great depression Archives • Rutherford Investment

Will Obama Keep On Truckin’ With Agenda?

While president focuses on health care, voters’ actions suggest they’re more concerned with the economy

Nearly a year ago, Vice President Joe Biden notoriously asked, “Why are we focusing on health care when the economy is the problem?” Apparently Obama didn’t get the memo.

In the Scott heard around the world, previously unknown Massachusetts state Rep. Scott Brown (R-Mass.) drove his dusty, old pickup truck to victory in knocking off the Democratic nominee for the U.S. Senate seat previously held by Ted Kennedy. Elected in the bluest of the blue states, Brown is the first Republican elected to the U.S. Senate from Massachusetts in 38 years. German news source Der Spiegel pronounced: “The World Bids Farewell to Obama.” Elected just a year ago in a stunning victory, President Barack Obama now finds himself facing declining approval ratings and upheaval. He promised change, but voters did not like what they perceived as European style socialism. With the nation suffering through the worst economic conditions since the Great Depression, exit polls from his presidential election showed that two-thirds of the voters cited the economy as their number one concern, and fewer than 10 percent mentioned health care. Since taking office, Obama has focused on health care. Obama, in his first year in office, gave 158 interviews and 411 speeches – more than any other U.S. president; perhaps more than all of them put together. Yet the Democrats have now lost the governorships of Virginia and New Jersey, and a Senate seat in Massachusetts.

In the meantime, the Brookings Institution says the largest and fastest growing population of poor people in the U.S. is in the suburbs. […]

The Lost Decade And Beyond

Much has been written about the lost decade of Japan, which has now become two decades. Now the United States has lost a decade of its own, which hopefully will not also become two decades. In the 1980s the Japanese economy became overheated: the Nikkei index reached nearly 40,000 but eventually collapsed. Today it stands at about 11,000. The low point of the Nikkei of the last 20 years was about 7,500. In spite of massive spending efforts by the government and near-zero interest rates, Japan has never recovered. Even now, the Japanese economy appears to be headed lower, and deflation seems more likely than inflation.

In the 1990s, the U.S. economy became overheated gyrating from highs to lows to highs under the Greenspan Federal Reserve. Finally, the bubble burst and the economy suffered its greatest setback since the Great Depression. The response of the Federal Reserve was to keep interest rates very low for a very long time. The Fed feared deflation, and Greenspan wanted more than anything to be renamed Federal Reserve Chairman. With interest rates low, every segment of the economy took on leverage. With a government policy that wanted everyone to be a homeowner, housing was inflated. With very little supervision, toxic financial instruments grew to enormous proportions along with spurious banking
practices.
For its part, Japanese borrowing by 2008 reached 172 percent of its GDP, according to the CIA, as the government sold bonds to finance giant stimulus programs. The borrowing percentage is even higher today. Interest rates continue to be nearly zero. These are the conditions in the U.S. today. Will we fare any better than Japan?

The decade of the […]