Time to Get Back to the Real Economy
Obama needs to get his priorities realigned. The country voted for change, yet he allows the Washington and Wall Street Insiders call the shots on seemingly everything and we are back to a bubble market again. It is about time for him to put re-election plans on the back burner and concentrate on doing what he was elected to do. The people who elected him are getting the shaft. He will get re-elected if he puts the three dandies, Geinther, Summers, and Bernanke in their place and start making government money really work, Geinther should be the first to go. If he doesn’t make these changes he will be cooked from both sides. At the same time Congressional Democrats need to get Blue Dogs in line, go beyond what the Republicans are saying and get some things done, however they have to do it, or they will also get deep sixed.
So, What is the Measure of Success ?
Do rising gold and stock market prices indicate success in the Obama “Change” Program? To me if one believes in the Commonwealth philosophy for the United States, the changes so far are abysmal. Getting people back to work should be the number one goal. Obama’s advisers, Geithner and Summers along with a complicit Bernanke are getting exactly what was easiest and what they can use to show they have some expertise. The almighty Dow Jones measurement makes them feel good, but does nothing for the average American. We should have learned something under Reagan, Greenspan, and Paulson.
What can be done?
The goals are simple and straight forward:
1) Get people back to work;
2) Bring income distribution back to the more equitable levels that existed before 1980.
3) Reduce trade deficits keeping in mind that oil and China reflect about $ 500 Billion in US imports annually.
How does one do this? Three things:
1) An aggressive Energy Program with at least 1 trillion dollars of government investment and tax incentives for renewable and grid initiatives. Cutting back oil imports can provide ten year savings of 1.5 to 2.0 trillion dollars to the US consumer (reduction in prices and quantities).
2) Get Health Care functioning and more efficient with a triggered Public option and finance through tax code changes.
3) Push China to move to more efficient exchange rates
What Will Close the Gap ?
We are talking about the gap between the real economy and the bubble trading market economy.
I would expect that the increased economic activity from these changes will raise Interest rates to more normal levels, possibly short term rates rising to around 3.5 % and long rates to 5.5 %. The 0 % cheap rates have helped the speculative economy rather than the real economy anyway. This will move money out of speculative trades, gold will topple, and the dollar would soar. How will this possibly occur, not because of Bernanke getting his head on straight, but more likely world investors, led by China, will cease loaning money at the current cheap rates.