As fears quickly rise that President Obama wants to wipe out American business and kill the stock market (as some like Jim Cramer would have you believe), I took a trip down memory lane to watch Obama’s (now forgotten?) famous call to buy the stock market right around the March bottom:
Less than 12 months later, the market is struggling like never before during this rally, and it seems that the President’s pronouncements against banks, Wall Street, and even the budget deficit, are encouraging investors to sell the top. It made me wonder aloud, how did this switch happen?
I was one of the many incredulous viewers when I first watched Obama recommend buying stocks last March. Now, I am almost as incredulous to watch and hear how quickly people believe that the President wants to topple everything in order to return to his populist base (click here to watch the passionate and poetic Professor Cornel West’s emphatic plea to the President to get back to taking care of the working class and the poor). This sentiment is particularly ironic given that the historic Senate election in Massachusetts was supposed to anchor the President to the elusive middle.
It seems that Obama has taken a long journey trying to please everyone yet pleasing no one (notwithstanding most of the Republicans in Congress who will not be placated by Obama no matter what he does). I believe Bob Herbert nailed the problem in his New York Times op-ed piece titled “Obama’s Credibility Gap.” The article starts by asking “Who is Barack Obama?”:
…Americans are still looking for the answer, and if they don’t get it soon — or if they don’t like the answer — the president’s current political problems will look like a walk in the park. Mr. Obama may be personally very appealing, but he has positioned himself all over the political map: the anti-Iraq war candidate who escalated the war in Afghanistan; the opponent of health insurance mandates who made a mandate to buy insurance the centerpiece of his plan; the president who stocked his administration with Wall Street insiders and went to the mat for the banks and big corporations, but who is now trying to present himself as a born-again populist.
The President has surrounded himself with many smart advisers and appointees. He is an intelligent, rational person who wants to consider and understand all the important pros and cons on an issue. However, in doing “the right things” intellectually, I think he has become distracted from his fundamental principles. I think the State of the Union will be the beginning of a correction where his principles become informed by debate and discourse rather than undermined by them. Maybe he will even encourage Americans to buy even more stocks.
So Mr. President, as you scribble your final notes for the State of the Union, I humbly request that you consider reviewing “Fear the Boom and Bust: A Hayek vs Keynes Rap Anthem” from Econstories.tv. I know you are a lawyer and Constitutional scholar who never thought he would have to consider such weighty economic debates, so I am sure it was all too easy to get captured by the Keynesians amongst us. Read the chorus, watch the video, and add some paralysis to your analysis:
“We’ve been going back and forth for a century
[Keynes] I want to steer markets,
[Hayek] I want them set free
There’s a boom and bust cycle and good reason to fear it
[Hayek] Blame low interest rates.
[Keynes] No… it’s the animal spirits."
Be careful out there.