Obama Doctrine: How to Rescue America from Americans

 Honestly, I don’t really get what’s Obama Doctrine all about. Obama admin hasn’t given any interpretation on the doctrine yet. So, the doctrine is open to public discussion. Bush junior hasn’t vividly revealed out his doctrine only after he left the White House in his memoir “Decision Point”. 

Mostly, economic policy is not included as a doctrine. I acknowledge that the Fed has privileges to manage the economy. When it comes to a decision that is likely, however, to create a huge impact on the economy, the Fed must at least seek informal green light from the President. The President still gets a final say on the economy. It is worth noting that economic policy should be included in the doctrine.

  I don’t want to elaborate on economic policy of the United States because I have gone through it many times already. For now, I will just touch on it. President Obama won a landslide in 2008 and lost the House of Representatives to the Republican Party in mid-term election but still retains a majority in the Senate. People said it was a consequence of Obamaconomics, a view I don’t necessarily share.

 For me, Obamaconomics is a short term gain for a long term gain. Some of my friends tried to challenge me that US can’t still compete in global economy even in the wake of economic crisis. American products aren’t much cheaper than those of Europe, let alone than those of Asia. On the contrary, cheap labor, long term low interest rate, out-of-this-world technology, qualified/skilled workers and savvy entrepreneurs will very much boost US competitiveness.

For instance, General Motors reported revenue and net income for 135.592 billion dollars and 6.172 billion dollars respectively for 2010[1]. For the first quarter of 2011, GM net profits rose more than triple to 3.2 billion dollars. The factors I raised above have supported that gain.

There is no something such as a free lunch. Americans have to pay the price. Obamaconomics drives up the prices of everything, ranging from food to oil, that suffers the poor the most. Obama admin is increasingly unpopular within middle class people and now even within the top brass. However, it is a price that Americans, especially middle class ones, have to pay to get America back on its feet, meaning that being able to compete globally.

Some readers might ask: Did you ever visit World Economic Forum website.  The answer is that I did and I saw that US was ranked Number 1 ,Number 2 and Number 4 for 2009,2010,2011 respectively. I can’t disagree with you that US competitiveness is being downgraded year by year. I used to mention that America is in transition but not in decline. It takes time for the afore-mentioned factors to permeate throughout American society and I believe that it won’t be long. Those factors will shake America’s economy some time at the eve of President Obama’s term.

 As a result, US and China will rescue the World from the beset of uncertainties. Nouriel Roubini, an economist who predicted recent economic crisis, once said that China’s economy will start to dramatically slow down after 2013, a view that I don’t buy. I will discuss it in details in my next article. President Obama will get a big credit for his attainment in kick-starting the economy. However, 2012 Election will be a neck-and-neck competition. Why? President Obama recently proposed that Israel -Palestinian peace negotiation be based on Israel’s pre-1967 borders with mutually agreed land swap putting Israel at a disadvantage. Many Israeli-American people living in US are millionaires. They will support fund Republican Party in the coming election.

 Let me brief you about ideologies of US political party.  Republican Party favors tax break for the rich and corporations. They claim that the surge in business activities will grow the economy and help to create jobs for working class and the country will be better. Democratic Party favors tax cut for middle class and the poor. They also claim that a diverse middle class will have a bigger potent.

  Two parties take and leave power that serve as an invaluable check for US economy. Two ideologies level inequality in Americans society. Some people say a society with equality will be in everybody advantage. It’s not a good idea if you think it over. A society with equal equality produces no creativity and innovation because people won’t work hard, study hard and think hard to realize their dream.  We had better prefer less inequality to equality.

Eight years of Bush presidency had been a good day for Americans business. It is time to buck that trend. America’s Middle class is need of special attention after eight years of being left behind.  Should the middle class is still unconsidered, they will feel discouraged and they will stop producing any output. America will suffer the most. Recent proposal of Obama to increase the taxes for the rich and corporation is vital for the future of America. I agreed with Gabor Steingart, author of War for Wealth, view pinpointing “America’s biggest problem is not China but America itself.

