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All Aboard!

But we can't all ride in the wagon. Someone has to pull it...

PRESIDENT-ELECT Barack Obama is faced with the daunting challenge of fulfilling both the campaign promises he actually made, as well as promises that voters only think he made, reports Donald Grove, Washington correspondent for Casey Research.

Unfortunately, the latter category predominates.

The new president didn't actually say much on the campaign trail, but he said it well. He invited Americans to dream, actually to fantasize, about an unreal world in which their government will care for them using its own unlimited supply of money – money that comes from some mysterious place which too few people have even thought about, much less understood.

Voters are said to have turned to the left, choosing "liberal" candidates, as part out of a desire to change the economy's direction. Their choices at the polls are said to reflect their concern over the economy's descent into recession, the loss of jobs, and the collapse of their retirement accounts.

These are legitimate and understandable concerns. But unfortunately, voters have not done the hard work of learning about and understanding basic economics. As a result, they have set themselves up for their predicament to worsen exponentially.

I think it's safe to say that we don't really expect politicians to keep their campaign promises. We can only hope that the new president will conveniently forget to raise taxes on capital gains and dividends, and neglect to raise the top income tax rates, impose a windfall profits tax on oil production, maintain or raise high corporate tax rates, collect more social security taxes, mandate higher ethanol production, expand regulation, and add new entitlements, just to recall a few of the proposals bandied about during his campaign.

We can't all ride in the wagon. Someone has to pull it.

The presumption seems to be that government has a big job to do in cleaning up this mess and it will need more money to do so. Wrong! Government is still the problem. Obama has promised to help the Blue Dogs (fiscally conservative House Democrats) achieve fiscal discipline, including honoring the pay-as-you-go ("PayGo") rule against adding to the budget deficit. But with obligations also set to rise, just how can Obama do both?

There are limits to how much tax you can extract from the populace before you are faced with open revolt. While Obama's tax increases are ostensibly imposed on the rich, the pain of those tax increases will also be felt by the poor. Moreover, there is no way that straightforward taxation will be enough. Instead, we can count on more of the surreptitious, insidious, and brutally regressive tax of inflation to fill the gap.

This should have been a contest focused on the real, underlying issue facing Americans and the world: will we choose more or less government? Instead, the contest was over more government or much more government. It appears voters chose the latter. They know something is wrong, but like a drunk taking "a hair of the dog that bit you" to ease the pain of a hangover, Americans are hoping to cure their ills with another dose of the same poison that made them ill.

I have heard the new president described as a fall guy. In a way it's too bad that he may mean well, but he will probably preside over economic hardship that persists for many years. At first, the continuing debacle will be blamed on George Bush and a Congress with enough minority influence to have thwarted the grand plans of a thin majority. Inevitably, however, the inherent character of government and politics will be apparent in this new administration as well.

The US nation's chief executives and legislatures (of both parties) have shared in contributing to today's economic meltdown all the way back to the creation of the central bank, the Federal Reserve, in 1913. The Obama administration is backed by a now stronger congressional majority that is very nearly filibuster proof and no longer needs to worry much about mustering the supermajority required to override a presidential veto. Those who sent Barack Obama to the White House are anxious to see their fantasies made manifest. They may be patient for a little while, but not for long.

Hillary Clinton ultimately did a great job of helping to boost Senator Obama into the White House. Some say she's now a shoo-in for a White House appointment, but she at least professes to be happy to continue being the best senator from New York that she can be. Probably a wise move.

Barack Obama came to office with the promise to deliver "Change We Need", but we know that, since Texas Congressman Ron Paul left the race, no one has had the cojones to actually discuss the change we really need.

I wish the new president well and hope he will, miraculously, do the right thing. In my heart, however, I know he cannot. Leveling with Americans would be political suicide. In their own way, the Obama administration and a cooperative legislature may pave the way for a truth-telling politician in the future – an honest, uncompromising man or woman whose message today would be ignored and drowned out, even by the fading echoes of election night euphoria.

Doug Casey is a world-renowned investor and author, whose book Crisis Investing was #1 on the New York Times bestseller list for 29 consecutive weeks, a record at the time.

He has been a featured guest on hundreds of radio and TV shows, including David Letterman, Merv Griffin, Charlie Rose, Phil Donahue, Regis Philbin, NBC News, and CNN; and has been the topic of numerous features in periodicals such as Time, Forbes, People and the Washington Post.

His firm, Casey Research, LLC., publishes a variety of newsletters and web sites with a combined weekly audience in excess of 200,000, largely high net worth investors with an interest in resource development and international real estate.

See full archive of Doug Casey articles

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