Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

The Obama Shock

|Includes: Ford Motor Company (F), FCAU, GM

Almost 40 years to the day, President Obama has signed his version of the Nixon Shock.

The Nixon Shock had two elements, one highly controversial but unimportant in the greater scheme of things, one almost ignored but far more vital to growth in the long run.

What was controversial was the imposition of wage and price controls. What was important was that America abandoned the gold standard.

What the Shock recognized was that the rising generation's economics were naturally deflationary. Gordon Moore's famous article on the economics of microcomputing was just a few years old then, Intel's first 4004 chip just leaving factories, but the implication was plain. The coming abundance of processing power would create a deflationary spiral if dollars were tied to gold. Nixon headed it off.

The Obama Shock also came in two parts, one highly controversial, one almost unnoticed. The controversy you know, the debt ceiling deal that pleased no one. The more important act was a doubling of CAFE standards, to 54.5 mpg, by 2025. Auto makers are already rushing to meet them.

Why does this matter? Why is this such a shock to the economy? Because 70% of our oil use comes in transportation. Rising fuel economy cuts oil imports. It puts a thumb down firmly on energy prices.

It also redirects research away from pure computing toward manufacturing, for the first time in a generation. The modern equivalent to magazines like Popular Electronics from 1971 are the Maker Faires, where a new generation of tinkerers combines cheap computer technology with mechanics. The most recent one was held last week. In Detroit. 

Pointing engineers toward new challenges is the essence of leadership. President Kennedy pointed us to the Moon, based on the challenge of the Cold War. This President is pointing us in a more prosaic direction, based on the challenge of energy

Just as we had rockets in 1961, so we have the basic technologies to meet today's challenge. Hybrids are common. The Toyota Prius already meets the new standard. Fuel cells exist across our electric grid. The electric Chevy Volt and Nissan Leaf are both on our roads. Some Detroit models are already half-way to the new standard, including the Ford Focus and Chevy Cruze

What the President has done is to unleash innovation. Combine what he's done here with the money to be made in our cheapest renewable energy – efficiency – and with the continuing expansion of solar, wind, geothermal and biomass industries – and you begin to see a way out of our present situation.

If America can cut its energy bills substantially, that growth will pay down the deficit and unleash a new generation of prosperity. Just what the Nixon Shock did.

What we learned on the race to the Moon is now well-known. It spurred innovations in computing, in materials, and in the imagination that remain vital today. This new direction, too, will result in the creation of great fortunes, and new technologies, that will put today's problems firmly in the past.

But please, continue with your pessimism. That was the common attitude in 1971, too.


Disclosure: I am long F.

Additional disclosure: Don't know what you're going to think of this one, and I would not be offended if you turn it down flat, but it's an important turning point that needs to be defended and placed in context.