Obama shackled by debt
Barack Obama's economic and business policies are, on paper, more conventionally left wing than those of Gordon Brown.
They include:
a) a windfall tax on the "excess" profits of oil companies;
b) a redistributive tax cut for those on middle and low incomes, funded by a claw back of tax cuts received by the wealthiest 2% during President Bush's two terms;
c) serious public spending on roads, bridges, transport and infrastructure;
d) subventions for renewable energy and for the development of green technologies, especially in the automotive industry;
e) tax penalties on US companies that relocate jobs overseas and tax breaks for companies that create jobs in America;
f) greater rights for trade unions to recruit;
g) curbs on what credit-card companies can charge and increased rights for homeowners struggling to pay their debts.
In theory, it represents a significant shift of money and power from private sector to public sector and from the super-rich to those on middle and low incomes.
In a UK context, Obama's decisive victory may provide cover for a leftward move by the Labour government, to the delight of many Labour MPs and the anxiety of many in the City and in business.
But I couch all this in hypothetical terms.
Because Obama may turn out to be less red in the practice of his presidency than his words and aspirations would imply.
For example, on that windfall tax - which much of the Labour Party would love to see imitated here - there's already been a strong hint from Obama's advisers that it's on hold, following the collapse in the oil price.
That said, the oil giants have been making stupendous, record-breaking profits. And if Obama were to fail to skim off some of these, it's difficult to see how and where he will raise the money for his significant tax cutting and spending commitments.
The point is that he is inheriting an economic estate that has been pillaged by his predecessor.
US public sector debt is well over $10,000bn, equivalent to around 80% of US economic output (roughly double the share of GDP taken by our government's debt - though most economists would say that the Treasury significantly understates the British national debt).
And the rising burden of bailing out America's battered banks and financial institutions means that US government debt is on a strong rising trend.
That worries foreign investors who are supposed to buy all this debt in the form of US Treasuries.
If these investors see no realistic prospect of Obama cutting public borrowing on any meaningful time horizon, that would put further downward pressure on the dollar against the currencies of China, Japan and the eurozone (though probably not against sterling, since the UK is perceived to have too many structural weaknesses in common with the US).
Which perhaps would be no bad thing for US exporters. But it would be a problem if it led to a painful rise in the cost for Obama's administration of servicing all that debt.
The US government, US banks, US consumers and US business all remains precariously dependent on borrowing from Asia and the Middle East.
The urgent need for the US to become more financially self-sufficient, for its economy and the global economy to be better balanced, may conflict with Obama's determination to spend in order to make his country (in his view) a fairer society.
UPDATE, 13:50: Whoops. Mea culpa. I omitted a "0" from US national debt in the initial published version of this note (if you're a creditor of the US, I guess you might mind if nine trillion dollars was wiped from what it owes by a missing keyboard stroke).
I'm 
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Well, way back last year he pretty much knew what he was in for.
And so did we !
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"US public sector debt is well over $1000bn, equivalent to around 80% of US economic output"
Guys, really. Edit properly. It's $10,000 billion ($10 trillion). If US economic output was $1,000bn I don't think we'd be bothering to write endless commentary about their election...
W
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If he pulls out of Iraq within the 16 months, he will have well over 2 years to spend spend spend and in the first two years he can build a plan
And what a great plan. I would like him to go further and not just limit the interest payable on credit cards, but to limit interest on ALL types of loan to a maximum of 10% above core.
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Robert, you're right, he's inherited a total mess from the outgoing Republican Party. Whether he can get around this mess is debatable. Like in the UK, if the Tories get in they'll have a lot of 'mess' to sort out. Give him a chance though, God knows we all need a break from the discredited Republican elite that has been driving the global economy into the abyss.
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I think you missed a zero in this comment:
"US public sector debt is well over $1000bn"
Brgrds,
Dutch_renter
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> The urgent need for the US to become more
> financially self-sufficient, for its economy and the
> global economy to be better balanced, may conflict
> with Obama's determination to spend in order to
> make his country (in his view) a fairer society.
Yes, he's walking a tightrope. The trick is to optimise industry so that it "most serves most people". Rather than make the people the slave of industry, make industry the slave of the people.
Then, as long as industry is helpful, it can remain free. But if it shows signs of being unhelpful (like the banks have been recently), then it must be shoved back into place with great force.
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Robert,
Have you got your figures right? You say that US debt is well over $1000 billion, equivalent to 80% of GDP. That would make US GDP around $1250 billion, which is clearly wrong.
I think that the debt figure is much higher.
Could you check?
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With a ten trillion dollar debt, a financial crisis which threatens to explode from a looming recession to a depression, severe imbalance of trade, rising unemployment, and a credit availability problem, the way out is clear and painful. The US will have to become far more protectionist and print oceans of new money deflating the value of its currency. This will attract investment from abroad, allow paydown of expensive existing debt with cheap new money, reliquify the economy, and end the credit crisis. The cost will be very high. Inflation, devaluation, high interest rates, and blowing away the economies of the world beyond America's borders. It may also require withdrawl from NAFTA and WTO. It will be Globalization in reverse. Large American and other corporations may detest it, foreign governments and those who suffer in other economies may be furious with it, but that appears to be the course out. The process has already begun with the 700 billion dollar bailout of the banks by printing more money the government doesn't have. China for example will be paid back its trillion plus dollar debt the US owes it with currency worth 40, 30, 20 cents on today's dollar or less. Once the US dollar falls long and hard and the impact in other nations all of which depend on exports to the US either directly or indirectly, their currencies will collapse to. A top to bottom reordering of the the world's heirarchy will occur with the US on top once again. The process may take five or ten years or more but that's what I see happening. A Democratic Congress will be only too happy to oblige. Now all Obama needs is to choose a chairman of the Fed and a Secretary of the Treasury who will cooperate. Oh, BTW, I expect the stock market to crash soon. It took 2 1/2 years in the 1929-1932 time frame for this to happen, we are not even halfway into it. The current rally in a bear market is also characteristic of the consequences of the process of destruction of a large percentage of wealth through irresponsible credit over an extended period of time just as in the 1920s.
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"curbs on what credit-card companies can charge and increased rights for homeowners struggling to pay their debts"
I shall watch with interest as the New World teaches the Old World how democracy works..
It would be brilliant if Brown was effectively forced into acting - following Obama's lead, in fact it's something I am crossing my fingers and toes for.
GC
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This isn't really news-just a convenient collection of facts-I for one am glad Mr Obama got in-he is young, appears to be modest and honest. The old experienced way of doing things has brought the world into meltdown. Mr Obama is the most humble politician I have seen in my lifetime. I think the time has come for a breath of fresh air-we have more chance of creative and innovative thinking from a man such as this-and he certainly can't do any worse!
He will rattle many cages and clear out a lot of the dead wood-my biggest concern is that he has already come to power with a raft of enemies and will no doubt create more as he governs the USA. I would hate to see him go the way of JFK-no doubt he has a massive security contingent.
Good luck to him!
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Good points in your article - not much real room for manoeuver for the new guy. There's a lot of euphoria today about Obama's victory but I can't help but wonder if he can deliver the 'change' everyone's expecting.... especially as he comes to the helm at a very difficult time. At least the euphoria of Labour's '97 win came at a convenient point in the economic cycle! Good luck Obama (I mean that sincerely but... you're gonna need it!)
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Well, he could cut spending.....
He could raise taxes.......
Or he could print Dollars......
One of those is more likely than the other two put together !
Inflation all round I think !
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Crystal ball gazing is about as useful as contemplation of the navel !! Let's see what this man is *really* made of in the coming days. Give him a chance to show us what he can and cannot do !!
In these precarious times, if he goes left-wing and protectionist, then he will go down in history as, not merely the first black president, but the president that utterly destroyed America's economy !!
On the other hand, if he works towards a more reconciliatory stance towards other nations, he may go down in history as the president that re-built America from the ashes of the GW Bush horror years.
Bush had been steadily building up Festung Amerika over the last few years. Will he add to that or dismantle it and be more approachable ??
Only time will tell !!
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Time to invest in papermills.............
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I suspect many will soon be reminded that the promises of politicians are far harder to keep than make.
Good luck to President Obama. At least he did not attempt to say there was no problem with the US economy.
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g) curbs on what credit-card companies can charge !!!!!!!!!!!!!!!!!
Time we had some controls here.
Major credit card companies in the UK (banks) are stealthily and steadily raising their rates on current balances (for perfect credit history customers!) to 26-32% apr and more.
Clearly anyone who has a running balance would repay it if they had the means (any means) to do so. They're over a barrel; they have no choice and in theory there is no upper limit.
At what point do we call it extortion?
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40 years ago, the "MAD" magazine published a cartoon that was a sad but true comment on the American psyche !! It had a hand trying to catch a balloon floating just out of reach and about to float away and the caption was "Life, Liberty and the Pursuit of Happiness" !!
