The Obama Crash

Obama never had much of a record to run on, but thanks to a series of absurd decisions between the election and today's inauguration, he has finally made a little mark on reality, in contrast to the volatile impressions of voters, and the stock market has already unpacked the message encapsulated in that little mark.

It isn't hope.

Here's a summary from Spengler, the sphinx of Asia Times Online:

From the day Obama was elected to 9:30am Tokyo time on Monday morning, the S&P 500 index has lost 17% of its value, after absorbing Obama's proposed cabinet and hearing the gist of his economic stimulus plan. That can't be blamed on Bush. It counts as the Obama crash.

Americans of all political persuasions are claiming to be optimistic about the next four years, but almost nobody is investing in anything, or lending anyone else any money to invest, or even buying the toys that Americans typically trade their lives for.

The pitiful discrepancy between optimistic blather in the polls and terrified hoarding is what makes Spengler's christening of "the Obama crash" so appropriate, and behind the pomp and circumstance of inaugural balls and parades, the hard world of dollars and jobs is whispering an entirely different message.

It isn't hope.


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    Spengler can be totally wrong, but... (5.00 / 0) (#1)
    by Jacob Freeze on Tue Jan 20, 2009 at 04:10:07 PM EST
    Spengler predicted that Bush would bomb Iran, and every time his predicted date came and went, he predicted it again, with equal absoluteness, only later.

    Now I think we can be fairly sure that George W. Bush is never going to bomb Iran.

    But he also gets some things absolutely right.

    Inauguration day brings to mind the reason I don't read science fiction. It's never weird enough. Today, America will place more power than any peacetime president ever has wielded into the hands of a man nobody knows. He has convinced more incompatible constituencies that he takes their side than any politician in American history.

    American political columnists have devised about a million different ways to dance around that particle of truth, although it's about as obvious as a mushroom cloud over downtown Tehran.

    Spengler's earlier column about Obama's One-Trick Wizards is also worth reading:

    Rubin, a transition advisor to president-elect Barack Obama, was mentor to Treasury secretary designate Timothy Geithner. Even Goldman Sachs, the thoroughbred trading machine that gave us Treasury Secretary Hank Paulson as well as Rubin, is trading at a fifth of its peak value.
    These facts came to mind while reading David Brooks' November 21 New York Times panegyric to Obama's prospective cabinet, which gushes, "Its members are twice as smart as the poor reporters who have to cover them, three times if you include the columnists." Brooks added, "... as much as I want to resent these overeducated Achievatrons ... I find myself tremendously impressed by the Obama transition."

    Has Brooks checked the markets? The cleverest people in the United States, the Ivy-pedigreed investment bankers, have fouled their own nests as well as their own net worth, and persuaded the taxpayers to bail them out. If these are the best and the brightest of 2008, America is in very deep trouble.

    The one-trick wizards of Wall Street had one idea, which was to ride the trend and pile on as much leverage as credulous investors and crony regulators would allow. It has gone pear-shaped, and those who didn't cash out early along with the cynics are poor. Fortunately for them, Obama will let them play with the budget of the US federal government for the next four years.

    The "leader" of majorities in Congress (5.00 / 0) (#6)
    by Jacob Freeze on Wed Jan 21, 2009 at 07:03:27 PM EST
    Obama has been the "leader" of a party with majorities in both the House and Senate since he clinched the nomination for President last summer.

    About the economy, Obama exercised his "leadership" chiefly by backing a worthless $700 billion give-away to speculators in the banking industry.

    Now his supporters want to pretend that Obama just fell off a turnip truck that was passing through Washington on January 20.

    I have to agree that Obama's appointments and policy proposals make him look as clueless as a turnip, but he has had enormous power in Washington for at least six months, and all he accomplished with that power was blathering away $700 billion.

    A few things (none / 0) (#7)
    by CST on Thu Jan 22, 2009 at 01:26:23 PM EST
    I don't think he just "fell off a turnip truck".  Personally, I don't see anything wrong with spending 700 billion dollars to help the economy (only half of which has been spent btw) - I have a problem with HOW the money was spent.  Obama is certainly not blameless in passing a bill with no teeth, but  the way it was spent is all Paulson.  It's not the money that's a problem, it's the destination.

    Finally, the effects on the economy are not immediate.  They never were.  No one blamed Bush when the tech bubble burst, and that was a few months AFTER his inauguration. Rightly so I might add.  The economy is still falling because it hasn't hit bottom yet from the mistakes made previously.  It won't for a while.  The hope with Obama is he can raise the floor, stem the tide a bit, and prevent a re-occurance.  While he hasn't done that yet, you can hardly blame the fall itself on him.  

    Make a case that he hasn't done "enough" to stem the tide, or that he has appointed people who won't (btw - those people have NOT been in charge since Nov.), but when you blame the stock market crash itself on him you sound ubsurd and lose any argument you might have.


    Obama's economic initiatives, from the AP wire... (none / 0) (#8)
    by Jacob Freeze on Thu Jan 22, 2009 at 08:08:14 PM EST
    Jim Oberstar talking about the stimulus...

