Warning!  The following may seem cynical and overdrawn.  IMO it is a very realistic view.  In fact, if this theory is not correct, the most plausible remaining option is that Mr. Obama is totally clueless about markets and the economy and is inadvertently creating the Second Great Depression in 100 years.  If he truly is clueless, I have a hopeful suggestion at the end (All Mr. Obama needs to do….).


First you have the assumptions.   Mr. Obama’s goals are:

1.  Get reelected in 4 years;

2.  Maximize the power of his Presidency;

3.  Maximize the power of his Party;

4.  Be known as a transformative leader like Franklin Roosevelt

5.  Leave a legacy of social programs intended to all but eliminate poverty and suffering.

Next is the Plan.

1.  Set the Public up for his plan by emphasizing that the blame for all that is wrong with America belongs in three houses:  The Republicans, the Capitalists, and the Rich.  Repeat over and over and over that these are the villains and they are actually one in the same.  Just read “Inheriting a Legacy of Misplaced Priorities” and tell me this is not what he is doing.

2.  Give negative speech after negative speech on the economy and also, while the honeymoon lasts, pass every spending/taxing bill possible.  This double whammy will take all confidence from investors.  They will pull their money out of the markets and the markets will swoon.  I am told that 3 months ago, investors held only 20% of their investable funds in cash, but, today that number is over 50%.

3.  The mostly paper losses of all those who are invested in the market will create a self-fulfilling gloom that will further depress markets.  When people sell, the paper losses become real losses.

4.  The job losses (created when businesses cut costs to weather the storm), will take consumers out of the marketplace further exacerbating the negatives in the economy.  Same store sales will be down for most businesses causing them to further cut inventories and people.  This is the classic downward spiral.

5.  Driven to financial stress points, huge portions of the population will be looking for government assistance, further building dependence of the people on their government.  Those who are dependent on government will vote for people who will give them more.

6.  Borrow excessively to pay for huge government programs.  This gives government agencies the only real wealth to distribute.  It also creates inflation.  Then, the government pays back its debt with cheap (inflated) dollars.  Without inflation, paying back the debt that is being created by the “Stimulus Bill” alone would be almost impossible.

7.  18-24 months before the November, 2012 Elections, Mr. Obama will start to be positive.  In every speech, he will be encouraging, upbeat, optimistic.  He will show the great strides made by his administration in building the safety net that ‘we all need at times’.  He will stop proposing new spending/taxing bills and tell Wall Street that it is time for us all to keep a steady course.  He may even propose some real stimulus measures, like Capital Gains Tax Holidays, etc.  The economy will start to come back (as it could now if he started doing these things now) and “Hope” will again win the day and Mr. Obama will win another 4 years.  He will have installed an almost impossible-to-defeat incumbency of his party in Congress, and like FDR before him, will set the stage for 30 years of rule by “Progressives” who will keep eating away at private enterprise and private rights in favor of more government.

If this is all wrong and it turns out that Mr. Obama is just clueless as to what his actions are doing to our economy, I have a simple suggestion that will go a long way to reversing the damage he has already done:

All Mr. Obama needs to do is to act like any responsible leader who wants to improve the lot of his people.  What is that?  He just needs to be positive, optimistic, encouraging and then get out of the way as the people create their own success.  Every time Mr. Obama stands in front of a microphone and TV cameras and says that our economy is in terrible shape and that it is going to take huge Government programs to prevent complete collapse, Wall Street averages drop another percent or two.  If instead, he stood before cameras and said that the USA is still the world’s largest economy;  if he said we still (though it is changing daily) have the best combination of government support without interference of any developed nation; if he said that we still have a vibrant people who have proven time and again that they are up for the challenge; all this would begin to change.  If he modeled the actions that we need rather than the actions that will cause us pain, he would be a real leader.  He could send his daughters to public school.  He could donate 10% of his salary to charitable causes, etc., etc.  

In short, I still believe that Mr. Obama has the opportunity to be a powerful leader for the good of our country.  Like everything else in life, if he has the right goals and the right attitude, he will succeed, as will we.  If his goals and attitude are as per my theory, above, we are all in trouble, unless we are of the political class.

•••••••••••••••

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years.”  – probably attributable to Alexander Tytler

“Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.”  –  probably attributable to Benjamin Disraeli

Watching current events makes these men look very smart.  I hope both were wrong.

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