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Obama shackled by debt

Robert Peston | 11:04 UK time, Wednesday, 5 November 2008

Barack Obama's economic and business policies are, on paper, more conventionally left wing than those of Gordon Brown.

Barack ObamaThey 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).


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  • Comment number 1.

    Well, way back last year he pretty much knew what he was in for.

    And so did we !

  • Comment number 2.

    "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...


  • Comment number 3.

    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.

  • Comment number 4.

    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.

  • Comment number 5.

    I think you missed a zero in this comment:

    "US public sector debt is well over $1000bn"


  • Comment number 6.

    > 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.

  • Comment number 7.

    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?

  • Comment number 8.

    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.

  • Comment number 9.

    "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.


  • Comment number 10.

    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!

  • Comment number 11.

    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!)

  • Comment number 12.

    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 !

  • Comment number 13.

    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 !!

  • Comment number 14.

    Time to invest in papermills.............

  • Comment number 15.

    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.

  • Comment number 16.

    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?

  • Comment number 17.

    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 !!

  • Comment number 18.

    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?

  • Comment number 19.

    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.

  • Comment number 20.

    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

  • Comment number 21.

    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.

  • Comment number 22.

    #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 !!

  • Comment number 23.

    "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.

  • Comment number 24.

    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

  • Comment number 25.

    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.

  • Comment number 26.

    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.

  • Comment number 27.

    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.

  • Comment number 28.

    What exactly do they export ???

  • Comment number 29.

    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.

  • Comment number 30.

    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.

  • Comment number 31.

    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?

  • Comment number 32.

    '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.

  • Comment number 33.

    Can anyone recommend any economic forums where I could question and debate the current situation in more detail?

  • Comment number 34.

    "...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...

  • Comment number 35.

    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.



    Alexander Curzon

  • Comment number 36.

    Uh oh... I see there is talk of `billions' of dollars on a trans-Atlantic forum!


    a cardinal number represented in the U.S. by 1 followed by 9 zeros, and in Great Britain by 1 followed by 12 zeros.

  • Comment number 37.

    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!

  • Comment number 38.

    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.

  • Comment number 39.

    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)?

  • Comment number 40.

    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.

  • Comment number 41.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 42.

    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.

  • Comment number 43.

    "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.

  • Comment number 44.

    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

  • Comment number 45.

    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

  • Comment number 46.

    >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.

  • Comment number 47.

    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.

  • Comment number 48.

    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.

  • Comment number 49.



  • Comment number 50.

    ... 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.

  • Comment number 51.

    "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.

  • Comment number 52.

    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.

  • Comment number 53.

    Less red? Don't you mean less blue? Blue = Democrat, Red = Republican.

  • Comment number 54.

    $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.

  • Comment number 55.

    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!

  • Comment number 56.

    "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?

  • Comment number 57.

    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.

  • Comment number 58.

    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?

  • Comment number 59.

    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.

  • Comment number 60.

    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...

  • Comment number 61.

    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!

  • Comment number 62.

    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.

  • Comment number 63.

    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...

  • Comment number 64.

    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:

    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:

    Which was included on the AutomaticEarth blog.

    (Just in case other readers were a bit confused).

  • Comment number 65.

    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???


    Case closed.

  • Comment number 66.

    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.

  • Comment number 67.

    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:

    You can follow many of his links for current economic thought and opinion.

  • Comment number 68.

    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.

  • Comment number 69.

    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.

  • Comment number 70.

    The lamb may lie down with the lion, but the lamb should not expect to get a lot of sleep.

  • Comment number 71.

    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.

  • Comment number 72.

    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".

  • Comment number 73.

    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.

  • Comment number 74.

    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.

  • Comment number 75.

    #38 ExcellenceFirst.......great post!

    Hear, Hear!

  • Comment number 76.

    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.

  • Comment number 77.

    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.

  • Comment number 78.

    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.

  • Comment number 79.

    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.

  • Comment number 80.


    Saw this story

    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?

  • Comment number 81.

    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.


  • Comment number 82.

    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?

  • Comment number 83.

    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...

  • Comment number 84.


    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.


  • Comment number 85.

    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.

  • Comment number 86.

    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.

  • Comment number 87.

    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 ?


  • Comment number 88.

    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 .

  • Comment number 89.

    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.

  • Comment number 90.

    What's the stock market reaction today ??

  • Comment number 91.

    > 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.

  • Comment number 92.

    We can only hope Robert, we can only hope.

  • Comment number 93.

    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.

  • Comment number 94.

    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.

  • Comment number 95.

    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 ..."?

  • Comment number 96.

    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.

  • Comment number 97.

    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.

  • Comment number 98.

    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.

  • Comment number 99.

    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.

  • Comment number 100.

    Would you like strawberry sauce with your Flake ?


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