A view on President Obama’s speech to congress 24 February 2009
I watched the speech and thought it was very inspiring. President Obama has a difficult challenge with the Economy at the moment. He has to:
- Set Expectations realistically
- Show he knows people are hurting
- Inspire America to rise to the challenge
- Prepare sectors of business and the population for more pain
- Avoid talking the markets down further
- Get past the blame game
- Get unregulated markets back under control so they can be deleveraged and lower exposure
I thought there was a good balance of all of these. America is a great country that has proven its ability to rise to huge challenges. Many in the population have the drive and capability to deliver when called on. I think linking patriotism to the way forward is sensible but risks a swing toward protectionism and a focus on “buying American”.
This would be a mistake. China won’t like that and might stop buying US paper. That would be a huge problem. Whilst China has no incentive to see its savings decline in value, they have deeper pockets at the moment and are still growing (even in at a declining rate). China holds many of the cards at the moment. It will be interesting to see what price they extract for cooperation.
I’m my opinion increased interdependence and coordinated actions will lead to a quicker recovery and in all likelihood decrease the chances of animosity between the major powers of the world. The last thing we need now is Russia, India or China to pipe up and count on US weakness or unwillingness to take on more responsibility in international affairs.
The republican response was interesting. It tried show the difference in the big picture view. It kept on with a call for tax cuts (surprise surprise) and reinforced the big government vs small argument which separates the parties.  I’m not convinced that the way forward is just returning money to people via tax cuts. They will save it, pay off debts and wait and see. Those aren’t bad things but they won’t create jobs at the rate needed fro recovery and increase tax receipts. That will also not solve the bigger issues that must be acknowledged (e.g energy independence, US carbon emissions and global trade). America need more and better quality infrastucture and more research and development. That won’t come from entrepreneurs and corporate america (in this climate at least).
As ever it isn’t a black and white situation and the solution will most likely involve a mixture of all the suggestions/policies.
The markets are struggling to find equilibrium and aggregate demand/supply is in flux. This will take time to settle down. Price discovery will be rocky and reactionary. The markets will need several quarters of positive corporate earnings and a higher confidence in financial stability and consumer confidence to call a recovery in process.
Here are two other ways of looking at the 2 speeches (From wordle.com):
We live in intersting times. The next year will determine much more then the fate of economies of the world. Â New opportunities and risks will present themselves. I’m keeping an eye out…
February 24, 2009 - 9:38 PM No Comments
