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The Obama Economic Recovery

8 June 2009 9 Comments

Okay, let’s all put down our Blackberries, look up from our computer screens, put down our cell phones and think for a moment what’s going on out there in “investment-land”. After all, since the heady days of late 2007, when the Dow Jones Industrial Average hit the 14,000 level, we have seen the balances in our 401K’s plummet, the value of our homes sink to all time lows and our early retirement hopes entirely shattered. There is little doubt that on March 9, 2009, most investors and market movers were thinking the U.S. economy was headed into another “Great Depression“. Then something happened. It began to dawn on investors that perhaps the Obama Administration bailout of the financial services industry and the economic stimulation package really were going to save the country from economic disaster; perhaps, just perhaps the new President with a bold new plan and a can-do attitude could spark a new birth of prosperity to an economy racked by doubts and paralyzed with fear.

Since the darkest day of March 9, 2009 the capital markets have staged a powerful, almost unprecedented rally, evidenced by a whopping 39% increase in the Standard & Poor‘s 500 Index. In addition, the Dow Jones Industrial Average has seen a rise of 2,200 points in a little over three months. The naysayers, who bitterly criticized the president’s stimulus plan and industry bail-outs, have become conspicuously silent these days; maybe desperately waiting for Rush Limbaugh to lead them to his much desired “failure” of the Obama Administration, and total collapse of the American economic system.

Before you pick up your Blackberries and start answering you cell phones, remember that the American economy is not out of the woods yet. The one, major missing ingredient for a sustained economic recovery is consumer spending. This key indicator is still showing that consumers, who represent two thirds of economic activity, have not yet returned to the marketplace. It is likely, however, that the pent-up demand for consumer goods will soon become unleashed with a vengeance. When this happens, the Dow Jones Industrial Average will move up by at least another 2,000 points, perhaps hitting the 10,000 level by the end of 2009. Oh yes, one other thing, a totally discredited and increasingly irrelevant Republican Party will suffer another drubbing in the 2010 mid-term elections, ensuring a Democratic majority in Congress for the foreseeable future.

9 Comments »

Posts about Rush Limbaugh as of June 8, 2009 » The Daily Parr said:

[...] on conservative talk-radio hosts, including Rush Limbaugh. He also appears to have singled The Obama Economic Recovery – askcherlock.com 06/08/2009 Okay, let’s all put down our Blackberries, look up from our computer [...]

# 8 June 2009 at 9:40 am

Harrison said:

Markets usually sort themselves out on their own. One real why the Great Depression became “great” was because of government interference with the import/export market. Obama’s (and Bush started the trend) meddling likely made things worse or, at least, prolonged things. Germany’s Prime Minister, Merkel, has said as much going against the grain of so much “stimulus” spending and she was right… her party did very well in the elections.

People complain about the falling home and 401K values but I didn’t see any bitching when their homes were doubling in value at absurd time frames and people were buying a flipping houses like pancakes.

The press talked down Iraq when things were going badly and talked down the economy when it was going badly because they wanted Obama to win. In fact, Stephen Colbert just visited Iraq because, he said, the media has “forgotten” about that war (hint: because things are going well).

# 8 June 2009 at 4:12 pm

admin (author) said:

Harrison,
You make a very good point regarding the markets sorting themselves out. Adam Smith’s “invisable hand” is usually the best cure, as opposed to government intervention. There are circumstances, as history has shown, when the “invisable hand” does not work in the best interests of the markets. An example of this would be J.D. Rockefeller’s Standard Oil Trust. Another example would be the unregulated “dirivitives market”, that we recently experienced. Government intervention is necessary at times to prevent disaster. The less intervention the better.

Most people will agree that things have improved greatly in Iraq; however, it’s hard to get excited about the (hopefully) final unwinding of a war tha should have never happened, and that cost America dearly. Iraq is better left forgotten.

# 9 June 2009 at 8:04 am

Windroot said:

Markets usually sort themselves out unless they have become a playground for people bending or breaking every rule they can. Remember how we got into this mess inthe first place: The turning of a blind eye by government regulators to the creation of financial instruments that were found to be unsound at their very core.

Government should and must intervene to restore sound management practices to the market. In this case, since it was the financial sector that was in trouble, the government was forced to shore up the system. At the height of the panic, it wasn’t why but how much money can you throw at the problem. Now that things are looking better it is gee, why did we have to do that?

# 9 June 2009 at 8:27 am

Harrison said:

I was opposed to going into Iraq because I think we should have saved our bullets for Iran but it would be a mistake to “forget” what is going on there as it has the chance to remake the region for the better.

AS I recall, Standard Oil and Trust was broken up, yes?

# 9 June 2009 at 1:05 pm

admin (author) said:

Windroot,
It’s amazing how soon people forget. In a crisis everyone runs to the government for intervention on their behalf, but when things get better everyone wnats the government to mind its own business.

# 9 June 2009 at 3:27 pm

admin (author) said:

Harrison,
What possible reason would there be for a U.S. military campaign against Iran? This country has enough problems without having to deal with another, misguided, U.S. war of aggression. Iran is the “big dog” in a very dangerous and unstable neighborhood. We should sit back and let them reap what they have sown. If they want to be the leader in the Middle East, then let them deal with Al Queda, The Taliban and Hammas. Iran poses no threat to us over here in North America; we need to get out and mind our own business.

I used the Standard Oil Trust as an example of when government intervention is necessary. Yes, the government broke up Standard Oil, created a competitive environment, and returned the market to Adam Smith.

# 9 June 2009 at 3:43 pm

Harrison said:

Terrorist support, nuclear weapons, destroying Israel, etc…

I’m not saying we would do anything to Iran but the capability would be there should it be deemed necessary. Iraq made that option almost impossible.

Breaking up a company is different than propping it up.

# 9 June 2009 at 4:23 pm

admin (author) said:

Harrison,
I’m relieved by your clarification of the phrase “saving our bullets for Iran”. For a moment there I thought you were actually suggesting the U.S. should engage in another military foray in the Middle East. I absolutely agree that America should maintain “capability” that is second to none. I have a sinking feeling that our capability may be required against North Korea if they continue down the path they are going.
Although breaking up a company is different than propping up a company, each requires government intervention. Are you suggesting that government intervention into the free markets is okay as long as its intent is to promote competition bu breaking up monopolies?

# 10 June 2009 at 7:57 am