Is The O 'Destroying' the Economy?

Some continue to posit that the DJIA's cliff-dive is 'all Obama, all the time.'

Unnnnhhhh....not exactly.

It is undeniable that there was a "bubble" of cash moving around in the US economy since Greenspan countered the 500-point DowDrop back in the early 1980's. The Fed's injection of cash on that occasion has been bolstered with more and more cash, time and time again, with succeeding crises--the collapse of a major money-market firm in the mid-'90's and the 9/11 event were two more highly visible instances.

Compounding the 'excess cash' problem was an SEC decision to allow investment banks (e.g., Lehmann, BearStearns, etc.) to go to 30x capital leverage rather than the old standard of 12x. Added to THAT was the creation of the 'derivatives' marketplace, SIV's, and Credit Default Swaps--vehicles which ignored risk to insure against risk(!) There was subtle and overt collusion from the ratings agencies--we could go on.

All of this was, more or less, bi-partisan. Congressional Pubbies and Dems contributed, as did Clinton and Bush Administrations. None of this stuff is secret; it's all on the public record.

We should also note that the American consumer was behaving badly. The US savings rate actually went negative in the recent past, but had been barely over zero for several years. The cash bubble, along with the wholly ridiculous theory that housing and land will go up forever, contributed to a psychology of consumption. After all, we could live in our retirement fund! Screw savings, stocks, and bonds!! Perhaps this alternative-universe behavior was the most important cause of all.

Then stuff started to go wrong.

And Obama won.

The DJIA swoon had begun long before The One came into office, and as has been noted, was not entirely unexpected. The index was vastly over-pumped compared to its earnings base. There are a variety of ways to measure Price/Earnings--some have postulated that the P/E was 28 vs. a norm of 14; others have postulated a P/E of 15 vs. a norm of 7. In any case, if the Indices were to behave typically, they HAD to "return to the norm." Pick your 'norm;' but the markets were going to go down, period.

During its dying days, the Bush Administration thrashed about, alternatively 'rescuing' some banks and allowing others to croak. The bailout of the Big 2.0081 was cooked up--but prior to that, a number of highly-visible industrials were allowed to go banko (Delphi was just one example.)

We can say that the Bushies were erratic.

However: since the O-and-Savior (bless his name) has obtained office, he has announced and/or implemented all sorts of programs which are NOT good ideas. A bill of indictment can be found at this PowerLine post; I'll mention a couple here.

• Raised the capital gains tax
• Lied about "tax cuts for 95% of Americans", offering instead $13 a week, achieved not through tax cuts, but by changing the federal withholding tables
• Proposed a carbon cap-and-trading scheme designed to punish oil companies and further tax consumers

And, of course, he has promised to re-make the entire health system. SOME of these will clear Congress; others will not. It is clear that uncertainty reigns for the next few quarters.

Holiday Inn said it: "no surprises" is the environment favored by businessmen (and business capital). An atmosphere of uncertainty is the very best way to chase capital from the room. To the extent that Obama and Pelosi and Reid have created uncertainty, they are responsible for the economic palsy we see.

The PowerLine post's author (Hinderaker) does not see a sinister plot in Obama's activity:

It is, I admit, an intriguing theory, but I don't buy it. Obama can't possibly want to be a one-term failure. That's what happened to Jimmy Carter, and Obama must know that it will happen to him, too, if his policies are perceived as dragging down the economy.

More likely the explanation is that Obama is an economic illiterate

That's reassuring; but not necessarily the whole truth. I think Obama IS an economic illiterate, but I don't trust him for one second.

Not in the least.

Given his track record of appointing high-priests of the Cult of Despair (that is, Moloch) to every imaginable post in Washington, his early formation at the knee of a true-blue Communist, his Extremist allies and associations (Jim Doyle and Bill Ayers among them) I'm much more willing than John Hinderaker to believe that Obama is a revolutionary in the worst sense of the word.

And those "worst sense revolutionaries" do not worry about re-elections, folks.

So: while Obama did not ignite the DowDump, and is not personally responsible for the recession we are in, he IS pouring gasoline on the fire.

And at some point in time, this WILL be "the Obama collapse."

But this is not that time, yet.