Without investment, risk-taking, and credit expansion, there will be little little long-term job creation.

Without investment, risk-taking, and credit expansion, there will be little long-term job creation.

1982 To The Future

Fact:
The US GDP shrank 3.8% during the 4th quarter, 2008. That is the 5th consecutive quarter and confirms that the US recession started in 2007. This is the largest quarterly contraction since 1982.

Question:
What happened following that last large contraction of 1982?

Answer:
President Ronald Reagan's economic plan that included record-large tax cuts kicked in.

Fact:
President Reagan's optimistic nature, large tax cuts, and reduced government meddling initiated the largest bull market in mankind's history. The Reagan bull market benefited every industry, every civilized nation, and every individual who works to earn a living.

The Reagan bull market lasted until early, 2008. At that time it became apparent that Obama was electable. Investors initiated their withdrawal of capital, fear of increased taxation, and risk-aversion, that is, fear of socialism.

As consequence, the entire world will now experience the Obama bear market over the foreseeable years.

Fact:
Investors and consumers flee markets of all types, including real estate, financial, antiques, and autos, when they believe risk overshadows potential gain. When socialism's redistribution, the government's forced taking of profit, is included, investors flee to instruments such as US Treasuries. They care not for yield, desiring only the return of their principal. They rationalize that to earn little profit is OK, since then there will be little tax also.

The lesson to learn from not having learned lessons from history is that we will repeat historic mistakes of history and suffer similar pains and dislocations.

The $820 billion Obama bill would be enough to give every unemployed American $75,000.

In an ongoing, repetitious, unending stream, nearly all major economic indicators point to a continuing decline in available jobs, manufacturing activity, the housing market, investment and asset valuations. Prices for cars and homes are declining, but there is little credit available, so purchases are difficult and less likely than is required for economic growth.

The majority of jobs being lost are higher paying jobs that require education, training, and skills. Many future jobs will tend to pay lower wages since more people will be in the job market, businesses will be reluctant to add employees, and managements are learning to operate more efficiently with fewer employees.

The US Congress has passed a bill it calls a "stimulus" bill. It is actually a "spending" bill. It allocates hundreds of billions of dollars for lower-paying, non-career oriented jobs of limited duration. Many jobs are identified as "shovel-ready". Many people who have lost jobs are not going to settle for a short-term, shovel-ready job that pays less than they "know they are worth".

The Pelosi-written spending bill, promoted by and known as the Obama stimulus bill is promised to be the tool by which his administration will create four million jobs over the next two years. Simple arithmetic applied to their bill produces the simple fact that the government will spend $290,000 to create each new job. That is significantly more than the workers on those jobs will be paid.

Obama, Pelosi, Reid, and any other self-styled economist can call their bill a "stimulus" bill. However, if its components stimulate few well-paying, long-term jobs and infest credit markets further with bad mortgages, then their bill will not stimulate the US economy. In any case, their bill will cost taxpayers approximately $9,000 per household. Even if paid back by 2020, it will cost $342,000,000 in interest. And this bill will add to the developing inflationary forces resulting from the financial industry bailouts that have already planted the seeds of inflation that will sprout when the economy does recover.

Until investors believe that they may invest with a reasonable opportunity to make a profit, they will not invest. Until confidence returns to markets, credit will remain in tight supply. Until risk-taking again is seen as potentially -- and likely -- profitable, credit will remain in short supply.

Obama fails to comprehend what investors comprehend. Investors know that he is a socialist, that he demands redistribution, and he will eventually mandate increased tax rates. Under this Obama set of circumstances, no wise investor will invest, credit markets will remain tight, and the US economy will continue to shrink.

It is difficult to understand how Obama can fail to understand that his widely proclaimed socialist economic philosophy inhibits investment, risk taking, and credit expansion.

We all know he's a smart guy, although we wonder why he refused to release his college and law school transcripts... unless his grades and course completion records were not something he wanted displayed. Of course, we would still say that we know he's a smart guy. We have to add that caveat to any analytical or critical comment under threat of being called.... names.