 Obama administration is walking on the right track. Obama Doctrine is saving America from self-appointed wise or unwise Americans seeking to freeze tax break for Corporations and the rich operating at the expense of the whole American society. Just drop me an email if you would like me to cover on Obama Doctrine related to foreign policy filed. Obama’s Olive Branch to Muslim World will be discussed in detail if it gets the support. Thanks for reading. God Bless You.  

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[1] http://en.wikipedia.org/wiki/General_Motors

Short Term Pain for Long Term Gain 

The World’s Secret Economic War: The Zero-Sum Future Is Waiting For Us

  As virtually all countries are the winners of the economic crisis, the World is experiencing another daunting challenge. Countries are waging economic war against one another for their own gain. Beggar-thy-neighbor policies are rampant in places around the world raging from a skeptical both fiscal and monetary policies of United States to the likelihood of unfair devaluation of Chinese Renminbi against US dollar. Guido Mantega, Finance Minister of Brazil, criticized developed countries, especially United States, that their ways of handing economic crisis are at the expense of developing ones. Cheap US dollars drive up the prices of food and oil, causing particular pain for the world’s poorest people, he went on.

Only the Weak will survive !!! 

The lowering of interest rate close to nil and “irrational injection of capital to the economy” are too responsive to the crisis, some puts. Take economic crisis. US has injected trillions of dollars into its industry sector. As I have already mentioned in my previous article that America has changed their style of living. They don’t like being indebted by borrowing to consume but they do want to consume via the surpluses of export. Economic revolution is a must for America should she is to sustain her future.

 The bad news is that the debts nearly reach %100 of its GDP. America can’t afford not reducing the debts or she will run a high risk of losing both investors and lenders confidence. In worst-case scenario, it would bring down the entire economy again. It’s a dilemma for US. European countries have been uneasy about the economic policy of the United Sates. The US Fed keeps injecting money into the economy to keep its currency weaker and weaker, enabling the surge in export. I expect a fierce competition, may be a violence one, between Western countries and emerging markets for export markets. Although globalization makes countries to be more dependent on one another than ever in term of economy, it’s not a guarantee war is not a resort.

America is now in the stage of restoring its manufacturing system. Pual Krugman, 2008 Nobel laureate in economics calls that shift as “Manufacturing Renascence”. America can’t depend on domestic market, at least for near and medium term, for reducing its debts. It’s still the case for European countries. According to Krugman, America manufacturing sector, thanks to the Fed policies, is seeing signs of a turning point. US firms are moving back to America and many European countries are considering investing in America too. I’m sure that America will take a prominent role in exporting products and services anytime soon.

 America’s advantages are cheap currency, long term low interest rate, cheap labor and highly skillful human resources, considered as consequences of economic crisis. In the coming years, US will be able to compete efficiently with other countries in manufacturing goods again. The economic crisis is bad for European countries in term of economic growth. However, the upside of the downside is that European governments have saved hundreds billions of dollars in the wake of that ordeal. I don’t really get why European governments carried out austerity measures. On the contrary, I’m sure that the money they have saved will invest back into the economy in order to attract investors around the globe. Economists blamed European government’s policy on contributing unnecessary risks to global economy.

Wall Street Journal once put that Chinese government has spent one billion dollars a day to manipulate its currency. US officials claimed that Renminbi is undervalued between %40 to %60. Other countries are more of the same. I believe that Superpowers are waging economic war. They only share, to some extent, the view that today economy environment is like Prisoner’s Dilemma in which we are better-off from cooperation than competition.

 Recent economic war is very much invisible but it may be of great consequences. Hopefully, I am wrong.

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[1] Follow my previous articles for details.

