and anti-establishment candidates rising up before this 2010 election.

At the first glance, many would probably think President Obama wouldn’t be elected for another term, simply because so many people are worried about the economy and future, and also because we’ve yet to see things turn around for the better. Then again, President Obama is still quite popular, although his popularity in America has surely withered some since he came to power. Gallup recently reported that for the first time in his presidency there are more people who regard him unfavorably than favorably, but he is still on par with many presidents before him, like Ronald Reagan and Bill Clinton, who were both quite popular two term presidents. Obama as a person is also likable, tolerant and well spoken – much like the two others mentioned, and such charisma can go a long way.

But unlike all other elections for the past three decades, there is one issue that may trumph everything else put together the next time around: the economy. Unlike how this issue has been debated during the recent years, the coming debate will not only revolve around creating jobs or trying to get us out of a recession; the debate this time will be about the causes of economic downturns, the role of government in said economic downturns, how government and the Federal Reserve destroy more than they create, and how government burdens coming generations with a devalued dollar, huge and misguided government programs and gross deficit spending. On this issue there is one future uncertainty that can wreck all of President Obama’s chances for reelection, or may very well save his political tooshie: Will he and the Federal Reserve Chairman, Ben Bernanke, be able push the coming depression enough ahead of them to avoid having to face judgement before the next election?

The reason everything depends on this fact is that despite what the White House and many Ivy League economists would have you believe, the economy simply isn’t recovering and hasn’t seen any true growth for possibly the past 10 years. The actions of the federal government echoes those in the 1930s; actions that exacerbated the problems and created a depression lasting for much longer than necessary. The view that government cause economic turmoil and exacerbate the problems is supported by those who warned about and forecasted the Great Depression of the 1930s and those who warned about and forecasted the Recession of 2008 by explaining exactly what would happen if government would act in the way it indeed ended up doing. Now as then, we have seen a federal government help inflating an economic bubble and help fueling the fire by increasing the money supply and intervening in markets, and we have seen a federal government attempting to keep the bubble from bursting as it must, or re-inflate it if it does, expanding the reach of government power and burdening the citizens and the private sector with more taxes and weakened purchasing power. One key difference, however, is that America in 2010 has the biggest deficit of any nation on the planet throughout history. This was not a worry people had to take into consideration after the second world war when America emerged to become the greatest creditor nation in the world. To put it differently: The private sector is sucked completely dry this time around, unlike in the 40s and 50s when they had plenty of juice to serve.

If the answer is ‘yes, they will be able to push the depression enough ahead of them to let President Obama campaign on being the savior, rather than a clown’, then you can expect the following words to be the core of President Obama’s strategy in the coming campaign:

We just went through the worst economic downturn since the 1930s, but we were able to avoid another depression. We’re still recovering, but I tell you this: had it not been for the quick, decisive and necessary actions by government, it would have been much worse. That is why it’s important for us to not disrupt the recovery at this point. We must stay our course and do what is necessary, because we will face disasters much worse if we lose our focus now.

Author’s comment: I have a feeling I will be able to quote myself on this in 2 years time, and if I’m not already worrying enough, this makes me truly worry about how life will be in 6 years. It took only 6 years to lay Europe completely to waste 70 years ago, after all. Humanity may not have learned from history when it comes to economic issues, but you better well hope that humanity have learned enough from history to not start another world war over it.

It’s not hard to imagine that he will be able to win in 2012 based on this. Of course, President Obama, with the help of Chairman Bernanke’s printing press, is only delaying the inevitable. But if President Obama serves another term and continues his current policies, we will be faced with troubles much worse than what we see now, something not he nor his possible successor will ever be able to explain away, which may by 2016 unfortunately result in the possibility of civil unrest and a large portion of the population with complete distrust in the political system. It’s important to note, though, that the possible civil unrest may not necessarily be aimed at the President in particular. Echoing the tendencies of the Tea Party rallies, you are more likely to see it aimed at Washington in general, but fueled by economic distress rather than any political disagreement. It will not matter who they are and what party they belong to; if they have been in Washington for some time they will be blamed for all the horrors. They can only hope, for their twisted political sake, that people will forget instead.

However, if the answer is ‘no, we will clearly see the storm coming over us before the next election, the depression has become a fact rather than a possibility, and economic distress will sweep the country into fiscal responsibility’, we will likely not see President Obama serving a second term, depending on the Republicans being able to nominate a true fiscal conservative that will stay true to his words. Throughout history Americans have always tended to change their leaders when faced with economic turmoil. Americans have also always elected the candidate campaigning peace and diplomacy when exhausted by continuous wars. This time we are faced with both extremes at the same time, much more so than any other time since the second world war. The sad part is that we this time around do not have a party that advocates peace and thus cannot advocate real fiscal responsibility.

Democrats have never truly advocated that America should stop their military interventions around the globe. Bill Clinton frequently deployed the military on glorified missions to police the world, and President Obama never kept his promise of leaving Iraq, even advocating for an expansion of the war in Afghanistan throughout his whole campaign and to this date. Republicans on the other hand have constantly been advocating military expenditures since the days of the Cold War (Reagan’s Peace Through Strength), and have long been advocating military intervention, especially since 9/11 (Bush’s War On Terror). Not willing to build down the military imperialistic character of the United States, Republicans face a hard task in promoting the necessary fiscal responsibility to tackle the deficit and let the country climb out of an economic depression. Some are calling for the possibility of a third party candidate rising to the occasion, but taking into consideration the numerous laws biased in the support of the current two-party-system, we are not likely to see a third party candidate do anything more significant than stealing just enough votes from one candidate that the other will get ahead, if we were to face a close election.

What do I think? For non-interventionist small government advocates there has never been a better chance in recent history to spread their message of peace and economic freedom, but gathering the people around one candidate that can sway the minds of Americans will be the true task at hand, and it will be crucial for their goal of economic recovery to elect a president with the integrity to stay clear of political corruption and avoid falling for the temptation of turning on the voters when in office, like so many presidents have done in the past; a president that has the courage to clean out the administration and bureaucracies of established “big government values” that will disrupt any attempts of restraining the federal government by building down Washington and pull back the interventionist powers of the executive branch.

At present time there is still only a single politician in America that fits this description, and by 2012 his name is sure to be on everyone’s tongue, but only time will tell if politicians, voters and the political system in general will have the courage to bite the dust and wholeheartedly support him, and if his vitality and mind will stay as young and vibrant through a possible campaign and presidency as it is today, considering his age. I will let time be the judge of this.

Written by Morten Rolland

October 24, 2010 at 7:33 am