July 2, 2009
COMMENTARY: Our Fragile Economy
By Tom Proebsting
Ben Bernanke, chairman of the Federal Reserve, recently predicted the nation's recession will end later this year. That same day, billionaire Warren Buffett, CEO of Berkshire Hathaway, said the economy is in 'shambles' and that it has ‘fallen off a cliff.’ He claims it will stay that way for some time to come.
Who's right? I side with Buffett, an informal adviser to President Barack Obama. Buffett believes inflation will be a problem in coming years. He also criticized President Obama's 'cap and trade' provision as a method to control pollution.
Maybe we should listen to the world’s second richest man -- Warren Buffett. Buffett thinks the reappointment of Bernanke to the Federal Reserve was a good move. He credits last year’s government intervention as improving the financial sector of the economy and advises maintaining faith in the nation’s banking system. However, Buffett says the economy has had no bounce and that there are still excesses to be wrung out. The numbers prove him right: U.S. gross domestic product fell at a 5.7 percent rate in the first quarter.
History can also teach us something about the economy. During Germany's Weimar Republic, from 1918 to 1933, when Hitler was elected chancellor, the nation's economy stagnated. There were several reasons for this.
First, the German economy was noncompetitive and very state-dominated. Because of this, government peons made vital economic decisions rather than CEO's or entrepreneurs. Government intervention resulted in mundane people making mediocre decisions, which caused business to suffer.
Then, around 1924 there was a massive infusion of foreign loans, mostly from America. The Crash of 1929 hit and brought the resulting Great Depression. America’s tanking economy caused most other economies worldwide to free fall.
Also, the nation maintained extensive welfare and entitlement programs. These, along with Germany’s war reparations, dragged the economy down heavily.
The economy experienced rampant hyperinflation because the government printed money to finance its deficit. Finally, unemployment reached 10 percent by 1926.
Compare Germany’s Weimar Republic to America today. President Obama has nationalized two of our auto makers and several of our banks and insurance companies. And that's just the beginning, his first six months in office. Can we expect the government paper-pushers to make the important daily decisions that a company faces? And can we expect these decisions to economically benefit the company and its employees?
Today, foreign banks hold a record $2.754 trillion of U.S. treasuries and agency securities. The leading buyers are the Chinese and the Japanese. What if they dump a portion of these securities on the open market? What if their U.S. Treasury buying drastically decreases? Either scenario portends economic disaster for America.
Today, two of the largest federal entitlements, Social Security and Medicare, make up over 33 percent of the federal budget. All government entitlements make up about 65 percent of the budget. Giveaway programs are expected to grow, especially if the liberals in both houses push a national health insurance plan through, like President Obama wants. These figures do not count corporate entitlements and giveaways.
Finally, our unemployment rate stands at 9.1 percent. President Obama said it could climb to 10 percent.
If America wants to see an end to this recession, it would be wise to consider ending all nationalization of private industries and to stop most, if not all, government and corporate entitlements.
Otherwise our economy may be headed for a financial Armageddon.
* * *
Tom Proebsting is a writer living in Missouri. He may be visited at http://thulesociety.blogspot.com
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COMMENTARY: Our Fragile Economy
By Tom Proebsting
Ben Bernanke, chairman of the Federal Reserve, recently predicted the nation's recession will end later this year. That same day, billionaire Warren Buffett, CEO of Berkshire Hathaway, said the economy is in 'shambles' and that it has ‘fallen off a cliff.’ He claims it will stay that way for some time to come.
Who's right? I side with Buffett, an informal adviser to President Barack Obama. Buffett believes inflation will be a problem in coming years. He also criticized President Obama's 'cap and trade' provision as a method to control pollution.
Maybe we should listen to the world’s second richest man -- Warren Buffett. Buffett thinks the reappointment of Bernanke to the Federal Reserve was a good move. He credits last year’s government intervention as improving the financial sector of the economy and advises maintaining faith in the nation’s banking system. However, Buffett says the economy has had no bounce and that there are still excesses to be wrung out. The numbers prove him right: U.S. gross domestic product fell at a 5.7 percent rate in the first quarter.
History can also teach us something about the economy. During Germany's Weimar Republic, from 1918 to 1933, when Hitler was elected chancellor, the nation's economy stagnated. There were several reasons for this.
First, the German economy was noncompetitive and very state-dominated. Because of this, government peons made vital economic decisions rather than CEO's or entrepreneurs. Government intervention resulted in mundane people making mediocre decisions, which caused business to suffer.
Then, around 1924 there was a massive infusion of foreign loans, mostly from America. The Crash of 1929 hit and brought the resulting Great Depression. America’s tanking economy caused most other economies worldwide to free fall.
Also, the nation maintained extensive welfare and entitlement programs. These, along with Germany’s war reparations, dragged the economy down heavily.
The economy experienced rampant hyperinflation because the government printed money to finance its deficit. Finally, unemployment reached 10 percent by 1926.
Compare Germany’s Weimar Republic to America today. President Obama has nationalized two of our auto makers and several of our banks and insurance companies. And that's just the beginning, his first six months in office. Can we expect the government paper-pushers to make the important daily decisions that a company faces? And can we expect these decisions to economically benefit the company and its employees?
Today, foreign banks hold a record $2.754 trillion of U.S. treasuries and agency securities. The leading buyers are the Chinese and the Japanese. What if they dump a portion of these securities on the open market? What if their U.S. Treasury buying drastically decreases? Either scenario portends economic disaster for America.
Today, two of the largest federal entitlements, Social Security and Medicare, make up over 33 percent of the federal budget. All government entitlements make up about 65 percent of the budget. Giveaway programs are expected to grow, especially if the liberals in both houses push a national health insurance plan through, like President Obama wants. These figures do not count corporate entitlements and giveaways.
Finally, our unemployment rate stands at 9.1 percent. President Obama said it could climb to 10 percent.
If America wants to see an end to this recession, it would be wise to consider ending all nationalization of private industries and to stop most, if not all, government and corporate entitlements.
Otherwise our economy may be headed for a financial Armageddon.
* * *
Tom Proebsting is a writer living in Missouri. He may be visited at http://thulesociety.blogspot.com
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