Americanly Yours

The following story isnt true.  It is more of a “political joke” of sorts.

When Nikita Khrushchev was forced out of power in the Soviet Union he left his successor (Leonid Brezhnev) with two letters.  He told his successor to open the first letter when he came to his first major crisis and follow the instructions.   He was told that following the instructions would get him through the crisis.   He was also told that when a second major crisis stuck, he should open the second letter from Khrushchev and follow its instructions.

The inevitable crisis happened and Brezhnev became worried that the crisis could cause him to be removed from power.   He opened Khrushchev’s first letter which said “Blame everything on me.  The only way that you can stay in power is to blame everything on my poor leadership and announce that you have to reverse my policies in order to save the State.”

So, Brezhnev followed the instructions in the letter and things in the Soviet Union got better for a while.   However, after a few more years, the economy began to stagnate and Brezhnev once again became worried that he would lose power.  He realized that the advice from Khrushchev’s first letter had saved him once and that maybe it could do so again.

Brezhnev opened the second letter and it read “Sit down and write two letters.”

As I said above, this is not a true story.  It is however, a useful lesson on political survival.

I would argue that President Obama began reading his first letter during the campaign when he blamed everything wrong in the world on President Bush.  He has continued to beat up on President Bush’s record in a constant attempt to convince the public that the current crisis is not his fault.

He will likely continue to read from this letter for several years.

For example, if the situation in Iraq continues to improve and we can pull our troops out, Mr. Obama will undoubtedly take all of the credit, despite the fact that President Bush’s controversial Surge plan was a complete success and has effectively won us the war.  If on the other hand, the situation in Iraq deteriorates and we either do not leave within Mr. Obama’s promised 16 months or we end up leaving in disgrace, there can be no doubt that President Obama will blame Mr. Bush.

Similarly, if the economy turns around in the next year or two, Mr. Obama will take all of the credit.  If however, the situation worsens, the economy continues to contract, and unemployment approaches or reaches double digits, President Obama will claim that he inherited this mess.  In his speech last night President Obama said “I can’t tell you for sure that everything in this plan will work exactly as we hope, but I can tell you with complete confidence that a failure to act will only deepen this crisis as well as the pain felt by millions of Americans.  My administration inherited a deficit of over $1 trillion, but because we also inherited the most profound economic emergency since the Great Depression, doing a little or nothing at all will result in even greater deficits, even greater job loss, even greater loss of income, and even greater loss of confidence.” This was effectively Mr. Obama hedging his bet:  if the economy turns around, he can take credit, but if it doesnt work, he will say that things are still better than they would have been if the bill wasnt passed and besides, it is still President Bush’s fault.

This is why President Obama still sounds like his is running for President, rather than holding the office.  It is safe to say that President Obama was not elected to office based any past accomplishments that he had.   He was also not elected based on any future plans that he had.  Rather, he was elected because the American public was (and still is) fed up with President Bush.  The fact that Mr. Obama was elected President is really only an externality of the perceived failure of the Bush Administration.  Mr. Obama really didnt run against John McCain; he really ran against President Bush. How many times did you hear Mr. Obama refer to “8 years of failed policies?”   Because Mr. Obama was elected as an opposition candidate–a reactive candidate rather than a proactive candidate– he is likely to continue this course of acton.  Expect him to continue to beat up on President Bush’s record.  Furthermore, you can expect him to denounce Republicans who vote against his programs (in a manner that will probably become much more hostile in the near future).

The problem is that Mr. Obama cannot continue on this course for too long.  The American people are fickle and grow tired of things quickly.  Remember that when the War in Iraq started Bush (who was cheered on to war by the American public as well as the media) had an approval rating of near 70%.  At some point, the American public will grow tired of hearing Mr. Obama blame all of the country’s problems on the previous administration–especially if things get worse.  The people want solutions and when President Obama realizes that he cannot deliver them, he may have to reach for that second letter.

Americanly Yours,

Phred Barnet

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I have some interesting quotes from President Obama which he said this week at a Democratic Party retreat:

“If you’re headed for a cliff, you’ve got to change direction.”

This is true, but the problem is that Mr. Obama has misidentified the direction of the cliff that we are headed for.  A year ago, we were about to enter what would have been a somewhat minor recession.  Mr. Bush and Congress flipped out and spent hundreds of billions of dollars on a stimulus that completely failed.  Then, rather than allowing failing business to fail, Mr. Bush and Congress bailed them out one by one and then bought a bunch more.  I am not going to fully detail this now, but in a free market system prices are important not just because they tell us the value of something, but they also contain a lot of information within any given price.  Mr. Bush and Congress should have allowed the banks and insurance companies to fail and for the debt to be repriced, rather than subsidizing bad banks and investments and keeping debt priced at the same level.  But Mr. Obama is continuing the exact same policies that got us into this mess. If you disagree, then read about how Japan’s economy stagnated for 15 years when their government shored up bad private sector bank loans.

Our economy is racing toward a cliff and Mr. Obama is hitting the accelerator, rather than slowing down or changing directions.

“When you start hearing arguments, on the cable chatter, just understand a couple of things.  Number 1, when they say, ‘Well, why are we spending $800 billion [when] we’ve got this huge deficit?’  First of all, I found this deficit when I showed up, number 1.”

Um… yeah you did.  But how is that an excuse for spending $800 billion.  Remember the cliff that he mentioned above?  Didnt he also mention changing directions?

“I found this national debt, doubled, wrapped in a big bow waiting for me as I stepped into the Oval Office.”