The United States of Obama’ Unfinished Economic Revolution

  People are widely convinced that financial crisis of 2007 and economic crisis of 2008 dealt a fatal blow to the States’ status as an unchallengeable superpower. The crises have pushed up debt-to-GDP ratio higher than it should be. Turbulences in financial market gave rise to an unprecedented capital flight from US to developing countries, especially emerging ones. For second time just in a decade, US economy went into recession in conjunction with high uncertainties about long-term economic performances. United States is also running a large trade deficit with its counterparts thanks to the losing of competitive edge. Scholars believe that Uncle Sam’s economic debacle dissolved Americans hope of gaining a second term as the most powerful country in the 21st century.

On the contrary, I don’t share those views. Hilary Clinton once interesting said that America is still around. It would be naïve to label recent crises as a failure of America. The ones are indeed an unfinished economic revolution. For the rest of my piece, I am going to defend hidden fact that the crises are running in favor of America.

In 2008, Bush administration and Congress approved 700 billion dollars bailout package to prevent the economy from being brought down by a great shock in financial market. In 2009, 787 billion dollars bailout plan and 825-billion-dollar economic stimulus package were approved to buy Treasury bonds and mortgage securities. Barry Ritholtz, co-author of Bailout Nation, estimated that the bailouts were valued at $4.1615 trillion dollars, even bigger than India economy in 2010 measured at PPP basis. So, the money that the Fed injected into its economy is surprisingly large. For now, US consumers are having confidence on their economy and they start to spend more as investors are in a mood to feel a sense of a secure doing business environment despite there are concerns about rising oil prices and unrest in Middle East. As US economy mired in recession, there was a massive capital flight from US to developing countries. From a different perspective, capital flight is beneficial to US economy. We must not ignore that fact capital flowing from US has made currencies of receiving countries more expensive in comparison with US Dollars, viz. China, India Brazil and Russia. Leaders of those countries are having their hands full dealing with a large inflow of US dollars. US is going through a dilemma, so do developing countries. Inflow of US dollars presents both opportunities and challenges. US investors get high interest rates from their invested money in host countries. Although the inflow of US dollars to the rest of world is largely speculative, I am optimistic that most of US investors will eventually find that developing countries are a lucrative place to do business. Against the backdrop, we shouldn’t think that capital flight is happing in US. Put simply, investment, on the contrary, plight has been happening. China, India, Brazil, Russia and other emerging economies have been largely benefited from the inflow US dollars although there have been recently fears of out-of-control inflation and asset bubble. US, in turn, will benefit from a faster rising middle classes of both emerging markets and developing countries. Home truth is that US can’t afford not having a richer, faster-growing Sothern world. The rise of purchasing power of people living in countries will be a check to US debt. The faster they rise, the faster they lose competitive advantage. In addition, they create a high demand for US goods and services. Weak US dollar, caused by low performances in economy, has been an advantage for US exporters and also has decreased trade deficit with developing world, especially with China. I expect US economy will see a healthy recovery. Consumers spending, innovation and investment should be an indispensible driving force. Investment now is a key factor for US economy to grow. It’s a matter of time that the trillion dollars the Fed injected into the economy become effective and it will be long before the economy to lose its momentum. At the time, US leaders will be busier dealing with inflation than deflation.

Furthermore, the economic crisis served as a best pretext for Obama administration to initiate and approve a law reforming US financial market that made an invaluable contribution to its credibility. Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into law by President Barack Obama in 2010 aimed at reducing risks in financial system , minimizing the gain of the rich at the expense of the poor and giving the Fed more powers to oversight the economy. Economic crisis is also reducing global imbalances which post a serious threat to global economy and more reformed are expected to come.

Both President Nicolas Sarkozy of France and IMF managing director Dominique Strauss-Kahn have proposed that financial transaction be taxed for the sake of financial risks prevention. Should the proposal is implemented, governments of developed countries will find partial solutions to their debts and deficit and United States will get the most benefits. For sure, it is inappropriate to say that America is in decline. From my point of view, America is in transition.