The abomination of Obamanomics

The enduring legacy of the Bush administration will not be the war in Iraq, but the war on the U.S.
Dollar. The massive spending and deficits pursued by Bush and accompanied by the free-wheeling
printing of money by the Greenspan/Bernanke Fed, resulted in the weakest Dollar since Jimmy Carter.

The weak dollar policy of the Bush administration was the primordial factor causing the housing
boom and the surge in commodity prices. Bush used housing to lift the economy. A careful examination of
the 7 million jobs created during the last 8 years reveals the majority were in the housing industry or
linked to housing.

But the weak Dollar inhibited business investment, thereby largely negating the positive effects
of tax cuts. This resulted in the economy being narrowly built on housing alone. Inflation was mounting
until it was temporarily checked by the bust in the sub-prime housing market.

Note the "sub-prime" housing market. The initiating of the sub-prime market began under
Clinton, with the Democrats controlling Congress. Those same congressional Democrats now have
a near overwhelming control of Congress. Robert Rubin and Larry Summers advised Clinton. Both
are principal advisors to Obama. Rubin went from Treasury Secretary under Clinton to Citigroup.
He collected million dollar salary and bonuses while wrecking that bank. Summers will now be head
of Obama's economic council.

The Dollar weakened under Clinton and collapsed under Bush. Clinton created the sub-prime
market and Bush fully exploited it. Obama's core constituency were beneficiaries of the sub-prime
housing boom. The Bush administration has actually been a traditional "Democratic" administration with
massive spending (the largest spender since LBJ) and huge deficits. Bush procured the $700 billion bailout
and appointed Bernanke to Fed chairman. Bernanke has initiated an $800 billion scheme. Obama voted for
the $700 billion and praised the Fed $800 billion plan. Bush appointed Timothy Geithner to be New York
Federal Reserve Bank President, and Geithner was a key architect of the Bush war on the Dollar. Obama
has selected Geithner for Treasury Secretary. So where is the "big change" from Bush?

Obama is proposing massive public works spending on top of the $700 billion and $800 billion
squanderings. He and his advisors believe there is "idle capacity" and "idle manpower" and government
spending will "create" jobs and thereby "create" wealth. They fail to understand that this increased
"wealth" and productivity is merely an increase in paper dollars. No real value has been added to the
economy because the increased money is concomitant with a proportional decline in purchasing power
of the money.

We can expect a situation similar to that of Japan during the 90's. The Japanese refused to let
any major business concern fail and printed money. The 90's are now known as "the lost decade" in
Japan. We can expect a resurgeance of inflation ( double digit inflation as experienced under Carter is
likely) and the Dollar to weaken still more.

Consider this; When a fully employed dollar is taxed inorder to pay for public works, that
otherwise fully employed dollar has to go through and "pay" different departments and agencies on it's
way to the assigned public works. So more than one dollar must be taxed inorder to achieve one dollar's
worth in public works "investment". An automatic negative at the outset. What kind of an investment
is that?

Or, the government can print the dollars. But as this means more dollars in circulation, the
value of the dollars declines proportionately. Therefore, multiple dollars have to be printed inorder to achieve one dollar's worth of "investment".

Thus, taxation to pay for public works leads to confiscatory taxation. Printing money
to pay for public works leads to monetary infaltion. The result of both is price and wage inflation.

Obama's policies, as a continuation of the Clinton and Bush policies, will result in another
collapse of the dollar. This provides us with an investment opportunity however. Remember, the
greatest fortunes have always been made during the worst of times.

The investment opportunity is this; The collapse in the dollar will result in inflation.
Therefore, buy foreign currencies against the Dollar, and American agricultural commodities. Great fortunes are to be found there.

Next week, we will discuss how the dollar is weakened and the Keynesian fallacies that
cause the weak and collapsing currency.