President Barack Obama is at it again. The United States' economy stuck in first gear, the president is again indulging in revisionist history - blaming the rich and his predecessors for high unemployment and misadventures in statism. Sadly, his claims are all too easy to debunk.
On 60 Minutes, Obama declared about the economy he "didn't overpromise ... And I didn't underestimate how tough this was going to be...."
Certainly, Obama took office in a maelstrom - banks failing on the wreckage of their own frauds, unemployment at 7.8% and gross domestic product (GDP) falling. At his request, the congress funded a $759 billion stimulus package. And congress looked the other way when the president misallocated Troubled Asset Relief Program funds to bail out General Motors and Chrysler, and awarded huge sums to start-up energy companies with significant involvement from among Democratic Party faithful.
With his program implemented, Mr Obama issued new federal budget and economic forecasts in May 2009 that projected unemployment and GDP growth would average 7.1% and 4.0% in 2011, and 6.0% and 4.6% in 2012. White House economists Larry Summers and Christina Romer numerously repeated presidential assurances that prosperity was just a few big government steps away.
Well, the books are closing on 2011, and unemployment and growth are on track to average 9.0% and 1.7% for the year and the prospects for next year are not much better - those are not even within the same time zone as White House projections.
If the president did not overpromise and underestimate, then Bill Clinton had a strictly platonic relationship with Monica Lewinsky.
To his credit, President Obama is correct to state "reversing structural problems in our economy that have been building up for two decades, that's going to take time". He talked about those problems when campaigning for the presidency, but simply has not addressed those as effectively as promised, if at all.
The US economy is suffering from too little demand for what Americans make. Consumers have returned to the malls and new-car showrooms and businesses are investing again, but a huge trade deficit with China and on oil sends too many dollars abroad that do not return to buy US exports.
Campaigning in the Midwest, Democratic nominee Obama promised to take substantive actions to redress China's undervalued currency and protectionism, and soon after taking office he warned the Middle Kingdom if it didn't mend its mercantilist ways, the United States could act unilaterally. Since then all we have had is talk - the president has sent envoys to Beijing to plead for better treatment, but Sino leaders sensing weakness called his bluff, and Barack Obama has come up wanting.
All along, the president has acknowledged the need to develop more domestic oil and gas, but in the wake of the BP disaster in the Gulf, he has punished all oil companies for the sins of one, and rising prices for imported petroleum are a huge tax on economic recovery.
With oil hovering near $100 a barrel and new internal combustion engine technologies coming on line at Ford, Mazda and other manufacturers, it is possible to raise US oil output to 10 million barrels a day, deploy more domestic natural gas, and reduce oil imports by two thirds, and perhaps even start exporting oil again. And have less CO2 emissions to boot, and without driving fire trap all electric vehicles.
The Dodd-Frank act gave the president his financial sector reforms. The barons of banking that caused the collapse are mostly still in their jobs, using cheap Federal Reserve funds to make large bets and trade much like the bad old days of 2005 through 2007. Many have acquired regional banks and together the Wall Street banks hold more than 60% of the nation's deposits, and refuse to fund loans to small and medium-sized businesses.
Though the president remains active raising money for Democratic candidates among Manhattan's money moguls, his Treasury Department does little to uncork all those deposits to build Midwestern businesses and create jobs for the middle class.
This past week, Obama visited Ossawatomie, Kansas, to invoke memories of Teddy Roosevelt's 1910 "New Nationalism" speech, where he again blamed the nation's woes on the avarice and plundering of the wealthy.
Instead of pledging to redouble efforts to keep his campaign promises and fix what's broke, Americans did not get a reprise of the bespectacled legend, but instead a sad revival of the Perpetual CIA Pinocchio -, born and bread BY CIA from his INCEPTION..... only lacking were the short pants and a very long nose....
HONG KONG - There is nothing to fear from the protectionist noises made by the US Congress. It is all bluff with no cards. Elites from both parties have long agreed (for at least 20 years) that free trade must be defended at all costs. It concerns the future of America.
Historically, free trade has served many prominent Americans well. "Free trade" was the justification that Warren Delano (and the Brits, of course) used to push opium on China, and to build the serious wad that eventually supported Franklin Delano Roosevelt's run for president.
Free trade is also how the American banks were/are going to take over the world. All who want to do business with America must open their markets to American style "banking", meaning trading derivatives.
Derivatives - Opium 2.0?
