Today I will be writing about what I think of President Obama and the Fed’s economic policy in the roughly two years since Obama took office back in 2008. Lately, Obama’s (and the Fed’s) economic policy has come into question, not only form the Republican Party, but by the general public as well. The main thing that has people mad is the multi trillion-dollar bailouts and the stimulus efforts since then. In my opinion a first initial bail out was a good idea, because it stabilizes the economy and takes the panic out of the financial system. It’s hard to say what would have happened with out an initial bail out but with out it I think things would be much worse. But I don’t think that Obama should have made it such a massive bail out, maybe he should have let the banks with the most debt go under or maybe he should have only saved the biggest banks. What I’m trying to say is that he should have let more banks fail to sort of cleanse the system and get rid of the bad apples.
As for the auto industry bailout I have a similar opinion there as well. It was necessary to bail them out but maybe it should have been a bit smaller. That said, the car company bail out’s are going better than I expected, Chrysler has already paid off it’s loans and I think that Ford and GM aren’t that far behind. Also, just last week GM had it’s second IPO. So things are going pretty well with the auto bailouts, although in the beginning it was a little iffy. One mistake I think Obama made is that he didn’t pass enough laws to ensure that a melt down of this size won’t happen again. Although he did pass some credit and debit card laws that protect the user of those cards, it just wasn’t enough. The government’s lack proper regulations really showed through with the story of the alleged fraudulent fore closer proceedings. Although I think an initial bail out was necessary I don’t really agree with the somewhat failed stimulus efforts instituted by the fed since then, the most recent of which was QE2. According to history when a bubble goes way up and then pops it takes as long as it took to go up to bottom out. With that knowledge in hand we can say that the housing market probably won’t bottom out until some time between 2014 to 2016. America and the world markets have had massive growth in the last 10 to 15 years so it’s only natural that the economy will shrink a little bit eventually and the Fed’s efforts to stimulate the economy are stopping that natural shrinking motion. What comes up must come down.
In conclusion I think that the first bank bail out effort instituted was good but should have been smaller so that at least you can get rid of some of the bad apples in the system. Although I agree with the first bail out I don’t think that the trillions of dollars spent by the fed since then has been good (what comes up must come down). The auto industry bail out was necessary because the auto industry employs so many people that it would have been disastrous to let it fail. But just like the bank bail out’s I think it should have been much smaller and there should have been more conditions attached to the agreement. Conditions like they have to build more fuel-efficient cars, they have to research solar or hydrogen fuel cell cars and they have to partially offset the carbon emissions from their factories (and perhaps some other financial conditions as well). I also think Obama should have been harsher when passing laws to prevent something like this from happening again. Sadly, this ends my series on large-scale economics though I will come back occasionally and write a blog or two. From here I will be moving into stock trading and investing strategies.
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