Thursday, March 12, 2009

Obama: Economic crisis 'not as bad as as we think'

Matt Drudge's headlined nailed it: Dire Emergency Cancelled.

"I don't think things are ever as good as they say, or ever as bad as they say," Obama said at a meeting of the Business Roundtable. "Things two years ago were not as good as we thought because there were a lot of underlying weaknesses in the economy. They're not as bad as we think they are now."

Clearly, Obama's fear mongering is getting bad reviews out in the country. The first sign was that Democrats were not siding with Nancy Pelosi when she hinted earlier this week that a second "stimulus" package might be needed.

This was folloowed by Sen. Kent Conrad (D-ND), the chairman of the Budget Committee, who called the track of future deficits "unsustainable" and singled out Obama's proposal for adding $634 billion in health care spending over the next 10 years.

"Some of us have a real pause about the notion of putting substantially more money into the health care system when we've already got a bloated system," said Conrad.

With the fear mongering over, consumer sentiment should start to climb, just as Bernanke's money pumping starts causing economic data to start trending upward.


  1. Just curious: why do you think this crisis is being oversold? I don't see where the money will come from to boost consumer spending.

  2. Obama has been fear mongering since the day he got into office for two reasons.

    1. If he paints a major crisis at the start of his administration, he can lay any problems on Bush. If thinks go right, it's because of him, since according to him things were so bad.

    2. He used the crisis as cover to get the "stimulus" package through, so that he would have immediate cash to pay off those key groups that got him into office, e.g. unions, ACORN...

    You are right he doesn't have the money for all his planned spending. If the Asians don't let us borrow it from them, Bernanke will print it.

  3. I understand that he's using the crisis for political ends. I guess my question is, do you think the crisis isn't that serious and that we are going to recover rather quickly? My take is that stimulus won't take and the new money won't hit the economy for a while, and that no one will borrow.

  4. The crisis is of a different form than most commentators and Obama have been promoting.

    Bernanke still has a little more water in his water gun. His money pumping will push the economy higher short-term. However, by the money pumping he is only creating more distortions. Down the road the inflation is going to be fierce. At that point it is hyper-inflation or a very, very serious crash. The current one will look like a summer breeze.

  5. Here is an example of burying political agenda in the stimulus (or was that "simulus"??)... Using the stimulus package to roll-back Clinton Administration welfare reforms (see here).

  6. @Econophile

    The "stimulus" has nothing to do with. That is just taking money out of one pocket, "the taxpayer" and putting into the hands of Obama's allies.

    And,if it wasn't Obama's allies, there is nothing wrong with that money being saved instead of spent (That's how the economy really grows.)

  7. I think I understand the economic implications of stimulus, bailout, and the causes of the credit bubble.

    I personally think this is the great economic crises of our time and it is behaving almost precisely as Rothbard described in his book on the Great Depression. I also think that what our fair government is doing in terms of fiscal stimulus will only prolong the crisis. I think the economy would recover on its own quite nicely after deflation properly values assets, new capital is formed from savings, and, all things being equal, the government didn't create uncertainty.

    I've been watching the money supply charts and, since lending is in the tank, credit is not increasing in line with base money. Understandable with deteriorating balance sheets and lack of demand for credit because of slowing economic activity. My feeling is that it will take quite some time for money pumping to take effect and lead to inflation. So for the near(er) term we'll be deflationary, and because of the "stimulus" stagnant at best.

    So I don't think it's oversold in general, but I think it's very significant for quite different reasons than our Keynesian leaders.

    This is my take and I'm curious if you would agree.

    Thanks. I very much appreciate and enjoy your commentary.

  8. @Econophile

    I think you pretty much have it!