Obama and the World That Awaits Him

On January 20th Barack Obama will be sworn in as President of The United States. He will become leader of a country in deep crisis. Indeed those old enough to recall the Great Depression of the 1930s are experiencing a strange feeling of' 'deja vu'. How will this new president deal with the plethora of problems, this 'sea of troubles' which beset not only the USA but also the entire global economic structure.

Much is expected of the 'New Messiah', but many wise and experienced heads have grave doubts as to whether he has the answers or the means to bring such ideas as he may have to fruition.

During the Great Depression the stagnating economies of the world were unblocked by implementing the economic theory of John Maynard Keynes. The idea was for the state to stimulate business by a massive program of infrastructural renewal. Dams, bridges and highways were built which provided employment for the vast army of jobless Americans.The government of course had to 'print money' to finance the recovery but it did work and the economy eventually survived and prospered. Of course the process was aided by World War 2 ---- but that's another story.

There is much talk at this time for a similar program of infrastructural renewal to be set in train. However, this time we are considering almost countless billions of dollars being used to stimulate the economy. Other countries are using the same tactic. The problem this time around is that there is precious little means of production in Western Economies left to stimulate. Manufacturing industry in USA and Europe is practically non existent. Economies based on ever rising house prices, hedge funds and derivitaves (which actually produce nothing) are not about to rescue our dead economies. We have mortgaged the 'family silver' and there is nothing left to sell. Most manufacturing plants have long ago been outsourced to far flung outposts such as Indonesia.

Financial institutions which by greed and deregulation caused the fragile bubble to burst in the first place are reluctant to lend money, even to viable companies. Bear Sterns, 'Fannie and Freddie' and all the long catalogue of busted flushes, even those rescued by the Fed with taxpayers dollars are still holding on to their taxpayers dollars money and not helping out in a patriotic manner. Governments worldwide are considering demanding the banks commence lending to viable businesses or face being 'taken over' by federal governments.
The departing President Bush has reluctantly sanctioned even more billions to apply a band aid to the ailing US car manufacturers.
The new President is in something of a bind. The huge borrowing has to be repaid at some stage. In the meantime he must agree to 'print money'. The damage to the US, should the strategy fail, is incalculable.

What, then is the solution?

The problem is global, therefore the solution needs to involve a global strategy. All the main economies of the world need to provide 'unlimited' funding to unblock the log jam of frozen confidence. No one must be allowed to opt out. Human ingenuity will re-invent a new form of Capitalism, this time viewed through the prism of full tranparency and butressed by the most stringent regulation. Companies and individuals have for too long got away with financial murder. Mr Madoff is the latest villain to have duped the world of finance. The public will find it hard to trust so called financial advisors ever again without new sets of cast iron regulation and scrutiny.

That is the best case scenario: recovery through provision of global financial cooperation urged on by the imperative of global survival. There appears to be no other stratagem.

The alternative is too horrific even to contemplate.

Robert Jack Eardley, M.D.                                                              Robert Francis Eardley, Cert. Ed., B.A.
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