In recent years, Americans have blown zillions in a futile pursuit of happiness. and has caused hardship and suffering around the world. Will they continue this reckless and futile pursuit of happiness or will they return to sanity ?? This is what Obama will be judged on !!
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There are several pointers in that speech.
1. Main Street, not Wall Street.
2. The wreckers, not the builders.
That adds dealer's and Haliburton's directors' bonuses to the recuperation list, for starters.
I'm also hearing arguments that this market is oversold, in which case these losses disappear. What P/E do we feel is reasonable? Some companies look for a 25% return on assets, for instance: shouldn't we start differentiating between production and service sectors?
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I watched Mccain's consession speech. If anyone doubted he would have been a bush clone listen to his speech his pace and delievry sounded exactly like bush. But he gave a very gracious congratulation.
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re "US public sector debt is well over $1000bn"
should that not be $10000bn
or $10T
as US GDP is about $14T so 80% would make US public sector debt of about 11T
if it is $1T then it seems very modest for such a big economy
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For me the most pressing job for Obama is to close Guantanamo and stop the illegal kidnap and torture of foreign nationals.
Regarding the economy, I fear it is inevitable that protectionism will rise, and globalisation will decrease.
With its vast natural resources the USA can survive a breakdown in world trade. Europe and Asia probably cannot. The UK, as a small overpopulated island, is uniquely badly placed.
I would love to see someone go after the fat cats in earnest, but it's probably wishful thinking. Labour have proved beyond doubt that socialist principles soon get forgotten once you have a chance to get your own snout in the trough.
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#8 Prior to what you say may happen, many creditor countries will take pre-emptive measures and dump US debts, thus devaluing the US$ before the US can.
Protectionist barriers will be greeted with equally protectionist barriers. Boeing will find that its planes cost double what Airbus' will cost !!
Imports will dry up because no one will be willing to take on more US debt that depreciates even as you watch it. Oil supply to America will be strangled !!
China has been quietly building its export channels to South East Asia, Africa and Latin America. It will just switch export strategies. So will the other Asian Tigers.
America will no longer be a worthwhile export market when the US$ is worthless and will be shunned by all but the most desperate.
Canada and Mexico will be extremely grateful for the miles and miles of fencing set up by the Bush Administration which will serve to keep Americans on their side (possibly aided by minefields and machine guns) !!
A significant section of the US population will go psychotic due to the sudden withdrawal of the cocaine and other such drugs supply. Homebrewed substitutes will be on the rise.
Rambo will find that each of his bullets cost him a week's wages and he can't afford to spray the landscape any more !!
And that is only the start !!
Welcome to Nightmare on Main Street !!
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"That said, the oil giants have been making stupendous, record-breaking profits. And if Obama were to fail to skim off some of these..." You mean like the UK where 70% of the price of fuel is tax and only 9% is profit, implying that the government takes approx £70 Billion. Some windfall.
The us Debt is already at the stage where it cannot be paid back, ever. Before the credit crises it was estimated that to merely pay the interest on the US debt, tax would have to rise to 60% and government services would have to be cut by 90%. This leaves repudiation.
The UK is in worse shape as the liabilites for the banks is £2000 Billion in addition to the national debt. Whenthis works through i would expect a severe devaluation of the Pound.
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The Americans had the same problem as Britain will face ! The worst of two evils.
The day of reckoning for America will come when they follow Britain. At the moment America just has an out of control financial sector. They will now keep that and as in Britain, also get an out of control Public sector.
The only significant plus for them is they dont have the looney unelected dictators in Brussels telling them what to do and costing billions more unaffordable cash.
Not a good week for the "Common Sense" party
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What is more interesting is his plan to implement tax relief on mortgages , with spain also taking steps to limit reposessions. The key is to stabilise house prices and therefore the value of assets, which means stopping wholesale reposessions and dumping of houses cheaply on the market depressing prices and asset values. The banks, by charging high interest and not lending are causing the very devaluation in their assets that they are complaining about.
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Call me jaded - but Robert Peston's and the BBC's coverage of the slowly unfolding crisis has always seemed to me rather crassly done, rather doom-laden (including at one point) a mock up of blood red skies to the accompaniment of some awful caterwauling strings. It would be nice if he didn't seem so frightened on telly when the news is very bad.
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I am just pleased the Amercian voter has found a half-way decent guy to do a job the current incumbent has thrown in the gutter. I wish we in the UK had such an opportunity
Given the heap of trouble you have enumerated, Robert, I hope Obama can justify his optimism. There is so much depending on it.
I doubt if I will agree with what he will do but he seems an honourable man so I wish him all the best.
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What exactly do they export ???
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Before going too far down the Third-World Road, there's the innovation question to answer. It's all very well talking about a third-world trading block, but not much innovation's actually coming out of there, they're mostly copyists. as a result, for all that they might want to ditch Amero-Europe, they'll find they get left behind as a result.
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that unfortunately was to be expected as would any new government in this country.
our government is borrowing knowing it will shackle future governments knowing they will not get back in on a fair election.
obama has to rectify the excess of the current leadership and as usual the incoming leader gets the flack for trying to fix the problem.
it will happen here and the public will have to suffer becouse we allowed our current leaders to waste billions.
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I am guessing that the approx $10T debt is attributable in the main to Military Spending which I think is about 10% GDP.
Does anyone know if the costly military adventure precipitated the low interest rates that caused the bubble which caused the slump?
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'If these investors see no realistic prospect of Obama cutting public borrowing on any meaningful time horizon, that would put further downward pressure on the dollar against the currencies of China, Japan and the eurozone (though probably not against sterling, since the UK is perceived to have too many structural weaknesses in common with the US). '
Can someone provide me with an explanation of the mechanism that leads to a devaluation of a currency when a government has excessive borrowing. Why does Japan have such a strong currency when it has massive public debt (195%)?
I don't work in finance and am trying to improve my knowledge of macro-economic policys to make an objective appraisal of where we might me heading.
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Can anyone recommend any economic forums where I could question and debate the current situation in more detail?
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"...Guys, really. Edit properly. It's $10,000 billion ($10 trillion). If US economic output was $1,000bn I don't think we'd be bothering to write endless commentary about their election..."
Perhaps the number used is the "long scale" billion - a million millions...anyone educated before the US-ification of the billion would know it...
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I feel sorry for the new president elect,gosh what a poisened chalice.
USA PLC is as good as bust!
Seems the GREAT CLUNKING FIST has left us lot in the same situation.
CRISIS WHAT CRISIS??
THE FUNDAMENTALS OF OUR ECONOMY. . . . .
Alexander Curzon
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Uh oh... I see there is talk of `billions' of dollars on a trans-Atlantic forum!
From dictionary.com:
Billion:
a cardinal number represented in the U.S. by 1 followed by 9 zeros, and in Great Britain by 1 followed by 12 zeros.
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Its facinating that not one commentator can see any value from the Bush years and that was the impossible burden McCain had to remove.
His message that he was not George Bush was fair enough but in truth he never got a chance.
How the President Elect gets to grips with the disaster left by Bush is anyones guess but we all need to wish him every success simply because Europe has no leadership to compare with America or ideas on what to do about the mess that our respectives economies are in.
Lets not be fooled Brown and Sarkozy are mere pawns compared to the President of the USA and the sooner they stop prancing about thinking they have a clue which its all to obvious they don't the better for us all.
Good Luck Obama you sure as hell are going to need it!
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I have to chuckle sometimes. Everything you have written in your final six paragraphs would be equally as valid if you had substituted "UK" for "US", and "Brown" for "Obama", all the way through.
And the reason you give for the parlous nature of Obama's task? Why, that his economic inheritance has been "pillaged" during the reign of his predecessor. Never have you attempted to suggest that Brown's troubles might in any way be related to his inheritance having been pillaged during the Blair government. Why not?
You write, rather airy-fairily, about whether or not the UK's stated national debt of 40+% of GDP is comparable with the US's of 80%. Why don't you use some of the BBC's post-Ross resources to have the comparison made? For example, does the US have an off-balance sheet PFI system like the UK's? If so, how does it account for it in the national debt. Similarly with public-sector pension provision - how does the US account for this? Do they ignore it, like the UK? Are there any other differences of treatment that need to be corrected for before a meaningful comparison may be made?
While you're at it, maybe you could investigate whether potential foreign lenders are more interested in gross levels of public-sector debt owed by a particular country, or by its total nett overseas debt - public, commercial and household combined. One would have thought, rationally, that an examination of ability to repay would be more interested in overall nett debt than in merely one aspect of it. And if this is actually the case, maybe a good line of enquiry for you would be to look at the UK's total nett overseas debt in comparison with other countries, and therefore assess our chances in persuading nett-surplus countries to lend to us.
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Sorry to be pedantic but, as a Democrat, isn't President-elect Obama actually 'blue', not 'red' as a you suggest, Robert?
