President Obama steering the Obamanomics ship into ‘The Perfect Storm’
Obama appointee, Mohamed El-Erian, CEO of Pacific Investment and chairman of the White House Global Development Council, speaking before the National Press Club, said that the Obama administration’s response to the Great Recession has increased income inequality and stalled the economy.
Mr. Obama promised infrastructure projects to put people back to work but instead he gave us easy money with three quantitative easings. Banks were flooded with money in the mistaken belief that they would put the money back into the economy.
With Eric Holder threatening to prosecute bank officials and fine banks over the collapse in 2007, it’s unlikely they will loosen up capital any time soon.
The Federal Reserve’s QE’s have fueled the stock market, increasing the wealth of people who are already rich. QE’s, however, do not reflect the true value of the economy.
Another participant in the panel discussion, Sheila Blair, said, ‘[QE] benefits those who have financial assets, who are the better off,” she said. “You need to produce real growth and services. Fueling growth through [federal inflation] is just not sustainable.’
We need substantive changes, not false props.
El-Erian said the economy won’t get better without tax reform and entitlement reform.
Special interest carve outs in tax measures have often been unhealthy.
El-Erian said that the acceptance of prolonged, high unemployment is indicative of a weak recovery. ‘If you remain unemployed for long, you become unemployable,’ he said.
Ben Bernanke recently suggested he would cut back on the $85 billion bailout (QE), which has caused sell-offs in the stock market this past week, something Mr. Obama does not seem to want. Bernanke’s term ends in January and it’s unlikely Mr. Obama will re-appoint him. The candidates Obama likes most are Larry Summers and Janet Yellin. Janet Yellin wants to continue printing money ad infinitum and my bets are on her as Obama’s choice. Obama cannot respond flexibly to actual events because he is entrenched in his ideological belief system.
Mr. El-Erian also said that the gridlock in DC is adding to the problems created by the administration’s policies.
Even though – as Mr. El-Erian said – the Obama policies have led to the poor recovery – Mr. Obama will undoubtedly stay the course. Our economy is beginning to look a lot like the Andrea Gail with Obama playing the part of Billy Tyne, as he steers us into The Perfect Storm.
Full story at the Washington Free Beacon