Did Obama Save Capitalism?

[ChievousFTFace]

Kinda goes against both sides of the political spin machine...

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http://finance.yahoo.com/news/Did-Ob...&asset=&ccode=

Did Obama Save Capitalism?

On Friday November 5, 2010, 11:20 am EDT
One of the most outlandish defenses of Obama's first two years has become one of the most emailed articles on the New York Times.



In the Opinionater section on the website of the New York Times, Timothy Egan tells big corporate donors to be worried "about what you just bought."

He's talking, of course, about the Republican victory in the midterms, which has delivered the GOP control of the House of Representatives. But it's far from clear that big corporate donors "bought" anything in this election. Certainly, it's a canard to say they bought the Republican victory.

As Tim Carney explains, the top 12 corporate political action committees gave far more to Democrats than Republicans. More campaign cash from HMOs went to Democrats. Wall Street donated more to Democrats than Republicans. Lobbyists sent more money into Democratic campaigns than Republican campaigns. Politico showed that even when you include independent political expenditures, the Democratic-aligned political machinery had far more cash to spend than the Republicans.

In short, if corporate donors were trying to buy anything, it would be accurate to say they were trying to buy a Democratic victory. As it turns out, money is nowhere near as effective in politics as Egan thinks.

But if Egan starts with a canard, he goes on to an absurdity: "For no matter your view of President Obama, he effectively saved capitalism."

What is the evidence that Obama "saved capitalism?" It's that Obama continued the Bush policy of bailing out banks. No, really. That's Egan's main argument.

The banking system was resuscitated by $700 billion in bailouts started by Bush (a fact unknown by a majority of Americans), and finished by Obama, with help from the Federal Reserve. It worked. The government is expected to break even on a risky bet to stabilize the global free market system. Had Obama followed the populist instincts of many in his party, the underpinnings of big capitalism could have collapsed. He did this without nationalizing banks, as other Democrats had urged.

Saving the American auto industry, which has been a huge drag on Obama's political capital, is a monumental achievement that few appreciate, unless you live in Michigan. After getting their taxpayer lifeline from Obama, both General Motors and Chrysler are now making money by making cars. New plants are even scheduled to open. More than 1 million jobs would have disappeared had the domestic auto sector been liquidated....

Interest rates are at record lows. Corporate profits are lighting up boardrooms; it is one of the best years for earnings in a decade.

All of the above is good for capitalism, and should end any serious-minded discussion about Obama the socialist.

While I'm not especially interested in the question of whether Obama is a socialist (my instinct is to reply that Obama is not a socialist, he's a golfer), I think it's important to clear up this question of whether saving failed banks and failed automakers while holding interest rates artificially low is good for capitalism. Of course it isn't.

The word capitalism is usually used to refer to a system of free enterprise in which market processes are permitted to operate with relatively little intervention by the government. All of the things Egan describes as "good for capitalism" are, of course, the opposite of capitalism. They undermine market processes.

Low interest rates are not necessarily the sign of something being good for capitalism. Indeed, when those interests rates are engineered by central bankers, they have nothing at all to do with capitalism. They are the product of central planning of the economy and manipulation of the money supply. They certainly aren't the sign of the healthy economy: the Fed is explicitly lowering interest rates because the economy is so unhealthy.

Corporate profits are not a proxy of something being good for capitalism, especially in the short term. Government subsidies and easy money can easily make for a great earnings year.

Egan is looking at the world through a very strange lens. Everything is the opposite of reality. Far from the "manipulators of great wealth" being ungrateful to Obama, they were very grateful. But this time around, they lost the election.

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[dmc89]

Aside from the argument about which side corporate America wanted to win (funny since both parties have little distinction in that respect), people who have never touched economics should refrain from opening their mouths about American capitalism.

It has never been free-market capitalism; it used to be mixed capitalism; and now it's corporate capitalism.

