Dec 18, 2009 11:35 am


Finally, everybody is admitting the obvious, even Obama. The uncertainty created by the Obama/Democratic legislative and economic activism is the real culprit for the unusually high American unemployment. Big companies are hiring abroad. Small business cannot get credit, hence, cannot hire. Seeking to deflect the anger of the American people from his administration to the financial sector, Obama gave the banker a public spanking.

Amity Shales, author of The Forgotten Man, has seen this all before, during the 1930s. Capitalism cannot function when NERVOUS Capital is sitting on sidelines, distrustful of the future. She writes:

“Fat cats” is what President Barack Obama just called bankers. He also invited them to the White House this week.

The reason for the mixed message is that the president is cross with banks: they have refused to heed his orders to lend. The dynamic of preachy executive and elusive lenders recalls the mid-1930s, when a petulant Franklin Roosevelt gave a label to banks’ puzzling behavior: “capital strike.”

In the 1930s, the capital strike was followed by the depression of 1937-38 within the Depression. Today too, capital ponders going on strike. And without big policy changes the economy will face similar consequences.

Fear of high taxes, low interest rates, run away spending, dollar pumping and worst of all, executive discretion:

The insistence on executive discretion is a real killer as well. Adolf Berle, Roosevelt’s assistant secretary of state, sounded for all the world like Hank Paulson or Timothy Geithner when he argued in the late 1930s for a “modern financial tool kit.” Tool kit means “let me fiddle around” and not “let us agree together on rules and abide by them, together.”

Who suffers most? Low paid workers.

Why? Because benefits make up a larger portion of their compensation that that of higher paid workers and the price of benefits (health care, unemployment, minimum wage) is in the greatest doubt. In other words, Unemployment stays high among the most vulnerable.

The unemployment rate was 10.0% in November 2009. The African-American unemployment rate that month stood at 15.6%, the Hispanic unemployment rate at 12.7%, and the unemployment rate for whites at 9.3%. Youth unemployment stood at a high 26.7%. And the unemployment rate for people without a high school diploma stayed high at 15.0%, compared to 10.4% for those with a high school degree, and 4.9% for those with a college degree.

Ironically, these are the people who helped elect Obama. How do those with capital fare? Much better!

Family wealth begins to recover. Total family wealth increased by $4.9 trillion, or 10.2% in 2009 dollars, from March 2009 to September 2009, largely as a result of higher stock prices. Home values rose by only $851, in comparison, or 5.4% during the same period. Household wealth was still $12.6 trillion below the level of June 2007—the last peak of family wealth.

The real irony is that Obama and the Democrats were elected by a combination of the highly educated upper middle class, union members and the poor? The first two groups knew what was good for them. The same cannot be said about the poor. They have been the true victims of what Marxist call false consciousness.

Have they learned their lesson? Obama and company are clearly determined to continue to throw dust in their eyes by all this talk about"fat cat" bankers. If the past is any guide, his chance of success cannot be summarily dismiss.


Updates: Surprisingly, number of filing for unemployment continues to rise These people just refuse to give up eating.

Oh, yes, Gerald P. O'Driscoll reminds us that banks that in Obamaland bankers do not need to lend to make money.

75% of those hiring do not plan to do so next year

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