The above quote from President Obama is almost true (the debt increased by about 85% during President Bush’s two terms).  But Mr. Obama has already requested about $1.2 trillion ($350 billion from TARP and over $800 billion from this “stimulus” bill) since he became President a few weeks ago.  That is an increase in the size of the National debt of about 10% in about 3 weeks!  Change, Mr. Obama?  Or just more of the same?

Americanly Yours,

Phred Barnet

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By effectively nationalizing the banking industry, our government has made a giant leap away from Capitalism and towards socialism.  Our government now owns large stakes in most of the Nation’s largest banks.  The government has already invested $271 billion of the $700 billion that it budgeted for “stimulating” private banks.  The have committed to funding another $30 billion.  The rest of the $700 billion will follow soon.  Additionally, some members of Congress are already saying that because the first half of the $700 billion isnt being spent “correctly,” more money may be “needed.”

Here is a really cool chart that lists how much each bank has received from the TARP program.  It is updated daily.

I absolutely refuse to put my money in a government owned bank.  I will not allow the government to take the profits it earns off of my deposits to fund any further bailouts.  By banking at a government run bank, you are encouraging these bailouts.  If you are against further (or existing) government bailouts, then it is your duty to remove your money from this bank and place it in an independent bank.  I used to bank at Washington Mutual which is now owned by JPMorgan Chase (which has received $25 billion from the government in exchange for ownership rights).  I removed my money from this bank as soon as I was able to identify a local bank that had not sold part of itself to our government.

I now bank at United America’s Bank in Chamblee.  This is a small bank with only a few locations in Atlanta, Chamblee, and Roswell, but it is a bank that is independent from government ownership.  Plus, it has the added convenience of being the closest bank to my house.  Whether you live in my area or somewhere else, if you oppose government bailouts and government ownership of businesses, you should consider putting your money in a small bank that is not owned by the government.  I would be glad to help you find a non-government owned bank in your area.

Americanly Yours,

Phred Barnet

People are now estimating that Mr. Obama’s inauguration will cost at least $150 million, and possibly over $160 million.  I know that the Democrats are excited to end 8 years of Bush-led Republican rule.  I know that many people in this Nation are also excited that America will be inaugurating our first black president, but I don’t think that spending so much on a president’s inauguration can be justified, especially in this economy.

Lets put things in perspective:

George Bush’s inaugurations each cost around $40 million.

Bill Clinton’s 1st inauguration cost $33 million and his 2nd cost $23.6 million.

George H.W. Bush’s inauguration cost $30 million.

Obama’s inauguration is set to cost as much as all 5 of these previous inaugurations combined.

Economically speaking, these are not exactly the best of times.  Unemployment is rising and people are having trouble paying their bills.  In a time like this, should the American people really be forced to pay for this event?  After committing trillions of dollars that we do not have to bailouts and “economic stimulus,” our government should be trying to save money wherever possible, not paying for lavish parties.

The District of Columbia has anticipated their costs for the inauguration to be $47 million.  Virginia and Maryland will spend another $16 and $12 million, respectively.  The states are already broke–Virginia just cut $429 million from its public education budget and $418 million from its health care budget.  This is just not the right time for states to have to shell out money for a party when they cant even afford to educate their own children.

In 2005, Bush was criticized for spending $40 million on his 2^nd inauguration (even though only $17 million of this money came from the government). Yet, the media is not criticizing Obama even though his inauguration is costing about 4 times what Bush’s cost. If you are interested, this BBC article from 2005 details some of the complaints of Bush’s inauguration, including a request by Democratic Representative Anthony Weiner to cancel the inauguration because he says that the government shouldnt be throwing parties while people are dying in a war. We are still at war, but ill bet that Representative Weiner is not calling for Obama’s inauguration to be cancelled.  Also, I have yet to see an article online criticizing the costs of Obama’s extravagant inauguration (although, I am not surprised).

Mr. Obama fundraising during the previous election was nothing short of amazing.  Why couldn’t he use his network of donors to help fund the costs of his lavish inauguration.  Or, he could take the example of Jimmy Carter who intentionally scaled back his inauguration during a recession, spending only $3.5 million on his inauguration in 1977 to avoid drawing too much attention to himself while so many Americans were hurting.

Is it just me or does the story of an extravagant party for a Nation’s leader while its people suffer sound familiar?  Well at least maybe Obama will let us eat cake.

Americanly Yours,

Phred Barent

The American people and Congress may have rejected a bailout for the automakers, but in his infinite wisdom (and apparently infinite power, as I was unaware that a President could circumvent our Constitution and our laws to enact legislation without the consent of Congress), our President has thrown Chrysler and GM a lifeline by giving them $17.4 billion.   Remember, Chrysler is the same company whose owners would not contribute their own billions to save, so clearly this is another smart investment from the Federal Government.  Luckily, Ford has announced that it doesn’t need the money and will not be requesting any.  With this new bailout, the government now has the right to purchase stock in the two companies and place them under governmental supervision.

President Bush, thanks for Socialism!

The government that is supposed to represent you has taken your money through taxes on your hard work and is using this money–without your permission or even your approval–to purchase stock in two failing auto companies.

Do you still think Robin Hood was a great man?

This act completely violates the basic core principles of both Democracy and Capitalism.  The principles of Democracy are violated because the government is acting without the consent of the people, and is in fact acting opposite of the desires of the people.  The principles of Capitalism are violated because the government is taking ownership in two more American companies, placing factors of production directly under its control.

Does anyone really think that $17.4 billion can save the automakers?  This money is just an excuse for the government to put more money into the companies in the future to protect their initial investment.  In poker, you are called “pot committed” when you have a large enough amount of money in the pot to justify calling a bet that you know you will lose.  In the investing world, this is called throwing good money after bad money.  I thik the investors have it right this time.

Americanly Yours,

Phred Barnet