Or are you referring to Labour's 'red', or the traditional 'red' of communist socialism (which many of Obama's detractors would have us believe is his way)?
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I kind of agree with what MarcusAureliusII (post no 8 - even though I'm not sure about his prediction about the stock market crash). Yes, Obama inherits a financially messed up country, and yes, corporations and American people won't be thrilled at the idea of high interest rates and de-valued currency - but is it so inconceivable that the US government could decied to spend more generally be more interventionist? Isn't an overly lassiez-fare policy that took us to where we are? Free-market capitalism in the US came only after a long time of protectionism. Rising govrnment debt will be an issue if Obama wants to spend more, but what does he care about the global economy. This won't just sort itself out if the US becomes more financially self sufficient - the invisible hand of the market is a bit of a myth because a perfectly competitive markets don't exist. One last point about Obama - I dare say that what 'in his view' is a fairer society is not so distant from an objective idea of a fair society. Is the US a 'fair' society to anybody apart from wealthy industrialists at the moment? Or is the UK a fair society in that respect? I think both societies are not very fair. And the could be a quite a bit fairer if we wanted.
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This comment was removed because the moderators found it broke the House Rules.
You know if he really wants to get the United sates out of debt he could always just tell the countries we have lended money to to pay us back. But if he did that there would be a lot of countries that the U.S.A. I guess would own you see thats what I don't understand every body ask for support but when we have a problem it is our fault ,and weel good luck on getting out of this. So I guess if we quit giving out money to countries that want us to support them but they won't help us then thas what we should do stop all forien support and see what happens to the world. I bet no other country would help out thats why we are in debt think about it if we just took care of ourselves a lot of countries would go down the drain. now as for Obama he's a lot of talk so lets see if he can walk the walk and talk the talk if not then he is no better than anybody else and i hope to God this country doesn'y go down the tubes, he has big shoes to fill and i hope he's not all talk if so we are screwed.
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"Change" - a slogan more cunning in its stupidity has rarely been seen. Change what into what - - and do it when - what will the consequences be?
"Change" says nothing - it is a deliberately empty box into which the voter can put whatever he desires - like putting Xmas wishes on a list to Santa.
He lets the voter read into "change" whatever he wants to read. Far better than being specific - that way no voter is put off. Cunning indeed.
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Robert writes an 'economy pillaged by his predecessor' and I agree that is what our next govt will face. I agree also that Brown has hidden his spending and I have likened it to maxing out a number of credit cards and just accounting for the minimum payments. Obama and maybe Cameron will have a very difficult time financially.
No-one under Bush was allowed to challenge the vast sums being spent on the Iraq war for fear of being labelled un American. Value never came into the spend. If just half of that money had been spent on projects in the USA and a huge national debt had been built up everyone would have been very critical. I agree with 4,23,26 & 31
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The man who was in charge of risk at Bear Stearns when it almost collapsed in March has been hired by the Federal Reserve Bank of New York to supervise the financial safety and soundness of U.S. banks.
see the US are as incompetant as Brown is when he apponted Sir Philip Hampton to a similar role in the UK
Truly we live in global times...Global incompetance
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>The US will have to become far more protectionist and print oceans of new money deflating the value of its currency. This will attract investment from abroad, allow paydown of expensive existing debt with cheap new money, reliquify the economy, and end the credit crisis
If the US government starts to significantly devalue its currency like this, there is a massive risk that those trillions in loans to foreign governments will be dumped, completely overwhelming any effect you are talking about.
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>Billion:
a cardinal number represented in the U.S. by 1 followed by 9 zeros, and in Great Britain by 1 followed by 12 zeros.
Billion has been used pretty much exclusively in the US sense in Great Britain from about 1974, so try and catch up with the times.
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Lets post the last peice of news I posted in full
The man who was in charge of risk at Bear Stearns when it almost collapsed in March has been hired by the Federal Reserve Bank of New York to supervise the financial safety and soundness of U.S. banks.
Michael Alix is a senior vice president in the bank supervision group of the New York Fed, according to an announcement. Previously he worked at Bear Stearns for 12 years, 10 as the worldwide head of credit risk management. He was named chief risk officer in 2006 and held the job when the government helped rescue the investment bank. Before Bear he spent eight years at Merrill Lynch, which sold itself to Bank of America in September amid the financial meltdown.
"That's incredible," James Cox, a Duke University law professor and securities law expert, told the AP. "This is not reassuring. ... What is there in this person's experience and skill package" that qualifies him for the Fed position?"
So not only did he have a hand in Bear Sterns he also had been at Merrill Lynch.
Cor Blimey no wonder Mandy was allowed back into Government office. I seems globally no matter how bad you are at a job its only a matter of time before you will be given a better one if you are in the in crowd.
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ON THE CONTRARY MR MARSHALL, AMERICANS HAVE NOT SHOWN THEMSELVES TO BE VERY GOOD A PICKING PRESIDENTS IN RECENT TIMES, E.G.
• A FRAUDULENTLY ELECTED THICKO WAR MONGER,
• A SMOOTH TALKING WOMANISER,
• A BRAINLESS DEPENDENT,
• AN INCREASINGLY SENILE EX-'B' FILM ACTOR
SURELY THIS NEW ONE HAS GOT TO BE BETTER THAN THAT LOT?
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... and Russia has already started posturing. They want to suss out where Mr. Obama stands as far as US sphere-of-influence policies are concerned.
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"23. At 12:35pm on 05 Nov 2008, starquin10 wrote:
The us Debt is already at the stage where it cannot be paid back, ever. "
Of course it can. You just print 10, 1 trillion dollar notes... That's the cheap way to do it.
The expensive way is to print 10 trillion 1 dollar notes.
They'll probably choose something in between... 100 billion hundred dollar notes.
The UK is in a similar pickle.
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Bush on the top of anyone else's bonfire tonight?
Symmetry - Obama conceived when JFK was President Elect. 20jan09 will be 48yrs to the day I saw JFK sworn in, and I will be, with luck, watching the Obama Inauguration.
Apathetic UK Voters need to believe they can have an effect.
Do we need compulsory voting to make everyone take personal responsibility for the UK political powers we end up with.
Only then will Finance & Industry have to beware the ordinary citizen.
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Less red? Don't you mean less blue? Blue = Democrat, Red = Republican.
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$50,000 for every man woman and child spent by the US government and not raised in taxes. A deferred tax bill of staggering proportion. A country founded on non-taxpaying and small government. The road will indeed be steep.
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UPDATE, 13:50: Correction has been made to blog - $10000bn US public sector debt not $1000bn as initially stated. (We missed off a 0, but whats nine trillion dollars between friends!)
---------------------------
Many years ago now, when I was in receipt of primary school mathematics education, I was informed that a whole number containing more than 4 digits should have a comma inserted before each 3rd one from the end.
Thus, $10,000bn is easily distinguishable from $1,000bn.
A very basic principle, Robert, which would have alerted you to your mistake at even the most rudimentary level of proof reading!
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"Because Obama may turn out to be less red in the practice of his presidency than his words and aspirations would imply. "
Have you not noticed that Red and Blue are reversed in the USA... what on earth do you mean? Very poor indeed, espicially as this phase was used as a headline on the home page, leading to this article. Really expect better from experienced journalists, or is it your job just to confuse people?
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Robert lists "subventions for renewable energy and for the development of green technologies, especially in the automotive industry;" as one of Obama's policies.
This is of course hugely dangerous for the UK's small band of "green" entrepreneurs because the UK Treasury and financial institutions would much prefer not to have to invest in such technologies and would really prefer others to do the development so that we can simply buy from them what we want when we want it. So if Obama develops this policy then we can expect that investment levels in the UK will fall away rapidly.
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Change of topic and back to 100% business news ;-)
I thought the timing of the Abbey move to up mortgage rates was interesting and probably means Santander is not as strong financially as it may appear - any comments or City gossip on that?
Certainly the Spanish economy appears to be in deep trouble and of course Santander was part of the RBS ABN takeover disaster, so surely there is something going on here?
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Obama might have a $10trillion debt that he will inherit, but the fact remains that the assets of all levels of government in the USA are worth $63trillion. Over the term of his presidency he could sell off government assets to wipe out the debt or reduce it dramatically.
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I think we'll just have to give him a bit of time and wait and see what happens. He's not actually inaugurated until January and a lot can still happen between now and then. A day is a long time in economics...
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Post 28 what does America export?
What about Ford or GM cars; Microsoft or Apple or Dell or IBM on computers; Boeing airplanes; GE engines to fly the planes or power our power stations.
On a more sobering level how about Jack Daniels whisky or Budweiser beer, or Pepsi or Coca Cola.
Just a few things then!
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thellers - I suspect Peston has slipped into the international view of left-red, right-blue, which of course just causes confusion when you're talking about (the?) one country that has it coloured the other way.
