Categorized | Opinion

It's Still The Economy, Stupid!

While Washington is busy playing the blame game, the economy continues to suffer. President Obama’s plan to flood the economy with borrowed and printed money is only causing massive and crushing debts that will haunts us for generations and ultimately change our lives for the worse forever. The problem is, Obama does not understand the economy at all. The economy is like a super tanker that does not take kindly to large movements and over steering.

If you take a look at the results of rapid increases in oil prices on the economy, there is a direct correlation to an economic slowdown. Noted economist and University of California professor John Hamilton has a very interesting series of papers on the subject here. Since WWII, 10 out of 11 recessions have occurred after rapid rises in oil prices. The price increases tend to cause people to slow down their spending forcing an economic slowdown. Interestingly, a rapid decrease in oil prices does not translate into a rapid recovery. But the point remains, any sudden change in the direction of the economy is dangerous. The 2007 / 2008 oil price increase was no exception. A recession was predictable.

So, why is this 11th recession since WWII such a serious problem that only massive government spending and takeovers will fix the problem? The short answer is, it is different because of Y2K. Remember Y2K? That computer “bug” that created a panic and caused a massive surge in electronic device upgrades and replacements? Liberals love to point to the economy under President Clinton as an example of Democrat economic prowess and mastery. I have yet to find anyone that can give a single example of a policy that created a budget surplus. It was simply the effects of Y2K.

As soon as the year rolled over to 2000, the economy started dropping like a rock. Electronic and computer sales almost stopped. The economy was so overheated that it took a while for the recession to manifest. By 2001, things in the Tech sector were in a rapid decline and 9/11 along with a steep and rapid increase in oil prices gave the economy a 1-2-3 punch that sent us into a tail spin. President Bush’s tax cuts and stimulus checks were the right medicine to get the economy moving again and end the recession.

The problem was, unlike previous recessions, the 2001 incarnation arrived on the heals of the most massive period of consumer consumption in history. We saw the late 90’s “Dot-Com” boom followed by a bust. As the economy turned down, investors found Real Estate was still booming and moved a lot of the money into Real Estate markets, which caused a massive bubble.

As we have seen time and again, financial bubbles enable unscrupulous individuals to hide massive amounts of fraud under the protective cover of wealth. When a company is making billions, it does not really miss a few million, until the economy takes a down turn. Then the misdeeds are glaringly obvious. Enron, Tyco, Global Crossing and WorldCom were all involved in accounting scandals and outright fraud, brought to light by a recession. Looking back to the 1990 / 1991 recession, after a substantial spike in oil prices, the S&L scandal was brought to light when the recession hit. According to Wiki,

In an effort to take advantage of the real estate boom (outstanding US mortgage loans: 1976 $700 billion; 1980 $1.5 trillion) and high interest rates of the late 1970s and early 1980s, many S&Ls lent far more money than was prudent, and too-risky ventures which many S&Ls were not qualified to assess. L. William Seidman, former chairman of both the Federal Deposit Insurance Corporation (FDIC) and the Resolution Trust Corporation, stated, “The banking problems of the ’80s and ’90s came primarily, but not exclusively, from unsound real estate lending.”[4] (Link here)

So, the Real Estate bubble burst around 2007 / 2008 and once again exposed the fraud and greed, not to mention stupidity, of the financial industry. In a mirror image of the S&L scandals of the 1990’s, financial institutions were again caught with far too many bad loans granted to unqualified people. The consequences of the S&L scandal and the Enron – Worldcom scandal were that many of the perpetrators of the greed landed in jail, or at least had their carers ruined.

Unfortunately, those responsible for the fiasco today, Barney Frank, Chris Dodd, past and present leaders of Fannie and Freddie made off with huge bonuses and continue to wreak havoc with apparent immunity.

So, this recession is not much different from past recessions. President Obama has spent unprecedented massive amounts of borrowed money to “fix” a problem billed as new and more massive than anything we have ever seen. In reality, it is simply more of the same. Good economy, downturn, fraud discovery. The basic cycle. The addition of the second and final Y2k residual wave, the Real Estate bubble, acted as a shelter that allowed the bad loans to hide from the light of day. And have exacerbated the problem.

As we have seen in the past, massive amounts of cash flowing into the economy bring out those looking to make a fast buck under cover of a tsunami of cash. Instead of the normal purging of the bad guys after a downturn, Obama is pouring more fuel on the fires of corruption. And the cost is a massive burden for generations. And massive tax increases, which lead to a lower GDP and more economic misery for Americans.

Which is why Obama has already failed.

About Tom White

Tom is a US Navy Veteran, owns an Insurance Agency and is currently an IT Manager for a Virginia Distributor. He has been published in American Thinker, currently writes for the Richmond Examiner as well as Virginia Right! Blog. Tom lives in Hanover County, Va and is involved in politics at every level and is a Recovering Republican who has finally had enough of the War on Conservatives in progress with the Leadership of the GOP on a National Level.

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Tom White Says:

Nothing is more conservative than a republican wanting to get their majority back. And nothing is more liberal than a republican WITH a majority.

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