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OBAMA'S 'HAIL MARY' EXPORT STRATEGY

Fed Turns up the heat on the administration
A highly unusual op-ed appeared in the New York Times on the eve of President Obama departure on a set of Asian State visits and summits.
President Barack Obama  
November 5th, 2010 - New York Times Op-Ed
"AS the United States recovers from this recession, the biggest mistake we could make would be to rebuild our economy on the same pile of debt or the paper profits of financial speculation. We need to rebuild on a new, stronger foundation for economic growth. And part of that foundation involves doing what Americans have always done best: discovering, creating and building products that are sold all over the world.
 
We want to be known not just for what we consume, but for what we produce. And the more we export abroad, the more jobs we create in America. In fact, every $1 billion we export supports more than 5,000 jobs at home. "
 
"It is for this reason that I set a goal of doubling America’s exports in the next five years."
In parallel a Board member of the US Federal Reserve and member of the FOMC , Kevin M. Warsh published an equally unusual Op-Ed in the Wall Street Journal laying blame on US Fiscal Policy as short term and short sighted. 

The New Malaise and How to End It  Wall Street Journal - Kevin M. Warsh - Bio


Attacks US Fiscal Policy
Policy makers should be skeptical of the long-term benefits of temporary fixes to do the hard work of resurrecting the world's great economic power. Since early 2008, the fiscal authorities have sought to fill the hole left by the falloff in demand through:
1- large, temporary stimulus
2- checks in the mail to spur consumption,
3- temporary housing rebates to raise demand,
4- one-time cash-for-clunkers to move inventory, and
5- temporary business tax credits to spur investment.
Pro-growth policies include:
1-  Reform of the tax code to make it simpler, more transparent and more conducive to long-term investment.
2- These policies also include real regulatory reform so that firms—financial and otherwise—know the rules, and then succeed or fail. Regulators should be hostile to rent-seeking by the established, and hospitable to the companies whose names we do not know.
3- Finally, the creep of trade protectionism is anathema to pro-growth policies. The U.S. should signal to the world that it is ready to resume leadership on trade.
Clearly the Federal Reserve feels it has been left to do all the heavy lifting and this may be ill founded. There is obviously a lot of discussion going on behind closed doors on why the US Economy is not recovering and required the blunt instrument of Quantitative Easing II. Fed members are not unanimous of QE II and all are worried about collateral effects. They are laying the blame on failed US Fiscal Policy to support Monetary Policy.

It is going to get worse with a split congress and a lame duck President. The Fed is extremely nervous that it is going to be the fall guy for a failed US recovery. A failure that may give Congressman Ron Paul even more sway as the new Chairman of the powerful House Monetary Policy Sub-Committee to push for a full audit of the Fed and reductions in the Fed's power.

The Fed is turning up the heat on the Obama Administration to do something - and urgently!

So what has Obama decided to do?

ACTVITY
LOCATION
GOAL
State Visit
India
Military & Defense Sales
State Visit
Indonesia
Military & Defense Sales
State Visit
South Korea
Military & Defense Sales
 
 
 
G20 Summit
Seoul South Korea
Currency War Dispute
 
 
 
State Visit
Japan
Military & Defense Sales
 
 
 
Asia-Pacific Economic Conference
Japan
Currency War Dispute
 

First Stop - India:
President Obama is traveling to India this weekend to make a $5 billion sale for 10 of Boeing's C-17 cargo planes. If India signs the contract, this would be the sixth biggest arms deal in U.S. history.
This and the pending $60 billion deal with Saudi Arabia will certainly help to jump-start the economy, as they have for the past fifty years.
 
William Hartung at the Arms and Security Initiative at New America Foundation has researched Arms sales and found the following since 1973. This includes ONLY aircraft sales that were made public. It does not include Ships, Communications, Missiles, etc. etc.
 
Year
Country
Sale
Inflation Adj.
Arms Sale
1973
Iran
$2.00B
$10.1B
Hundreds of Supersonic Military Aircraft & Helicopters
1975
NATO
$2.12B
$ 8.8B
348 F-16s
1981
Saudi Arab.
$8.50B
$21.3B
 
1992
Taiwan
$6.00B
$ 9.4B
150 F-16A/B
1992
Saudi Arab.
$9.00B
$14.0B
72 F-15s
2003
Poland
$3.50B
$ 4.2B
48 F-16s
2006
Turkey
$2.90B
$ 3.2B
30 F-16's and related equipment
2006
Pakistan
$5.10B
$ 5.6B
18 F-16's, Package of Aircraft, Weapons and Electronics
2009
India
$10.0B
$10.3B
126 Multi-Role Fighters
2010
Saudi Arab.
$60.0B
$60.0B
Fighter Jets, Attack Helicopters and other material

                 The US is the Arms supplier to the world.
 
G20 Goals - Seoul, South Korea November 11-12th, 2010
"Last year, the nations of the G-20 worked together to halt the spread of the worst economic crisis since the 1930s. This year, our top priority is achieving strong, sustainable and balanced growth. This will require cooperation and responsibility from all nations — those with emerging economies and those with advanced economies; those running a deficit and those running a surplus."
                       It is a call to the G20 to increase US defense purchases to reduce Current Account Surpluses!

In Mumbai, the President's speech was to an audience of Indian students, but it could easily have addressed to China’s politburo:   
“Back in the 60s and 70s, the US could be open even if others were not open. We didn’t need reciprocity because our economy was larger.  Now things have changed.  So it’s not unfair to ask for reciprocity on our friendship.”(1)
 
(1) Edward Luce, Charm Offensive focuses on “Risen Economy,”  Financial Times, 11/8/2010
 
 
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Gordon T Long