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Welcome everyone. I'm from the USA and have enjoyed reading your response to our election. I voted for McCain if you are interested. Facts first -- the US GDP is just short of 14T (last time I checked about 13.7T). If our debt is 10T, than that would be about 72% of GDP. Mr. PetersKitchen, wow what a comment, with which I tend to agree with you on most of your opinion, I believe Obama will not actually do 10% of what he claim he wants to do. Sorry must go now...
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41. At 1:54pm on 05 Nov 2008, PetersKitchen wrote:
Published by The Automatic Earth [11/03/2008]
[...]
Very interesting letter -- and thanks for drawing attention to the site where it appeared:
http://theautomaticearth.blogspot.com/
However, the last part of your quote, starting with the words "Revenge of the Left across the world ... " is actually from an article in the Telegraph:
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3366575/Revenge-of-the-Left-across-the-world.html
Which was included on the AutomaticEarth blog.
(Just in case other readers were a bit confused).
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We all know that he has a mess of things to overcome...
At this point, could we remind people that the current White House incumbent, who believes that Obama should have a dinherited a rather solid economy???
Thanks.
Case closed.
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What is far more worrying than Obama’s inexperience is that he looks to me like a dead man walking. Anyone who believes that racism is not alive and well in America is simply denying reality. My fear is that he or members of his close family will be assassinated probably within a year and that could provoke social unrest in America verging on civil war. From racial segregation to a black president in one mans lifetime is not long enough for beliefs to change. Lets face it there are men in America who not only were members of the Klu Klux Clan but also probably still are. Martin Luther King only wanted equality and it cost his life Obama has real power and many I believe will try to relieve him of it by the same means. These are dangerous times indeed.
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Someone asked for a good Economics source. Here's a blog I keep an eye on: Greg Mankiw's Blog -- professor of economics at Harvard at: http://gregmankiw.blogspot.com/
You can follow many of his links for current economic thought and opinion.
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I guess he won't be able to do everything that he would like to do...but then again, who does?
I think the expectations are enourmous and chances are that he won't be up to the challenge simply because people are expecting miracles...let talk about this again in a year.
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Just a nitpick about terminology: In the title "Obama may turn out to be less red than ...", uh, red means Republican in the American parlance, and blue is for Democrat.
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The lamb may lie down with the lion, but the lamb should not expect to get a lot of sleep.
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Sure, Obama has acquired a difficult situation - but he does start off with an enormous amount of goodwill, even from the vast majority of Republicans. That should provide him with the breathing space and leeway to make awkward decisions and take actions which might otherwise prove unpopular.
Further, one thing which struck me during my recent (short) stay in the US was how good Obama is in explaining situations in clear language. That should help tremendously in sellling policy changes.
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Obama has said that he will get US troops out of Iraq. Provided he does not send them all to Afghanistan this will bring a double benefit to the US economy. There will be savings which can be spent more usefully in the US, and the remaining cost of supporting the troops will be spent in the US.
He would wise to review all US foreign troop deployments. Those in the territories of stable loyal allies are unnecessary. Those supporting governments in unstable countries are probably counterproductive, because those governments will be seen as puppets supported by invaders.
Enormous savings could be made, but he would have to overcome the very strong and ruthless resistance of the "industrial-military complex".
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I'm not clear where you get the idea that Obama is going to be less left-wing in practice.
He will have a congress run by leaders who are very far left, by American standards, and very strongly anti-business. That is a problem at a time of recession.
There are numerous moderate Dems and Republcians, but they are shut out by the current congressiona leadership. There is little chance he will move to a more moderate viewpoint.
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I've been reading that Obama wants a form of Protectionism for the US economy. Wasn't the protectionism of Hoover in the Thirties the catalyst for the depression?
Protectionism will have huge ramifications for the global economy.
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#38 ExcellenceFirst.......great post!
Hear, Hear!
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Nobody's mentioned it, but I can't believe the headline - America gets our first ever African-American president, and bbc uses the word 'shackled' in the headline??
What a disappointment.
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I didn't stay up for what was a foregone conclusion. But I did enjoy the euphoria retold this morning.
I remember the same feeling of expectation and change in 1997.
What did we get?
Much of the same.
I hope Barack Obama will be different from New Labour Tony. But don't hold your breath.
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36. At 1:42pm on 05 Nov 2008, olafpalme wrote:
"Uh oh... I see there is talk of `billions' of dollars on a trans-Atlantic forum!"
The only time people use "billion" to mean 10E12 rather than 10E09 is when they are trying to show off on the internet.
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Let me clear one thing up for you coming from the US and as a US citizen...people totally ignored the fact, as you have in your article, that the Congress and Senate were both controlled by the Democratic party and have been for the last two years! Your comment that his "predecessor" hijacked the economy is totally off the mark. The Fannie Mae and Freddie debacle was begun by the Democrats and supported by them when it was failing, his "predecessor" and other Republicans tried unsuccessfully to get them to listen and take action on this situation and they refused. They lied to everyone that it was in trouble when in fact it was. Both Senators approved the government spending and bailout plans and it was a travesty. Now we have a majority Democratic party in power and who knows what will happen now. All we can do is pray that there are moderates among all those Democrats.
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Robert,
Saw this story
http://news.bbc.co.uk/1/hi/uk_politics/7709579.stm
Hidden under all the obama stuff.
Aparantly mandleson is refusing to reveal his meetings with Oleg, and MP's aren't happy.
I also saw that there had been a have your say on whether osborne should be investigated following your pieces on him.
Don't you think balance demands a 'have your say' on whether people think mandleson should resign if he refuses to be 'open'?
What do you think Robert?
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I believe and hope that Obama will launch something close to a selective and hard-hitting import ban or certainly high tarrifs. I believe it will be done with precision and I believe it will not be a barrier to trade with the USA but it will not be the open door is has been hitherto. There will be alliances, yes. I hope we're part of it. That way encouraging - even maybe forcing -Americans with the means to invest in America and Americans and start making things again. And same here and the sooner the better.
Hurt the global economy as indicated by one Rupert Murdoch on this site? He makes me mad! Rubbish, absolute complete and utter tosh. If your product is wanted and NEEDED by another country they will stop at nothing to buy it. Right now what the USA NEEDS is to stop buying things they can perfectly well make, put the mass importers where they belong and learn to stand on its own two feet.
And Britain should stand on its own two feet too, bin the EU, Gordon Brown and the whole lot of them with their stereotyped political 'I know better than you' mumbo jumbo and then bang all the financial experts who wrote the script to this mess in gaol.
An end to the get-rich-quick schemes where jokers import cheap junk from Chiner et alia, pass it off as the real thing because it looks like th real thing and then it falls to bits the 2nd time you use it! Like all those household fittings and ceramics and toys like those jazzy radio controlled helicopters that cost bugger all, look fantastic till the rotor head breaks up and takes somone's eye out because what looks like steel is actually zinc alloy, those plastic Xmas trees with 'made in PRC' proudly displayed on the label. You know the drill, all that cheap crap piling up in the Sainsburys and B&Q and Tescos and every retail outfit you care to name incl one well known Dragon's stationery chain etc etc for Xmas with Chinese writing on the packing boxes piled up in the corner. You sign up for that junk? You belong in gaol too.
Those in favour of Global Economy - the whole thing is complete hog/whitewash. There is no such thing as a global economy any more than there is a Universal Declaration to international trade without let or hindrance or customs tarrifs. There are countries trading with each other and there are seriously wealthy people and blue-chip companies who like to dress that up as some kind of big happy village and yes, you know the names, backed by big shareholders who sit in the home counties creaming in the cash and whining like children when their shares drop 0.5% and who haven't done a days work in years.
So called Global Economics has bankrupted the whole of Europe and nearly the USA too. Go and talk to Chiner about Global Economics. So what if it's stockmarket crumbles, it's a Communist country! Get with the mission here. The leaders only have to snap their fingers and the whole country will bang form the same drum, smiling that inscrutable oriental smile. You would too if the alternative was being cut up for donor body parts.
If I'm wrong about Obama, we're all so over.
GC
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Hang on Robert,
There are other correspondents in the BBC or are you becoming the expert on everything.
Some of us were not happy at the extent to which you adopted a negative reporting policy which encouraged panic during the recent banking crisis, then when the Standard Chartered solution came up your blogs to on a political aspect, and now you are becoming a commentator on the US political scene.
Where are you going to stop?
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Well first of all he could reduce military spending which has doubled for 300 billion$ to 606 billion$ WITHOUT the costs of Iraq or Afghanistan.
And even if Mccain got in Taxes will go up!
America cant go on borrowing this kind of money...
Or with the tax cut for the middle class and
increasing taxes for the wealthy could put more money in to the real economy therefore creating jobs and increasing tax revenues+growth.
Investment in the infrastructure would cereate jobs too.
But printing more money won´t work either..
Most govts rase taxes before they print money...
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#28
they export some of the the worlds' finest racing pistons and connecting rods too. And they are fighting a daily battle against counterfeiting operations producing 'facsimilies' in Chiner.
