Wednesday, February 25, 2009

The Problem with Bushonmics aka Obamanomics

I make no distinction between the way Bush and Obama have handled the economic uncertainty since last fall. They have had the same problem. They have no freaking clue what to do other than throw spaghetti at the wall and hope something sticks. The bank bailout at the end of Bush's term was just a random number plucked out of the air that sounded big enough to do something to help. Obama's pork-laden stimulus bill is no different. They are just copying the "bold experimentation" of the FDR years.

There is a problem with that approach. There is no certainty or consistency in the market. Obama complained last night that banks are not lending money to get businesses going again. There is a reason for that. If I run a bank, and know that the government is heaving loads of cash out the treasury doors, I am not going to lend a penny. Why?

I don't want to lose my money. If I make a loan to a company that gets bailed out, I probably will never see the money again. And Obama will say it is my patriotic duty not to seek redress. I know people who are stepping in where banks won't and making business loans at confiscatory interest rates and earning good money. Provide a service; collect a fee.

Since September the stock market has been in free fall. The major reason for this is uncertainty. No one, not even Obama, knows what Obama will do. As a business leader, my responsibility is to make the best decisions I can with all the information I can gather. There is no telling what load of manure this Congress will drop next, and until these issues are resolved, I can't invest in anything.

This uncertainty keeps private investors out of the stock market and keeps businesses from investing in new equipment which will improve their operations. Millions (of people and dollars) will stay on the sidelines until there is a resolution. I personally will not invest if the government will be taking over my business. Until I know my investment won't be confiscated, I will keep my money where it will be 100% safe, even if inflation costs me some value.

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