The next financial crisis? Didn’t we just have one, you ask?
As President Obama travels to Grand Rapids, Mich. today for all the wrong reasons, I wanted to recommend a documentary to you. It was recommended by one of our readers, who goes by Techie.
At 47 minutes, it’s not short, but it will feel that way, because it is riveting.
The documentary presents a theory about what has happened to our economy. It all makes perfect sense in retrospect, though few saw it coming. The film features the few who did.
The United States is addicted to bubbles. The Dot Com bubble drove the economy for a while, and after it burst, we got the housing bubble which, as you found out last time you thought about refinancing, also burst.
And now the scary part.
We’re currently in a credit bubble, and when it bursts, nothing can save us. Because the next crisis will be caused by the very medicine the government uses to fix the economy: Low interest rates and stimulus spending. If the crisis is caused by our deficit being too high, we cannot run up the deficit to fix it. And interest rates are as low as they can get.
Predictions made in the documentary, filmed in 2010, are already coming true.
One of the analysts featured is former U.S. Comptroller David Walker. I covered Walker sometimes when he testified before Congress. He always had this weird thing about him: he made perfect sense and backed it up with numbers. Lawmakers could ignore him, but I don’t remember them refuting him.
Here’s what he said A YEAR AGO in the documentary.
Today the United States is rated triple A, but if it doesn’t start taking steps to put its financial house in order, that triple A rating will be lost – it’s only a matter of when and how quickly.
Well, not bad for crystal ball gazing.
Which brings me back to Obama. The president, as you well know, has provided no leadership on the deficit. Reducing the deficit is about cutting the growth in entitlements. That’s what it’s about. That causes political pain. And this president, despite all the baloney about change and his willingness to be a one term president, is not about political pain.
And he’s not about seriously restructuring entitlements. It’s not what he believes in.
Here’s what White House Press Secretary Jay Carney said today on the way to Grand Rapids, where the president will visit a plant that makes batteries for electric cars.
While at Johnson Controls, the President will highlight the key role innovative technologies will play in helping automakers achieve the historic fuel economy standards, establishing U.S. leadership in advanced vehicle manufacturing, spurring economic growth and creating high-quality domestic jobs in cutting-edge industries across America.
Johnson Controls, the White House brags in a press release, was selected as part of the stimulus “to receive $300 million to build domestic manufacturing capacity for advanced batteries for hybrid and electric vehicles.”
So Obama is headed to a company which got a debt-financed gift to make cars nobody wants in order to help automakers satisfy a fuel economy mandate that will cost the the auto industry huge sums, kill people in lighter cars, and have no measurable impact on global warming, in the grand scheme of things.
It’s exactly why the economy is going to Hell.
Walker says we can still save ourselves. I pray he is right.
We can do it. But we need to do it soon, because the clock is ticking, and time is not working in our favor.
I hope you have time for the video.