GC
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The real question is this. Afghanistan is becoming a quagmire, with Taliban stronger and with help with sympathetic Pakistani tribes they will press their attacks on US and NATO forces. Lets face it, the Afghan war might replace Iraq and the vow of Obama to "get" Bin Laden will have to be followed thru with.
I dont' see any change in that area. I expect Obama to fail and falter in the first year somewhat, being Prez ain't no picnic son.
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At the end of this article the writer corrects his mistake, yet there are several posts complaining about this error.
If people read THE ENTIRE ARTICLE before complaining it would be less annoying and they would be better informed. Please. Read everything before doing anything. It saves space for real comments.
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Barack Obamas, left wing promises, I sincerely hope he can deliver them, if so the U K could import them.
Especially the windfall tax, it would be the most popular thing this or any government could do.
But how is he B.Obama going to avoid the shackels of the super rich establishment ?
jonhawks
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From Osama Hussein to Obama Hussein ,MUST MAKE George Bush feel that he's on the receiving end of black humour ,demonstrating thatHuman history is obviously written by a poet
The Republicans will be squatting themselves soon as Obama puts them on a five year wait training schedule and then passes out the 5 fishes and loaves[all thats left of the fedderal reserve appart from toxic waste ] to the assembled masses who came to hear the sermon on on the mount and then be lead into the land of the Mcainanites to blow down the wall st of jerico after marching round them 7 times .
Religious archetypes overide the thinking of the enlightenment
Still to happen ,walking on waater ,turning waaater into biofuel and then ,healing the sick ,raising the dead economy ,gaining the baptism of John [Mcain]and turning him into number one disciple ,thus winning over the USA Roman empire of international debt etc etc .
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With 0bama in control the US and the world is doomed. The US is so far in the hole financially and with the baby boomers starting to retire there will be massive demands on the Social Security system that other projects will have to be left undone. By 2030 SS will take up 104% of the total US budget.
Get ready for the long overdue massive depression.
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What's the stock market reaction today ??
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> Obama may turn out to be less red
The use of the adjective 'red' here is very ambiguous, red being the colour of the Republican party and also traditionally used around the world to represent the political left. Very confusing.
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We can only hope Robert, we can only hope.
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82 - It's a blog, not a column and as such it's Robert's own personal opinions - not the news, not the BBC, not HMG - just RP chatting, chewing the cud, browsing, musing and making general chit-chat.
More importantly it's not just a blog it's his blog and he can write about whatever he feels like and express whatever personal opinions he has on any subject.
If he want's to, he can write about herbaceous shrubs. It's his blog, it's up to him.
Sometimes he writes rubbish, sometimes he doesn't. Sometimes his opinions are flawed, most often they aren't. It's his right.
If it's hard factual news you are after, stick to the news pages.
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When the Clinton's left the White House, they tossed a 5 trillion dollar budget surplus into the lap of the 'execution-governor-turned-prez', GWBush. But Dubya, the cowboy who failed in many personal business ventures, pished away that surplus in less than 2 years.
GWBush and GHWBush both have the distinctions of incurring the HIGHEST and the SECOND HIGHEST national debts, respectively, in the history of the USA, according to the General Accounting Office stats.
The outgoing prez, GWBush, not only has a record-setting job approval rating - the LOWEST in the history of the USA, but his irresponsible and unchecked spending over the past 8 years leaves the incoming prez with a 10 TRILLION dollar federal deficit in the midst of collapsing financial markets across the globe. Despite driving the USA into the ground, both GWBush and GHWBush will continue to receive their pension checks from USA taxpayers for their years of disservice to this country.
As a proud American, I offer my apologies to the rest of the World for the antics of the 'execution-governor-turned-prez' over the past 8 years. My hopes are that the rest of the World will join with me and with all Americans who are looking for a brighter global future.
God help/save president-elect Obama in unraveling the global and domestic catastrophes created by GWBush.
Best regards to all.
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Red is the colour associated with the republican party in the US. What do you mean by "Obama may turn out to be less red ..."?
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Just remember; 'he who pays the piper calls the tune' and Obama is the piper, he has been thoroughly bought and paid for so he will have to do as he is told by whoever bought him.
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in relpy to imnoidiot's post:
curbs on what credit-card companies can charge !!!!!!!!!!!!!!!!!
Time we had some controls here.
Major credit card companies in the UK (banks) are stealthily and steadily raising their rates on current balances (for perfect credit history customers!) to 26-32% apr and more.
Clearly anyone who has a running balance would repay it if they had the means (any means) to do so. They're over a barrel; they have no choice and in theory there is no upper limit.
At what point do we call it extortion?
-----------------------------------------------------
Give me one good reason why you're in debt on your cc in the first place? If you're in debt and paying 26-32% apr, you've obviously been scammed beyond belief and have only yourself to blame.
Live within your means, sunshine! You're not a rock star, so stop trying to live like one!
You're another victim of the credit crunch; you're the reason behind the credit crunch, you, me and everyone else who got caught up in the cheap credit scam.
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Reading comments 1-65, some more carefully than others, I see considerable gloom coming from well-informed contributors and on a day when so many around the world are welcoming the change of leadership in the US.
Many hundreds of millions of people believe that this is fundamental change. I can't guess at that.
I presume Mr Obama will be busy in the coming weeks proposing an array of policy options and being fed back the implications of each, not as 'standalone' changes, but considered in concert with all others.
What do I see as positive indications?
- He is intelligent and has demonstrated calm consideration of issues
- he has shown a capacity to personally engineer a well funded, large-scale campaign
- he has (apparently) considerable goodwill from leaders around a frightened world at this point in time
- he plans to create jobs relating to US infrastructure projects which he can probably direct large scale funding toward
- he has a one-off opportunity to deliver a message to his electorate that 'change' comes at a price
- he has the ability as an accomplished and charismatic public speaker to get his message across
- his message during European visits, was of engagement with an international perspective
- unlike the current president he is undoubtedly thinking of his 'legacy' from day one
So I am hopeful that Armaggedon is not yet around the corner and that the markets are not inexorably heading toward meltdown.
I share the fear that this is a President in great need of personal security and not just from racial resentment, but the further causes of resentment that are to come.
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Whatever Obama's campaign promises, he will be remembered for rocketing interest rates, unemployment, poverty and either the end of entitlement or dollar devaluation. None of which will be his fault, but those are the inevitable consequences of America's two generation credit binge and the bill will come due on his watch. Whether anyone will understand that the crises about to test him are not of his making by the time his four years are up is anyone's guess.
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Would you like strawberry sauce with your Flake ?
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I suspect that the American economy will recover. How much do they give away each year?
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#8 MarcusAureliusII
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# 78
Or non-native English speaker, because 10 on the power of 9 (that is American billion) is milliard in most European languages...
I think it was merely a typo and that happens. Here you have the advantage of using words instead of numbers.
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#8 MarcusAurelius2
I rarely agreed with what you usually wrote around these blogs, but I think you may have got it right in your brilliant analysis.
And as many hopes ride on Obama's name now, it may yet come to be reviled in the end.
Not that he can necessarily do a lot about it one way or the other though.
What a mess we have (all) gotten ourselves into. And I guess it is really too much to ask for all of us to start being reasonable all of a sudden.
Let's quickly find someone else to blame though. Have they found life on Mars in the end, or not ?
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Robert Peston makes a concise assessment of the problems of the US facing the presidency.
Today, unlike the American people Wall Street is seriously underwhelmed by an Obama presidency.
A sour note amidst all the media hype.
Will the dollar be the first serious casualty of the new presidency?
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Change you can believe in [dimeocracy]
I agree
Buddy can you spare me a dime !
Obama was really talking about change STARTING with and within himself [he gave up smoking at the start of the campaign to his credit ],as much as changing the bigger picture ,which is why he has credibility ,everyone should do what they already know is right .....everyone ,the writing is on the wall st and its well red
Hey Man D ont you remember you called me AL
And then it was Aluminium ALL the time
[i needed that]
Obama is on a steep learning curve where the "normal" experience and training by AAA's owls serenading pussycats on their way to bongoland politics is irrelevant ,he is benefitting from the strict madras education he recieved as a child growing up in Indonesia .
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# 93
Fully agree.
And of course at least we know from where RP is coming from, but it is not always so obvious about posters when criticising the blog in terms of subject, bias or whatever.
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Hendrik Ibsen 1879.
'Home life ceases to be free and beautiful as soon as it is founded upon borrowing and debt'
Tough times ahead in the Dolls House for the weary years of Obama's first term.
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#28 Windows of various revisions, Ipods, Iphones, cruise missles, oops sorry, they don't export those, they just "donate" them, preferable from Unmanned Ariel Vehicles (UAVs).