The system which we've had since the last 30 years is a kind of Ponzi scheme. The bailouts have only given further life to a system where shadow banking remains untouched by regulation. These non-bank institutions have far surpassed conventional banking but they are still vulnerable to bank runs (the very thing that started the whole crisis) because they're not protected.

Therefore, the insanely-low IR currently under the Fed isn't doing much because the above parallel banking system lost so much money in things like tender option bonds, auction rate securities, and generic asset-backed commercial paper like a MBS. Not to mention investor confidence is too low.

Few people realize or even understand how fundamentally unsound the structure of our financial system has become. All these recent "bold" moves by the Fed are being done because conventional monetary policy has partly failed. We are facing the same liquidity trap that Japan did in its lost decade.

Obama didn't save capitalism. He's only upholding a behemoth of a tumor and praying it won't metastasize again (I think it will simply because of its nature), since we're too broke to face another crisis soon. This Ponzi scheme only works when everyone buys the BS and keeps feeding the system. So we've been pumping money into it and everyone is lulled with a false sense of security.

[rhadamanthus]

dmc89, you took the words right out of my mouth. There is not a single true capitalist economy in the world. You called it corporate capitalism, but I think the proper term is state capitalism - a cleverly disguised pseudo-fascism that uses public funds to spur industry and private profits. It's been that way since the great depression, but it really became a permanent fixture after WWII.

Republican or democrat, neither are gonna even dent that machine.

[rocketsjudoka]

I didn't see the original Eagan piece. Does someone have a link to it?

Anyway I agree with the other posters. Obama didn't save true capitalism in which would've allowed the banks to fail. I will say though that Obama might've saved capitalism as we know it the same what that FDR might've. If we did actually have a complete collapse of the global finance system faith in that sort of system might've been lost and instead we might actually have more of a socialist economy.

[Bandwagoner]

Originally Posted by rocketsjudoka I didn't see the original Eagan piece. Does someone have a link to it? Anyway I agree with the other posters. Obama didn't save true capitalism in which would've allowed the banks to fail. I will say though that Obama might've saved capitalism as we know it the same what that FDR might've. If we did actually have a complete collapse of the global finance system faith in that sort of system might've been lost and instead we might actually have more of a socialist economy.

That's weird. I thought Bush signed TARP into law.

[Air Langhi]

How is government intervention considered capitalism?

[thadeus]

Socialize the costs, privatize the profits. The American way.

[rocketsjudoka]

Originally Posted by CaseyH That's weird. I thought Bush signed TARP into law.

Yes Bush, Obama, members of both parties played a role.

[Dubious]

If the economy had slipped into depression, everybody loses.



but....


“Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue to be depressed. Longer‐term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.”


So, once we translate that into English – after the TRILLIONS that were spent during Q.E. 1, TARP, HAMP, TGLP, TGLF, ABCD, DEFG, FKYU, etc., these programs have produced ZERO in terms of REAL organic economic growth. Why? It’s really a simple fact. ALL of these programs facilitated the bailout of Wall Street but does not go past Wall Street into the consumers’ pockets. The rest of the world as we know it is still in a deleveraging mode and have no intention or desire to start levering up with debt again.
With this in mind – here comes Ben to the rescue. Why? Because in 1936 when the stimulus ran out from the government the economy slid into a recession and the financial markets collapsed by 50%. The Fed, and the White House, can NOT let this happen.

http://www.streettalkadvisors.com/XFactor/110510-QE-2-The-Hidden-Tax.pdf

[da Whopper]

Not only did he save capitalism, he healed the planet too.

[bingsha10]

we're in a depression.

We're just not in the depression we should be in.

So now we get two depressions for the price of one!

Brilliant!

[rocketsjudoka]

Originally Posted by bingsha10 we're in a depression. We're just not in the depression we should be in. So now we get two depressions for the price of one! Brilliant!

If we are not in the depression we should be in how can we have two depressions for the price of one?

Also we are not in a depression.