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Thursday, July 02, 2009

Does BHO Rhyme With FDR?

"History doesn't repeat itself, but it does rhyme" -- Mark Twain.
In Britain as in America, the real economy is falling off just as investors, analysts, and commentators think they see a recovery. They think rising stock prices – US stocks are up 40% since March 9th – predict and precede a growing economy. Stocks, they say, “look ahead.”

People will believe anything. If stocks had been watching where the economy was going they never would have traded at such high levels in ’07. They clearly had no idea what was ahead. Nor do they now.

The images of the ’30s keep coming back. TIME has put Franklin Roosevelt’s picture on its cover, as if he were the man of the hour now.

Americans think they are confronted with a challenge, which…with proper leadership…they will overcome. Madoff has been locked up; now it’s just a question of beefing up those regulators so it doesn’t happen again. The stimulus packages have been set up; now we just have to wait for them to do their work. The Fed has done its part too; it’s just a matter of time until all that money and credit it put into the banking system turns up in the consumer economy.

And Obama…isn’t he just like Roosevelt? Isn’t he taking advantage of this crisis to help build a stronger…fairer…US economy?

If you read the papers you might think so. In The New York Times, Felix Rohatyn, has written a remarkable essay – remarkable in the sense that he has managed to take up 2/3 of a page without saying anything. To help him do so, he calls on the first Roosevelt, Theodore: “He insisted on government’s obligation to regulate the large new business aggregations not so much to address the inequalities of wealth as to police its potential distorting influence…to reinforce the new system, not weaken it.”

Mr. Rohatyn goes on to advise Obama:

The work ahead, he says, “will require difficult and painful actions, which can only come from a multi-year, bipartisan plan, led by the president and the Congress, with the support of business and labor.”

Blah, blah…blah… What he is urging on the nation is more central planning – with no idea how or why central planners will be better at controlling other peoples’ money than people are at controlling their own. And imagine the ‘plan’ that would have the support of politicians of both parties, business interests and labor; it’s bound to be a disaster – like all of Teddy Roosevelt’s plans.

But it’s the other disastrous Roosevelt that catches most looks. The one on the cover of TIME magazine. This was the Roosevelt who, with the help of Herbert Hoover, turned the correction of the early ’30s into the Great Depression. Rather than let the markets quickly correct the mistakes of the ’20s, he tried to put them in a straitjacket. And rather than let people sort out their own finances, he set up a huge bureaucracy to bring Mussolini-style central planning to America. That bureaucracy is still with us – including Fannie Mae, which was instrumental in creating the housing bubble…and the SEC, which was instrumental in camouflaging the risks of in the investment markets.

But there’s no point in going on about the two Roosevelts. TIME and the nation believe they were great heroes who practically single-handed saved the country from destruction. No use trying to tell them anything different.

So, instead…we will continue our lonely vigil – watching to see what mischief these clowns undertake next…and how we might protect ourselves…

What we see is this: the United States prospered in the 20th century not because of the Roosevelts, but in spite of them. The American economy was expanding… it was still young, strong, competitive and prosperous. The empire grew with economic power.

But the years ahead are not likely to resemble the post-Roosevelt years. America’s position relative to the rest of the world is weak and in decline. She is not a creditor, she is a debtor. She is not a low-cost competitor; she is a high-cost competitor. She no longer has a free and flexible economy; she has one freighted with central planners, regulators and busybodies.
--from "Crumbling Cornerstones of Middle Class Wealth" by Bill Bonner


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