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Funny thing is Obama or come to think of it any leader of a West European/North America, could now pull off such a psedo-socialist program without fear of recrimination from capital. Its not as if there's anywhere better for it to go. Some developing countries may offer looser tax and regulation regimes, but are themselves under similar pressures from global conditions, and comparive advantage is being eroded by reduced local spending power, and arguably weaker infrastructure. Multi-national corps' metropole bases offer the better returns in the medium term, and for now big business may see the levying of higher taxation, and increased government spending as a necessary evil, in the hope it re-stimulates demand. States hold all the aces for now.
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"Obaaamaaa shackled by debt"
Well i blame the wittierr than witty subprimessists and their clueless clucked claaan ,the sooner that their sorry looking AAA's gets tranched and rebranded with 666 of the beaaa'st ...the better
Yes ,the soonerr
"Things can only get better "
for the USA version of our British flip side hit .
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64. At 3:33pm on 05 Nov 2008, papanca wrote
Very interesting letter -- and thanks for drawing attention to the site where it appeared:
http://theautomaticearth.blogspot.com/
I thought this 'letter' summarised everything form the American political 'family' across to the 'Jewish' banking family and the BBC decided to nuke it. Thankfully, they didnt cut your link.
I would ask anyone that has in interest in the current climate to read this letter and other blogs
Robert and your editors; shame on you, just because somebody writes something that hits home instead of being the pillow on the PM's bed!
Jealousy will get you nowhere, upstart
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Oh and another thing, GMAC just about to go bust - thats part of GM isnt it?
As the correspondent suggested, it should be laid to rest with the other Detroit trio - looks like this failure might help
Get with the action Mr Peston, not with your ego
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THE ONE THING THE YANKS DONT NEED IS A NEW TONY BLAIR.
THIS OBAMA GUY IS GOOD AT THE TALK.HE SAYS EVERYTHING BUT MOST OF WHAT HE SAYS MEANS NOTHING.
TONY WAS GOOD AT THIS STUFF,POWER CORRUPTS,REMEMBER THE SEXED UP DOSSIER.
OBAMA MUST DELIVER,TELL NO LIES . .
IF HE DOESNT DELIVER & REINSTATE AMERICAS STANDING WE WILL ALL BE IN THE STICKY STUFF. . .
Alexander Curzon
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#28
What does the USA export?
Well they try to export accounting standards.
The UK are attempting to import their model of universities being the economy.
US style gets exported in big gas guzzling cars SUVs etc.
US eco nonsense gets exported in the Honda Prius. Badging a fuel heavy heavy car as green - fantastic..
I could go on and on. Built-in obsolescence. Etc etc.
Some of the US style Icons are, or are about to be foreign owned.
Eg. Budwieser.
Not Budwieser Budvar..
IBM pcs are now Lenovo.
Windoze will eventually become open source.
Larry Ellison's Oracle will still continue to be a major US earner though. As long as there are still big corporations.
Watch what happens over the next years as China starts to actually design things. Not style. Things.
It is a long long time before they can design and build an aircraft carrier though.
Once they build one and take it through the Straits of Hormuz then the sun will have set on the mighty USA.
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i had to laugh rupert murdoch today spoke of his concerns of obama bringing in trade barriers,this from a man who fights in the european court to stop a person from the uk buying a greek decoder to watch premiership football.
what he meant was he does not want barriers for trade only for the public.
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This new President will be defined in the next 30 days. He will need to use the word that he heralded for 2 whole years from Brand to Action.
CHANGE? Does this mean you are going to change the appearance or transform?
Your team around you will define your Brand of Change
Can you change anything encompassing the people that led to the cause of dialectical materialism?
There is nothing that can be done about the depression. It will cleanse once again, but will you cleanse us from the parasites that continue and will resume, if allowed, to,
bankrupt life for their own (short term) panacea?
If you start to succeed, then there will be attempts to assassinate you. I am confident that you will be protected and as such will use the first attempt as an indication that your CHANGE agenda is valid
Shackled? Another crass remark by a BBC upstart trying to tie you in with the slave trade, when in fact your roots are from Kenya (that today still encourage internal slavery)
Unfortunately, Mr Peston and his BBC are the ones that are shackled by the Government that heralds freedom above all others, what does that tell you?
You will need to nationalise all major corps and utilities, swap mortgages for government rent, put the perpetrators to the sword and above all, don't learn from history- make new (change) history
Please use the nest 30-60 days wisely
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Britain used to rule the world, where did all the debt come from? We owned everything!
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117,
If Obama was assasinated, all hell would break lose in America, I wouldn't rule civil war out. History repeats itself.
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"greater rights for trade unions to recruit;"
He wants to outlaw secret ballots about whether or not to unionise, in other words union activists will know how everyone voted.
Great for unions, not so great for the workers.
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As an individual in the nuclear industry, I'm more worried about how the elected party will examine energy generation.
I heard Obama say nuclear once as an afterthought but he really can't say that word with the variable support he has. Most of his "clean" words were aimed at those constituents. I do know that for most of the past decade we were included in the "clean energy" statement. Nuclear is such a dirty word.
Most of the people I work with are pessimistic about the democrats in the white house, but I feel that we are all too important to cast aside and I think we'll be just fine. We might have to move over just a bit for the sun and wind in the research budget, but I don't see our renaissance ending soon.
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#112 PetersKitchen
"I thought this 'letter' [see post #41!] summarised everything form the American political 'family' across to the 'Jewish' banking family and the BBC decided to nuke it. Thankfully, they didnt cut your link [see post #64]
I would ask anyone that has in interest in the current climate to read this letter and other blogs
[http://theautomaticearth.blogspot.com/]"
I thought it was a pretty interesting site as well.
When a post is removed and it says:
"This comment was removed because the moderators found it broke the House Rules."
isn't the person who posted the deleted supposed to get an email saying in what way it broke the rules?
I have tried several times in different ways to find out from the BBC what the difference is between a post that is "awaiting moderation" and one which has been "referred to the moderators" but no one will tell me. If I complain about someone's post is that what causes it to be "referred to the moderators?" If in fact that post did break the house rules, shouldn't the person who posted it get an explanation?
I saved the text of your original message, and apart from the slight confusion caused by your inadvertently stringing two long articles together, I couldn't see anything objectionable in it.
Are you sure it was nuked because of its content? Since I'm here posting the offending (if it was an offending) link, it will be interesting to see if this message is also removed as well.
Cheers,
papanca
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saw the news - Mr Obama's street is sealed off by police-they obviously take his and his family's safety seriously. White supremacists are the shame of the USA and Mr O's first concern-then all the the big industry people he's going to upset. JFK and Martin Luther King come to mind, as mine and others have said. Surely this should be the world's biggest concern right now. Not a confusion of red or blue, nor how many zeros make a billion!
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#118. JavaMan1984 wrote:
Britain used to rule the world, where did all the debt come from? We owned everything!
Currency attack by foreign speculators.
http://uk.youtube.com/watch?v=5Bp9YuKtUh8
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A tax on companies sending jobs abroad and incentives for those hosting jobs at home. Hmmm ... Surely shouldn't this have been done decades ago. OK so we get cheap goods, but, never ignore the missing revenue. For each job there are several others employed servicing that one worker. Lose those jobs and you undermine the earnings base of the nation, something that has been done now for 2 decades.
An offshored worker pays no tax.
An offshored worker consumes no services or goods.
Each offshored worker induces several other workers to be redundant.
I am leaving my current job at the end of November and start a new job (interestingly a UK company here in Australia) in December, the only reason I am leaving, is because my job is moving to India soon (it is inevitable despite what management claim and whatever machinations they enter into) and so I have rightly concluded there is no future for me where I was.
For me that is OK (I think age and aptitude saves me) but for others, and not for all, can there be work elsewhere. There are limits to how many jobs can be soaked up by other employers, when all are engaged in the same, have already off-shored, or are considering it.
And yet these people have the skills the company (a Bank) will always need.
I believe that tax punishments for lazy managers looking to cheap solutions to complex problems would make them think and act with more caution and to consider the national macro viewpoint rather than their individual micro viewpoint.
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#118 "Britain used to rule the world, where did all the debt come from? We owned everything!"
All that got squandered by successive Labour governments on political correctness !!
The biggest loss of "British" assets came about when a Labour government tried to "redistribute wealth" by force - taxing the rich and not-so-rich up to 112.5% on unearned income - i.e. interest on savings, dividends from shares purchased as a nest-egg for retirement, etc.
Huge numbers of the rich and not-so-rich fled abroad to become "foreign" citizens of the USA, Canada, Australia and other more wealth friendly states. In the process, they took with them their assets, especially the wealth creating assets !!
What was left was destroyed by the unions gone mad !!
To make matters worse, while the Labour governments concentrated on political correctness, the Empire drifted away and became the Commonwealth instead.
Bush, pere et fil, bankrupted the US with excessive ,especially on foreign wars and the purchase of exaggeratedly priced "war materiel" from the military-industrial complex who, just happens, to be owned and/or operated by their friends. They also made the Americans a detested nation.