    The reason for the reduction in overall funding -- we took money out of Amtrak and out of aviation; we took money out of the Corps of Engineers, reduced the water infrastructure program, the drinking water and the wastewater treatment facilities and sewer lines, reduced that from $14 billion to roughly $9 billion -- was the tax cut initiative that had to be paid for in some way by keeping the entire package in the range of $850 billion.


    House Speaker Nancy Pelosi wants Congress to consider repealing President George W. Bush's tax cuts well before they expire in 2010, in contrast to what President-elect Barack Obama is proposing.


    Obama also has pledged to end the tax cuts.

    But aides have said that he is not proposing to raise taxes at this time on those making more than $250,000, citing the economic crisis, rising joblessness and the credit squeeze.

    And... (none / 0) (#9)
    by Jacob Freeze on Thu Jan 22, 2009 at 08:13:57 PM EST
    The always excellent Dean Baker reports on American Prospect...

    The Wall Street Journal told readers that former Treasury secretary and Citigroup honcho Robert Rubin is playing a central role in designing President Obama's economic policy. It would have been appropriate to note that with the possible exception of Alan Greenspan, Mr. Rubin is the person most responsible for the policies that lead to the current crisis.

    Mr. Rubin was a staunch advocate the policy of one-sided financial deregulation under which the government ignored prudential regulation while continuing to allow major banks to benefit from the government's "too big to fail" insurance policy. Mr Rubin also actively promoted an over-valued dollar which led to the enormous trade deficit of recent years. In addition, he had a "bubbles are fine" approach that allowed huge asset bubbles to grow unchecked.

    The WSJ does note that Mr. Rubin personally profited from these policies in his role as a top Citigroup executive, but it does not point out the extent to which he was directly responsible for the policies that have produced the worst economic downturn since the Great Depression. If Mr. Rubin is in fact playing a large role in determining the economic policies of the Obama administration, this should be serious cause for public concern.

    And thanks to the truth-seekers at FSZ! (none / 0) (#10)
    by Jacob Freeze on Thu Jan 22, 2009 at 08:23:45 PM EST
    Just as I was about to tediously surf around looking for some material for a reply to CST above, I found an excellent diary by Archangel M on FSZ with all the quotes I used here, and just pasted them in.

    Lazy, I know, but when fairleft and 4kedtongue and Archangel M had already extracted the most salient elements out of the senseless media noise about Obama, I couldn't have done any better, to say the least.


    Thanks for the info (none / 0) (#11)
    by CST on Fri Jan 23, 2009 at 10:13:25 AM EST
    I think that is a horrible idea. I would just note that the diary said:

    "Obama administration are preparing to make"

    Meaning they haven't done it yet.  I am not trying to defend Obama's economic plan or advisors. If they make mistakes or are proposing bad legislation I want to know and we should make a stink about it. I just think you lose value in the case you are trying to make when you say things that aren't true. Like blaming the stock market crash on legislation that hasn't happened yet.

    However, I want you to know that you've inspired me to send some e-mails. The funding bill in question directly affects my job.


    Thanks to you, too, CST. (none / 0) (#12)
    by Jacob Freeze on Sat Jan 24, 2009 at 07:46:46 AM EST
    Your challenge pushed me into looking more carefully at what the economic stimulus was trading away for tax cuts.

    The price of postponing Obama's campaign promise to undo the Bush tax-cuts for incomes over $250K was the biggest surprise for me: Around $225 billion per year.

    (I had a better link, and now I tried ten different combinations of search-words and can't find it again!)


    Wow (1.00 / 0) (#2)
    by squeaky on Tue Jan 20, 2009 at 04:46:41 PM EST
    One upping  Limbaugh:

    Limbaugh: `I Hope Obama Fails'

    I think this is an excellent point (none / 0) (#3)
    by jbindc on Wed Jan 21, 2009 at 04:39:47 PM EST
    Since his election, Obama has been running this economy.  Oh, not legally, but he was the one working the phones (before Election Day) to push for the bailouts, and since then, it is his economic advisers that have been asked the questions, his words of wisdom on the economy that has been quoted in every newspaper, and Wall Street has reacted to his plans and his words and outlines for his policies. The market has not reacted to Bush.

    The media even declared TARP, "Obama's first big win"  (See here, here, here, here, and here, to name a few.)

    Obama has been the go-to guy on the economy since November (and even before, it could be argued). This is his baby.  He didn't get us here, but since the fall, it's been his decisions that are having impact and will have impact in the future.

    Wow (1.00 / 0) (#4)
    by squeaky on Wed Jan 21, 2009 at 04:43:46 PM EST
    Does that mean that Hillary is responsible for what just went on in Gaza?  

    Except (none / 0) (#5)
    by CST on Wed Jan 21, 2009 at 04:52:15 PM EST
    That everything that has happened since November is a direct result of everything that happened BEFORE november.  Economic impacts are never immediate, they always take a while to set in.

    Maybe, just maybe, the market has been reacting to the actual state of the economy, and not any one person.  If a company has no money, I am not gonna buy stock anyway just because Obama is around.  The market has reacted to high unemployment, low sales at Christmas, and high rates of forclosures.  Not something that can be laid at any one person's feet, and certainly not Obama's.  Although the government that allowed the economy to spiral out of control is not this current government.  And contrary to what you may think, Obama has not been running the economy since Nov. - Paulson has.  He's been the one passing money out to all his buddies.