Republicans say NO to more stimulus

Republicans, who are the house and senate minority, have said no to a new economic stimulus plan. The associated press released an article stating that republicans are against a new stimulus plan and the Obama administration thinks it is premature to be thinking about a new plan as well. I am relieved.

When president Obama was asked about the stimulus package recently by Anderson Cooper, Obama said "the stimulus is working exactly as we had anticipated." Really Mr. President? Just recently Joe Biden "slipped" by saying we misjudged the weakness of the economy. We also had the administration stating unemployment will not go past 8.5 percent when the stimulus bill was passed. We are now hovering around 9.5 unemployment rate, with rates close to 20 percent in some parts of the nation. There is an unfathomable amount of money being printed and spent. An increasing concern globally about the strength of the dollar. There is also some evidence that may suggest government intervention in the stock market as well. What the hell has the stimulus done? Many people will argue that we would be worse if there was no stimulus, but I am convinced that the amount of money we are printing and spending will be just as detrimental in the future.

I suppose all that can be done right now is hope that the administration does not find a need to create a second stimulus plan. I also hope that democrats in the senate and house see that a second stimulus is not what this nation needs right now and that they will align themselves with republicans on this matter.

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The administration and why more stimulus is a bad idea

As I have been saying for quite some time now, the Obama administration has been too optimistic. Recently, Vice President Joe Biden said that the administration misread the economy. Thank you Mr. Vice President!

The administration was adamant about creating new stimulus plans to create jobs and therefore "stimulate" the economy. Not only was it ineffective, but it was put together in such a poor way that many people, including those in the administration, did not really understand everything about it. They also created bank stress tests, however, these tests were insufficient and did not go far enough. So what is being said today? More stimulus.

Laura Tyson, who is one of Obama's economic advisors, recently said that we should consider more stimulus. Creating more stimulus will only increase the deficit even greater. This country is already at 62 trillion dollars in debt, an unfathomable number, and many nations, such as China, India, Russia, and even France are decreasing the amount of dollars they will have in their own reserves.


Charles Ortel, who is the managing director at Newport Value Partners, says that we must create incentives for other people around the world to come here and work, the best minds. I couldn't agree more, and I do fear that as every other nation (china and India) catches up to us, it is going to be harder and harder to stay ahead of the curve.

Find Charles Ortel's Interview here.

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India is Questioning the Strength of the Dollar

Recently, there has been a lot of talk about creating a new world reserve currency. Currently, the US dollar is the world’s currency. When there is an international transaction, it is all done in dollars. Lately however, all of this is changing. As of last week, China has expressed their belief that a “super-soverign currency” should be created in order to replace the dollar as the world’s currency. More recently, India has also expressed this concern.

Suresh Tendulkar, who is the chairman of the Indian Prime MInister Economic advisory council, has recently come out publicly saying that he agrees with china’s position. He is urging the Indian government to stop holding its reserves in dollars.

Along with China and India is Russia. Russia has decided that it too will cut the dollar from their reserves as well. With all this talk about creating a new world currency, what does this do for the dollar?

Well recently, the dollar has been pretty weak due to our economic situation. In the long run, however, creating a new world currency that totally displaces the dollar can be a nightmare for our country. When we say that we are borrowing money from china, we literally mean that China is buying our debt at treasury auctions. Now, if there is a new world currency, there isn’t much incentive for other nations to invest into the United States. All of this seems a bit scary, but I am willing to bet that nothing will happen anytime soon. The G8 will be meeting this week and you can bet that this will be something that Obama has to deal with.

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The Obama administration is being too optimistic

Recently, there was an article in the New York Times regarding this administrations overoptimistic view of the current economic situation. The article, which was written by David Leonhardt, states that many of the models the administration used were the exact same models that did not foresee this economic recession.

"It’s not fair to expect Mr. Obama’s economists to be clairvoyant. But they did make one avoidable mistake that led directly to their overoptimism. They relied on the same forecasting models that had completely failed to see the crisis coming."
-David Leonhardt

Leonhardt also goes on and says that the government most likely underestimated the severity of this recession. Therefore the stimulus that was initially proposed may not have been enough to keep this recession from getting any worse.

"...It’s an entirely reasonable prediction. Yet it’s hard not to look back on the last six months and worry that the administration is still underestimating the severity of the situation."
-David Leonhardt

In my opinion, stimulus plans work well theoretically, just like many things, but in practice they do not work very well. The multiple stimulus plans that were enacted by this administration have not brought down unemployment. Let's face it, people who had previously worked in corporate America, only to be laid off, will not settle for a construction job rebuilding a bridge (which is what most of the stimulus plan to put American's back to work is all about). The stimulus plans have only given corporations time to restructure and downgrade (layoff employees) their business. The administration has stuck to what they have been saying for a while now, that we will be out of a recession by the end of this year. In Leonhardt's article, he quotes Obama's economic advisors.

"Christina Romer, a senior Obama economist, argues that businesses that have spent the last few months drawing down their warehouse inventories will eventually need to rebuild them. Lawrence Summers, the top economics adviser, says that many consumers who have been delaying the purchase of a new car will eventually take the plunge."
-David Leonhardt

I strongly disagree with these statements. As I have said before, many people are losing their jobs. If jobs are being lost, people cannot afford to purchase a new house or car. People will also cut back on many things that they normally would have enjoyed in the past. With approximately 2.5 million jobs lost since Obama has been in office, it is fair to say that the stimulus plan may have only slowed the bleeding, but has not revived the economy. I also believe that the president's advisors understand this, they are just reluctant to admit they are wrong. I have said for a long time now that we are not out of the woods, and the fundamentals of the economy will take hold again when earnings begin coming out. I believe the economy will sink even lower through the end of this year.

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