Obama has no room to maneuver because of the parlous state of the US economy. If he is to repair the damage done, he has to win friends and influence people. Destroying other people's economy by devaluation of the US$ and protectionist barricades will *NOT* win friends and influence any one !!
Lecturing other nations and telling them not to do what the US does overtly will also not help. E.g. lecturing China on Human Rights while running Guantanamo Bay Hilton and CIA torture cells is hypocrisy beyond belief.
Declaring "War on Terror" because of an attack on US sovereign soil while blithely bombing other nations' sovereign soil totally discredits their claims to any moral high ground !!
Americans are the most polluting nation of the world. Per capita, they produce four times more pollution than the Chinese and three times more than the Indians. Solving those issue, even partially, will go a long way towards winning friends and influencing people.
Stop threatening others with heavy tariffs on their cheap goods while heavily subsidising their own will also help.
Indeed, Obama has a very dangerous tightrope to walk. His is not an enviable position. Having said that, if he pulls it off, he will be one of the most famous people in history !!
Good luck, and I hope he makes it !!
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#125 "consider the national macro viewpoint rather than their individual micro viewpoint"
Good point but very one sided !! Have you also considered that production of unsalable goods because of excessively high labour costs will destroy any company and lose jobs anyway ?? Now, *THAT* is a macro viewpoint !!
What can be done about that ?? Either they off-shore the production, as many companies and nations have done, or they fall back behind protectionist barricades. If they choose the latter, then they will soon be running around in ever decreasing spirals leading to an implosion of the economy and massive job losses. So, for some short term gain, there will be massive long term losses !!
The current financial crisis arose because many in the developed world live in the delusion that they have some divine *right* to a good living without doing the equivalent amount of work !! If you wish to retain jobs, then you will either have to work harder, work cheaper or move up the production/knowledge food chain !!
Since most people in the West cannot work harder and will not work cheaper, they will have to be more innovative or see their jobs go to those who will !!
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Obama holds promise, but can he do the near impossible task the people have set for him? We shall have to see.
Can Obama pull US troops out of Iraq in 16 months? I doubt it.
Can Obama rid the US of its defect? Unlikley.
Can Obama bring the US out of its economic slump? maybe.
Stop its debt? Not unless he gets a few more terms, more than the US constitution allows anyway.
The US debt of over 10 trillion is massive,but it was not started by Bush but he did increase it, mind you every other NATO country, minus Canada is doing that was well, Budget defects are a terrible thing countries living beyond their means.
Iraq, wellnow ive seens posts that hope the US will be out in 16 months, im afraid it is unlikley,unless someone can see into the future. I would not get my hopes up, 2011 might be good by 2009, not likley, the place to still to unstable.
The econmoic rut. While ive heard (and read) many blame the Bush government if you want the real culprits, you must simply look at the average American. Carrying more than 3 credit cards and buying things they cannot afford, they dont pay the bank and the bank looses money, the bank closes down and no one can get a loan. Then everywhere else looses money because the consumer isnt spending anything. thats the basic rut the US (and alot of the world) is finding itself in.
i wish good luck to Obama, he is going to need it.
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Ishkandar, some of your views on Americans and the future of the country are obnoxious.
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#129 Is my view the Guantanamo Bay Hilton or the CIA torture cells obnoxious ?? Or is it the bombing other nations' sovereign territory without declaring war ??
Has America not blown billions fighting a war in Iraq on the flimsiest of excuse - WMD - which was later proved to be non-existent ?? At the very least, Obama said he will seek a peaceful solution to that war !!
Not *all* Americans are obnoxious but those that *are* obnoxious spoils the perception of other people about Americans in general.
America has dug itself into a deep, deep hole. No amount of posturing will bail it out of that hole. What is needed is cooperation with the other strong economies of the world. Devaluing the currency to welsh on your debts and protectionist barriers, as mentioned by others, will not gain you any cooperation at all.
I truly hope that Obama can reverse this trend !! And I wish him all the luck he can get !!
If you have any helpful suggestions, I'm sure they will be gratefully received by the relevant parties !!
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The US government is planning to sell up to $550 billion in bonds, in total, to fund the acquisition of the toxic assets. The questions now are:-
1) Who has the hard cash to take up those bonds ??
2) Of those who have the hard cash, who will want to take up those bonds in view of the fact that there have been threats to devalue the US$ and, thus, making the bonds a loss-making proposition from the start ?
3) If the auction of those bonds fail to find any takers, what is their Plan B ??
4) How will this affect Gormless Gordon's plans to raise money in the same manner ??
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I live in Latin America and while I applaud the victory of the first biracial man to the presidency of the US, Americans must know that quietly but assertively other men representing the long repressed, the long discriminated against indigenous peoples of the Americas have won their nations' highest posts prior to Obama winning his. I am referring to the win of Evo Morales to the presidency of Bolivia and preceding his, the wins by Venezuela's Chavez and Brazil's Lula, both of part-indigenous descent. These are remarkable achievements, truly "hope" inspiring and "change" inducing, considering that amongst all races in the Americas, the native Americans have suffered the most.
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It's such a shame this won't get out!
I believe this is BBC International... Not BBC UK caught on youtube:
http://uk.youtube.com/watch?v=5Bp9YuKtUh8
What the video is about...
American Dollar $ worthless in a matter of weeks.
What will be the knock on effect on us! Key point that our media seem to be covering up here.
Listen to someone with some minerals explain how dire the situation is.
Miss this and get washed away.
Don't let some shill discredit it in the next post before seeing it for yourself.
Demand more reporting of the fraud going on!
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Actually in France there is a 'taxe d'usure' which is the upper legal limit for any interest rate in the country.:
Aux termes de l’article L.313-3 du Code de la consommation, est déclaré usuraire « tout prêt conventionnel consenti à un taux effectif global (TEG) qui excède, au moment où il est consenti, de plus du tiers, le taux effectif moyen pratiqué au cours du trimestre précédent par les établissements de crédit pour des opérations de même nature et comportant des risques analogues
Hey, we could do that here, if we wanted, but we're too obsessed by the illusion of the ''free' market which is only free for those in command of it.
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Based on this it looks like he will be a great President.
But I don't believe that there should be a windfall tax on oil companies but part of the shares should be transfered to the government for free so that there will always be revenue.
Also there should be caps on maximum wealth an individual should be allowed to whole with penalising tax above it. Same should apply to income e.g. 110% tax in income above £3m a year.
Its better to have number of small companies than bigger once, also there is no material advantage in have non dooms in this country; as most of the jobs they create are outside the country they live in.
It would have been better if Obama was prepared to impose import tax from China till it lets it currency float freely, as this is unfair trade practice which is destroying manufacturing jobs in the West
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"If these investors see no realistic prospect of Obama cutting public borrowing on any meaningful time horizon, that would put further downward pressure on the dollar against the currencies of China, Japan and the eurozone (though probably not against sterling, since the UK is perceived to have too many structural weaknesses in common with the US)."
Might they not calculate instead that this borrowoibng willl in the longer run drive up US interestr rates, attracting more 'hot' capital, hence driving up the US interest rate? On top of the inflow of funds right now to invest in US Treasuries. No surprise the US$ still remains so strong.
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22 Bullets costing a weeks wages?
Thats a good idea !
Reduce Gun crime by taxing bullets.
If each bullet cost two hundred pounds it would tax the rich (save the wildlife) and make yobbos think twice before getting involved in guns.........
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Mind you anyone with a reasonable knowledge of chemistry could make their own bullets.
Saying that how many criminals will have any knowledge of chemistry?
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So when will we hear the Gov't stance to wards Housebuilders ?
Will they go down the Nationalization route?
Will they compensate Northern Rock and Bradford and Bingley Shareholders ?
And how will Santander cope with the Spanish property crash ?
Santander was advertising itself as too big for depositors to worry about on the TV recently.
But as events have shown no bank is too big to avoid problems !
National Savings is the best place if you are at all worried about any Banks.
Of course being offshore like Icesave, will peoples deposits be frozen should Santander run into trouble?
Does Spanish law or English law apply ?
Plenty to think about !
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Come to think of it Santanders advert did sound fearful.
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Maybe Obama should take the purchase tax off scissors so that his citizens could buy one and CUT UP ALL THEIR CREDIT CARDS
Mr Brown might do likewise here
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h) Cutting the billions of unnecessary food subsidies that cause hardship in other countries.
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#128
"Can Obama rid the US of its defect?"
Well, he's got rid of Bush, so that's one "defect" gone.
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The first thing Obama should do is courtmarshall George W Bush. This "President" is guilty of war crimes, crimes against humanity, violation of the Constitution, violation of international and fiscal laws. He has also amounted the biggest US debt in history having inherited a booming economy from Bill Clinton. I would like to see Buch tried and sentenced, his and his family's assets confiscated, as well as those of his associates.
