Obama’s Real Agenda and Why the Stimulus is Money Well Spent

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Last month marked the one-year anniversary of the stimulus bill, or the American Reinvestment and Recovery Act, passing into law.

It was to cost a whopping $787 billion. True to form it has actually cost more, some $862 billion.

The question remains: did it work, or at least did it work well enough to seed recovery? The Federal Reserve doesn’t believe it did.

According to the Globe & Mail, “We have an economic recovery that (Fed Chairman) Mr. Bernanke does not believe is self-sustaining.”

Then again, how could Bernanke think otherwise? Consider that:

  • The United States dollar continues to break down against other currencies while gold is near its all-time high. Meanwhile, prices for raw materials jumped 50 percent last year, more than doubling the advance in the S&P 500. That was their best year since 1971.
  • Mortgage applications for new homes are down 13 percent from last year and were down 30 percent the year before. This despite record low interest rates and housing prices that are cheaper than they have been in a generation.
  • Even with Soviet-style financing, many banks’ balance sheets remain weak. More than 140 banks failed last year. The potential exists for hundreds, perhaps even thousands of more banks to fail over the next two years.
  • U.S. unemployment is running at 9.7 percent and the true unemployment rate is more than double if you count those who have given up looking for work and the underemployed. According to The Atlantic that is the highest unemployment rate since the 1930s.

The only good news is that personal spending grew faster than expected in January by 0.5 percent—the fourth consecutive monthly rise. Wait… wasn’t it too much spending that got us in trouble in the first place?

Of course it was, but Americans are not spending frivolously says Keith Hembre, chief economist with First American Funds in Minneapolis. “This is not a credit binge. Bank loans continue to contract.”

According to Hembre, Americans are pulling cash out of their savings accounts just to get by.

But wait, our government has a solution. If you said more spending you are not clairvoyant, just cognizant.

Most of the Democrats simply can’t wait to spend enough to make the nation prosperous once again. Last summer, Nobel prize winner and liberal lapdog Paul Krugman was arguing that the country was in desperate need of another stimulus package.

“Getting another round of stimulus will be difficult. But it’s essential,” wrote Krugman. And if we don’t? Well Krugman and plenty in the Obama administration are ready to slam the Great Depression horn; that blaring siren that screams of soup lines, dust bowls and hobos.

Last year Christina Romer, the chairwoman of the Council of Economic Advisers, published an article on the “lessons of 1937.” That was the year that Franklin Delano Roosevelt started deficit spending in earnest.

There is a chorus from the Left that screams we need another stimulus package or we face Hell—an economic condition so severe that old-timers will recall the Great Depression with fondness.

One might argue that the Obama plan really hasn’t been given a chance. Heck, a trillion dollars here or there isn’t really enough to test a theory, is it?

On the other hand one might say that Obama’s plan has worked perfectly. Not because it has improved the economy, but because it accomplished exactly what it set out to do—to make the Federal government even fatter, greasier and more bloated than it was before. If that is the case then call it Mission Accomplished!

If you think I am crazy consider this: last year former labor secretary Robert Reich wrote on his blog that the recovery might have to rise from ashes like the Phoenix. Riech’s argument is that there can be no recovery until we find an entirely new model for the economy. He didn’t spell out what that model will be, but you can bet one thing—Big Government is a big part of it.

Ron Paul probably sums it up best: “The administration also claims that thousands of jobs have been created or saved by this massive spending bill, but these are just more government jobs, and counterproductive in the long run. Funding for the public sector necessarily comes at the expense of an overtaxed private economy… But the more the burden, the closer the government parasite comes to killing its host.” (You can read all of Dr. Paul’s comments in Whiskey and Gunpowder by clicking here.).

You can’t deny that the federal government is not only more indebted, but also bigger than ever. Last month The Washington Times wrote: “The era of big government has returned with a vengeance, in the form of the largest federal work force in modern history.”

According to the Obama administration the government will employ 2,150,000 employees this year, thousands more than when President Clinton declared that “the era of big government is over” in the 1990s. The growth is not coming to our overstressed military, but in the form of thousands of new civilian jobs.

I didn’t graduate from an Ivy League school like many in the Obama administration and I don’t even know who this year’s nominees are for the Nobel Prize, or even if they have nominees. But I do know that it’s named for Alfred Nobel—the guy who invented dynamite—and that is exactly what the Obama administration is playing with in trying to spend us toward prosperity.

Every government that has tried socialism has suffered for it.

I saw all I needed to see of it growing up in Canada. In the late 1960s Pierre Elliott Trudeau became Prime Minister. His Liberal government seeded socialism for 16 years.

Trudeau was convinced of the superiority of a socialist planned economy over free enterprise. He wrote in 1957, “As far as I go, it seems evident to me that the regime of free enterprise has shown itself incapable of adequately resolving problems posed in education, health, housing, full employment, etc.”

He made his vision a reality, instituting huge deficit spending, a massive welfare class and socialized medicine. And he damn near destroyed the Canadian dollar.

When Trudeau took office in 1968 the Canadian dollar was selling at par with its U.S. counterpart. By the time Trudeau left office in 1984 the Canadian dollar was selling for 70 cents U.S. That was the Canadian dollar’s first marked decline in 100 years! During the 16 years that Trudeau was Prime Minister the Canadian dollar lost more than half of its purchasing power.

Consider what would have happened to two Canadians: one who put $10,000 Canadian cash into his mattress and the other who bought gold in April 1968 when Trudeau was first elected. By June 1984, when Trudeau left office, the investor with the cash would have had the equivalent of $2,350 in constant 1968 dollars. Meanwhile our gold bug would have had $36,000—or 15 times more—in constant 1968 dollars.

If Obama’s vision of government is successful I have no doubt that the results will be even worse for the dollar and better for gold investors. It is ironic, but big creditors like China and Russia, who know better than anyone the ills of socialism, are selling off dollars and buying up resources.

They understand what Milton Friedman meant when he said: “If you put the Federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.”

Yours for real wealth and good health,

John Myers
Myers’ Energy and Gold Report

Personal Liberty

John Myers

is editor of Myers’ Energy and Gold Report. The son of C.V. Myers, the original publisher of Oilweek Magazine, John has worked with two of the world’s largest investment publishers, Phillips and Agora. He was the original editor for Outstanding Investments and has more than 20 years experience as an investment writer. John is a graduate of the University of Calgary. He has worked for Prudential Securities in Spokane, Wash., as a registered investment advisor. His office location in Calgary, Alberta, is just minutes away from the headquarters of some of the biggest players in today’s energy markets. This gives him personal access to everyone from oil CEOs to roughnecks, where he learns secrets from oil insiders he passes on to his subscribers. Plus, during his years in Spokane he cultivated a network of relationships with mining insiders in Idaho, Oregon and Washington.

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