Bailouts, Obama, and Debt

From Christopher Cant-think-well:

And Then The Market Crashed Anyway

He writes:

You might recall that incident, when George W. Bush said he had “abandoned free market principles to save the free market system,” don’t you? Lotta good that did.

Last time I checked, it may have done a lot of good. The S&P 500 has surged 100% since TARP, and earnings have more than doubled. There are other factors besides TARP for the post-2008 rally, but the consensus is that TARP was a success far exceeding anyone’s expectations, and the money was repaid in 2011.

That catastrophe was followed by a two term Obama presidency, the Orwellian named “Affordable Care Act” (Obamacare), staggering increases in taxes, regulatory burdens, and government debt.

I agree the Obama presidency has been more or less a failure. It only ‘succeeded’ because it wasn’t as bad as it theoretically could have been, thanks to congress for at least trying to curtail Obama’s power. I opposed the auto bailouts and the Obama stimulus (American Recovery and Reinvestment Act of 2009), arguing that unlike TARP such programs were a waste of money, and most economists agree the Obama stimulus was ineffective. The stock market is rallying in spite of Obama, not because of him. Thank Bush, Bernanke, free market capitalism, low taxes, foreign investment, the tireless consumer, high-IQ, and web 2.0 for the post-2008 recovery, don’t thank Obama. Same for the success of the war on terror an the killing of Osama…thank Bush, not Obama.

The debt is high, but it would have still been high with 8 years of Mc Cain or Money..maybe not as high, but still high. And it wouldn’t matter that much, as inflation is still low and debt repayments as a percentage of GDP are near historic lows:

If you call yourself a ‘realist’, as Christopher Cantwell does, that means having to confront economic reality, even if you don’t necessarily like it or agree with it. You can’t call yourself a realist and then go about picking and choosing the ‘reality’ that confirms your preexisting beliefs and ignoring the ‘reality’ that disagrees.

Alexis Tsipras, the Greek Prime Minister, has resigned and called for snap elections – which he is expected to win – in the wake of abandoning his campaign promises and accepting a third round of European bailouts in exchange for austerity measures he campaigned against. Further adding to political and economic uncertainty in Europe.

This statement has nothing to with stocks, and anyone with a working brain cell knows Greece is a basket case, anyway.

In China, following a massive drop in stocks which occurred in late June, the Chinese central bank responded with a rate cut. That didn’t stop their markets from dropping another 7 percent shortly after. The Chinese government responded with a series of measures aimed at propping up the stock market, like further rate cuts, government backed stock purchases, and halting the sales of some shares. That didn’t prevent their steepest one day drop in 8 years on July 27th. The Chinese government did everything they could imagine to prop up the market.

But that isn’t proof that the programs were ineffective. Instead of falling 7%, without such programs it may have fallen 27% – we don’t know. If the goal was preventing any subsequent decline, then yes it was failure. But when there’s a crisis, due to the ‘flight to safety’, borrowing costs for reserve economies to plunge, making the bailout effectively free. Small economies tend to have the opposite situation of money fleeing during crisis.

Far from securing our futures, our as of yet unborn children are saddled with debts so massive we would never dare contemplate taking them on ourselves

No one actually pays the debt all at once. It’s continuously rolled over. The only reason why taxes went up in 2013 was because of Obama’s refusal to compromise, not out of economic necessity. As I explain earlier, America’s reserve currency status is keeping borrowing costs relative to GDP very low. Here is the debt pie chart:

But a large portion of the debt is held in funds that will never sell even if the dollar does weaken. All interest paid to the Federal Reserve is returned to the treasury. For all the hype over China dumping debt, they control only 8%.

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