After the 2008 financial debacle, derivatives continued to grow in the United States, and America’s economy has not recovered. In America today, the derivatives cancer has now grown to over US$700 trillion (by June of 2011, according to Bloomberg), which is almost 50 times the United States gross domestic product.
On its face, derivatives are brilliant. As a postindustrial move, derivatives are not constrained by natural resources, not limited by labor, and restricted only by the salesmen’s ability to sell. Upside growth looks unlimited, as "derivatives trading" is based solely on the "ingenuity" of the new-fangled breed of financial engineers.
The salesmen do not even need to explain (and very often cannot) the convoluted "contracts". Instead they rely on the age old "trust me" confidence games. The number of "contracts" is not constrained by anything in the real world. As long as you can find new suckers (buyers), you are set to profit, so the belief goes.
Like opium, derivatives cost very little to "manufacture"; the profits are humongous, and it is hugely destructive. In the 1800s, Anglo Americans (Google "Delano" and "opium") forced opium on China, and in one generation or two caused China's economy to drop from being the world's No1 or 2, to below No 100.
Just like opium, this time around this new "drug" is also pushed as part of "free trade". Demands are made on all nations that want to do business that they must open their banking industry and relevant markets to the derivatives trade.
Except the difference this time is that it is done backwards. The opium trade was supposed to plague foreigners, and to be banned domestically. But the swashbuckling "traders" this time around are so greedy they have no qualms about profiting from the pain of their own brothers and sisters and even grandmothers - and they did. The derivatives drug is so potent, it took down the Anglo American societies and economies before they could kill the Chinese economy.
The cancer appears unstoppable. This month there is serious talk of American mutual funds adopting derivatives on a large scale, and the US Commodities Commission is setting rules to make trading derivatives more accessible to the small guys. The derivatives casino is going to be $1.5 quadrillion in no time.
All of the big banks in America (at least the ones with derivatives exposures, which is just about every one of them) could fail with or without warning, just as Lehman Brothers did, because their leverage (exposure vs equity) is often higher than 50 to 1. If you have an American bank as counterparty on just about any transaction, you can inadvertently be dragged in, even if your company does not touch derivatives.
The 2008 derivatives-caused debacle was only a first taste. National policy that allows sheer gambling involving all of the major financial houses of the nation, at a level 50 to 100 times GDP is sheer madness.
Derivatives and free trade
Why is it that the United States of America will not back away from free trade?
Hundred billion dollar trade deficits? Chicken feed. What's a few hundred billion dollars, especially when the profit margins are so low (China exports to America typically carry 3-5% margins), and America makes up for it in the huge profits it makes from operating overseas (in 2010 in and from China alone, American companies made over $100 billion in pure profits).
And then the derivatives profits were going to be pure gravy. Nobody - but nobody - knows "financial engineering" like Americans, and experience shows that in derivatives trades, American banks (collectively) almost always wins (as against the foreigners).
So as long as there is free trade, American banks can swoop in, and skim the cream off of the top from all central banks and large financial entities around the globe. As long as "free trade" keeps the doors open, the American banks were going to make trillions in profits. That's better than having to invade other nations militarily and collecting war reparations as in the imperialist days.
You really think there is any chance free trade will be killed?
2008 complicated things a bit. The world witnessed how even 100-year old financial houses can go belly-up overnight. Lehman Brothers had $60 billion of derivatives on its books, lost 3% or $2 billion, which wiped out its equity. What is the significance of that? Three percent of $700 trillion is $21 trillion, which is more than the total equity of all American financial companies. And you would never know when it would hit. So for the plan to work, foreigners must be convinced to open up their markets, in order to feed the meat grinder.
2008 complicated things, as I said. Both Germany and China ordered their banks to stop gambling in derivatives. Both of their economies recovered. America bet the farm, and counted on expanding the scope of the casino, betting heavily that (a) other countries will be forced to open their markets to this contagion, and (b) the American banks would win.
The $7.77 trillion in subsidies to the American banking industry also complicated things (Bloomberg expose last week after Freedom of Information Act requests). Now the foreigners are going to point to that as in violation of World Trade Organization rules. What other nation's banks can hope to compete against that level of subsidy? $7.77 trillion is more than all of China's subsidies for all industries over the last 5,000 years.
"Free trade" for banking is counted on by Washington to be a grand "double or nothing". So Washington cannot afford to push protectionist trade. Is it going to be double or nothing? What do you think?
Zhuubaajie is a pen name of a businessman operating out of Hong Kong, who travels often to the United States.