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I would not worry Mr obama will bring in the new "AMERO" currency..in 2 years time..
when the usa, canada and mexico join in a union (like the EU) with a single currency called the "amero".
this scripted agenda is so boring
kind regards
nomorefakenews
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Robert you say " (roughly double the share of GDP taken by our government's debt - though most economists would say that the Treasury significantly understates the British national debt). "
Now here is a story for you as an 'investigative reporter'* to get your teeth in to. (* not your spin/comment but just the facts !)
What is the TRUE 'British national debt' including all of the off sheet PFI arrangements ? How does the current total debt created by the last 10+ years of recent and current Labour governments compare with past history and will we and future generations be burdened with this debt ?
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#139
Actually Santander as a Spanish bank governed by Spanish regs and they were only allowed to lend on property deals provided they had capital to back it up.
that takes care of their property exposure to Spain - they should be more worried about exposure to Latin American positions in the severe downturn about to happen.
They are probably big enough to withstand this.
NS+I RPI linked bonds worth looking at as a hedge against the following scenario - there has to be a chance that the easiest route for the government is to inflate their way out of the debt mountain.
The economy may tank and reduce inflation risk but exchange rate weakness means we will import some inflation for necessities priced in dollars like oil, gas and food
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Santander as a Spanish bank governed by Spanish regs and they were only allowed to lend on property deals provided they had capital to back it up.
that takes care of their property exposure to Spain - they should be more worried about exposure to Latin American positions in the severe downturn about to happen.
They are probably big enough to withstand this.
NSI RPI linked bonds worth looking at as a hedge against the following scenario - there has to be a chance that the easiest route for the government is to inflate their way out of the debt mountain.
The economy may tank and reduce inflation risk but exchange rate weakness means we will import some inflation for necessities priced in dollars like oil, gas and food
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This comment was removed because the moderators found it broke the House Rules.
#115
"It is a long long time before they can design and build an aircraft carrier though."
It would not take them very long to copy one or several.
Perhaps they will not need any in the Persian Gulf (I know, Iranian Gulf). They can buy what they need.
On second thoughts, they may need some to project power to protect their African interests.
Apologies for going off topic.
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Obama is shackled by more than debt!
"The entire banking system is broken. For it appears that the US Federal Reserve has given up on the idea of easing stress on interbank and wholesale lending and is resigned to being the central bank-come-market-maker of last, first and every resort."
http://ftalphaville.ft.com/blog/2008/11/06/17903/fed-capitulates-the-central-bank-is-broken/
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lets be honest - he'll probably get assasinated before he makes any changes - to many states are anti obama - rednecks are not happy.
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BOE rate cut 1.5%
Cool. What happens when they run out of percentage points?
GC
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If Mr President is short of ca$h, he has a huge military land, sea & air at his disposal. Just find all those smug offshore accounts in the likes of the Caymans etc and take the whole lot! And don't stop here there's a huge pile of do$h sitting right in the middle of Europe.....called Switzerland........to far fetched, yeah you're probably right. He has a huge mess to sort out though, and it won't be done in four years......a decade mibee?
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RATE CUT OF 1.5% !!! WHAT UTTER MADNESS.
THE ROOT AND BRANCH CAUSE OF ALL THIS HELL IS THAT MANY PEOPLE HAVE LOST ANY PERCEPTION OF THE VALUE OF MONEY.
SO MAKING THE COST OF BORROWING CHEAPER ONLY COMPOUNDS THE PROBLEM.
I HOPE LIBOR RATES HOLD OUT.
Alexander curzon
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#153 - maybe a business blog would be a better place for such a question.
oh... yes... I see...
Anyway...
Brown is hoist by his own petard again...
Brown has been a massive fan of fixed-rate mortgages for a very long time - part of his 'stability' mantra.
Now it come backs to bite him, now it transpires that the 'stability' he has locked in is damaging and has removed the possibility of adjustment.
Brown - what an idiot.
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Bob
You are meant to be business blogger
How long ago did the BoE announce a rate change and still no comment from you
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Oh! I get it!
A black man shackled (by debt) - thats not very PC of you Robert -- lucky the editors haven't noticed.
Actually for what it is worth, I think race related PC is out the window now - if a black man can be president of the USA, they hardly need any 'special' help in the rest of society...
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Barring Bidens view of rapid Nato expansion I am utterly optimistic about Obama and his policies.
But ... on the economy I just cannot see how we can fix a problem when we don't know for sure what went wrong. Is the US going to have a full blooded inquiry or will it be oversight committee's with partial views that are cut and pasted together?
Japan stayed in stagflation mode for a decade until they handled the confidence issue - that requires hard facts rather than big speeches.
But I am still deliriously happy about Obama - and I am a UK citizen.
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Any comment on the 1.5% rate cut from the BoE?
Why this won't be passed on in it's entirety, etc?
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I do wish you would get your facts right instead of this Labour propaganda. The oil companies are not making stupendous profits especially on petrol most goes to the government in taxes. Do you understand how much it costs to drill for oil in deep water, the oil companies are still suffering from the last windfall tax by government. In fact we are in danger of killing the golden goose all oil companies are now cutting back on investment in drilling and getting oil out of old platforms this will in turn affect us all especially contract companies.
When will you Labour people understand you have to make money to spend money.
You annoy the heck out of me every time you report it has a Labour bias.
Why dont you report on why we have cut our interest rates more than europe, reason is we are a worst mess than the rest of europe, because of Browns mis-management of the economy, but of course this would go against your pro Labour stance.
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150. At 12:13pm on 06 Nov 2008, Toldyouitwould wrote:
#115
"It is a long long time before they can design and build an aircraft carrier though."
It would not take them very long to copy one or several.
For what it is worth, China bought a scrap US carrier about 20 years ago but still haven't succeeded in copying it - not as simple as it looks.
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So Robert, if the US public sector debt as a proportion of GDP is approx double than in the UK and the US interest rate is only 1% compared with (until today) 4.5% in the UK, can you explain why the £ is so weak against the dollar? I cannot see how their economy is any stronger than ours!
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So the deficit is $10 trillion or a pile of tightly packed $1,000 bills 730 miles high?
It might be worth an in-depth analysis of how this occurred in an atmosphere of greed and immorality at all the traditional top levels.
While it is laudable to look to the future and let bygones be bygones, it is important to set a few things straight e.g.
Who now remembers Enron?
Who now bothers about the Iraq reconstruction billions recycled back to the US?
Who now recollects the systematic repeal of environmental protection laws?
How did Blackwater become the wealthiest, best equipped mercenary force in US history?
etc etc...
The Bush regime was spectacularly self serving and undermined any possibility of a balanced economy.
When I hear that Wall Street is 'underwhelmed' by Obama I guess that is some sort of compliment.
For the future? Michael Moore's dream of better medical services for all might be utopian, but it would signal a move away from a crass self defeating decade and indirectly a reallocation of purchasing power
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#28 "What does USA export anyway?"
As the daughter of a USA farmer, I just about fell off my chair in disbelief. Who is it who feeds the world with wheat, corn, soybeans? Time for a food commodities cartel??
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Someone asked why US citizens have such high credit card debt. About half is due to medical expenses not covered by insurance -- many Americans with insurance have huge deductibles which must be paid before insurance pays even for part of the rest, otherwise the premiums are just impossible; when sick, we still have to pay the huge premiums despite much lower income. I had to borrow USD 20,000 on credit cards last year just to keep up on bills and especially medical insurance premiums while I couldn't work during a lengthy (though simple) illness, and to pay the medical bills and for the prescription medicines. My insurance deductible is now USD 5000, which I don't have, but otherwise I couldn't afford the premiums which they jacked up for my old USD 2500 deductible after I actually had claims last year for the first time in decades. Most US bankruptcies are likewise connected with medical expenses.
I can't afford to get sick again or else I'll be filing for bankruptcy myself. I'm very frugal, but it will be years before I will be out of debt for this little medical misadventure even though I managed to lock in a low interest life-of-the-loan rate before the cc companies figured out I was out of work. I can't even afford doctors and dentists routinely anyway - they don't provide installment plans anymore, they expect full payment immediately by cc.
Most of the rest of cc debt here is due to emergencies, especially prolonged unemployment for any reason (not just because of illness, it's hard to find another job once you've been laid off in many communities). Any unemployment insurance from the government runs out quickly and often won't pay normal bills (including mortgage payments, and the bank will foreclose if not paid and cc interest will skyrocket in that case once reported to the credit bureaus), and many people aren't covered by such insurance anyway (depends on their employer).
The cc companies routinely jack up interest rates on old debt, often making it hard for people to ever get out of debt since they can barely pay the principal plus the new high interest each month. The cc company also will send your interest into the penalty range if you are reported as late with any other creditor ("universal default" is what it's called). Penalty rates are commonly as high as 35% to 40% or even more. The cc companies locate an office in states with no anti-usury laws, so there is no limit and they do not need a reason.
Very little cc debt in the US is due to overspending on foolish purchases.
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