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Originally Posted by MiamiRob
I used to watch Rodgers in the 90s when he was on CNBC but clearly his mind is getting warped! He invested in Tawainese stocks and lost money. He shorted Fannie Mae and lost there too. He wants Americans to move to China and have more babies! WTF?
As for Obama it's clear that some of the things he did have worked such as bailing out the car companies which now are turning a profit and even though the stimulus bill hasn't done what it was promised it stopped the hemorraging in the US economy. So far we have had one full year of positive GDP growth.
I take a financial analyst like Rodgers with a grain of salt and how can he say that Obama doesn't know about economics when the man is a multi millionaire at age 48?
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The stimulus packages did what they were meant to do, which is the problem. In this country 70% of our GDP number is spending. The sole purpose of the stimulus packages were to get people to spend money. This is ok, assuming that money comes from savings. In this country the average American has 5.5x as much debt as they do disposable income. So all of that "GDP growth" we saw under Bush was mostly people going into debt through debt consumption. This is the exact same thing that the most recent stimulus packages did. All we did was push Americans farther into debt, and we said this was a good thing because our GDP number increased. A higher debt load is a drain on the economy, not a stimulus to it. All we did was force some short term gain for longer term pain.
Were the market allowed to function (without interference form the gov't, both Bush and Obama) we would have seen drastic GDP contraction in this country. Our savings rate would have went through the roof, and a lot more retail, restaurants, and other service economy businesses would have went bankrupt. Of course this sounds bad, but when you look at the long-term viability of the economy this was the best thing. This would have been the economy getting rid of the debt-load and faulty companies that erected during the boom years. We would have had short-medium term pain in exchange for long term gain. Right now we are doing the exact opposite, which will result in a much worse economy 5+ years from now.
I constantly hear the saying "Obama inherited this from Bush." That statement is very true, we will now be saying the exact same thing about Obama in the future. All Obama is doing is using the same principles Bush used during the early 2000's to get "out of" the recession resulting from the dot com bubble. Only this time, it's on a much larger scale. Yet during that "dot com recession" of the early 2000's we had the largest spending spree in American history, and the government called that the "recovery." The difference is, back then we could afford it because people didn't have that much debt. So what they did to "get out of" that recession was forced people to go in debt, resulting in less companies failing because people were spending money. This time we already have too much debt. The average American has very little debt they can add to their balance sheet without going bankrupt.
Both times there was never a correction. During recessions people save MORE and spend LESS, so why is it that during the recession of the early 2000's people did the exact opposite? Government stimulus, the fed slashed interest rates, we cut taxes and we tried to get every American into a house. In fact Bush declared a "war" on average Americans that didn't own houses, it was his goal to get everybody into a house. So the gov't had to guarantee loans in order for this to happen because the banks wouldn't have lent that money, which led to the housing bubble, without that government guarantee of loans. During Bush's 2 terms we created a TON of short term gain for long-term pain. Now we are trying to do the EXACT (let me say that again) the EXACT same thing only on a larger scale.
Even though Bush did a lot of terrible things, in his defense, he warned about the insolvency of Fannie Mae and Freddie Mac and tried to restrict their powers but the Democrats and some Republicans wouldn't pass the bill. He did this during his first term, but congress wouldn't hear any of it because the execs at Fannie and Freddie paid off the congressmen to vote Bush's bill down. In fact, one of the larger receivers of Fannie and Freddie exec. money was senator Chris Dodd of Connecticut. It's pretty funny considering he is one of the writers of the Financial reg. bill.
Anyway, my point comes down to basic common sense. You don't want people to spend more money when they are already swimming in debt. We want them to pay off their debt so we can have a sustainable economy in the future. This lack of spending by American citizens, alone, would drastically shrink our trade deficit. And in place of some of these service sector businesses that fail we would start to see more manufacturing erect, which would bring money into the US and we would have probably (within 10 years or so) have seen a budget surplus. Of course none of this can happen if we don't accept the fact that the pain must be taken in order to restructure our economy. Right now our government is doing a great job of not accepting that fact. And both political parties are at fault because Bush started the bailouts. Of course now we are seeing some common sense erect in the senate (mostly from the Republican side but some Democrats are seeing the light as well). The problem is our president still doesn't see the light because he insists that he will "stimulate" (aka put people more in debt) again if the "recovery" begins to falter.
My best example of everything I'm saying is in the savings rate. We saw a HUGE spike in US savings rate during the early 2009 period (reaching almost 6%). As soon as the stimulus packages reached the consumers we saw savings drop to below 3%. Please, tell me how we can possibly recover from the "worst recession since the great depression," with a measly savings rate of 3% when the American debt load (5.5x as much debt compared to disposable income) was the catalyst for this recession? The GDP growth itself is basically outpacing that rate (or right at it) which means people aren't even paying off debts but they are now just sitting idle keeping that debt load on their balance sheet (aka saving at the same rate they borrow).
This entire recession can be traced back to the average Americans debt. Without the high debt loads and bad credit ratings popping up around the country, the banks never would have had huge defaults on their loans, people wouldn't have quit buying cars, people wouldn't have quit shopping...basically no bailout would have been necessary and there would have been no recession.
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Jim Rogers accusing this administration of innumeracy:
