The President did something during the address nobody expected; he acknowledged the nation is on the wrong path. According to the latest polling, most Americans have believed this for some time. Presidents, in general, are by nature political animals, but Obama’s admission-by-inference is stunning, to say the least. The administration has taken great pains to paint a rosy “all’s right with the world,” nothing-but-upside picture to present to the nation.
The fact that Obama is willing to stick his neck out and say something that is risky both in political and in economic terms is quite telling. While the notion that our President, or any President, is altruistic in their motives during a speech is Pollyanna-ish at best, Obama would have been foolish to come out and simply say “Yes, the economy is still struggling, and we simply don’t have a clue.” That’s Federal Reserve Chairman Ben Bernanke’s job, and he worked as instructed this past week, attempting to deflect blame away from Treasury Secretary Timothy Geithner, as well as President Obama. When Bernanke admitted he had no clue why the economy can’t get its act together, he basically acknowledged that nation was mired in a deflationary cycle. Yes, you read right: deflationary.
Don’t misunderstand the word, and how it affects what the President said Monday night. Deflationary does not mean the value of money goes up; it means the value of things you can buy with that money (in particular, housing) will start to decline. While this is good for consumers in general, it is bad for the folks on Wall Street, because their money simply keeps its value, but the investments that money buys go down in value. Think of it like deprecation on a car; while our money’s value may actually stabilized in the short term, the assets that money purchased will drop in value, including investments, and that reduces the more than just the ability of Americans to buy. It does something far worse; it reduces confidence.
When an American’s confidence is affected, so is the willingness to purchase everything from a night out with the family, to a durable item such as a stove or refrigerator. All these decisions lead to slowdowns in services and manufacturing, and a loss of jobs. The only upside to this whole mess is that the bankers and financiers, most of whom who have been making a killing off this whole economic mess through shortsales (and don’t think for a second the cheap credit of the Fed hasn’t encouraged this), may actually get caught with their pants down. When financiers (many of whom are shadier than the underside of an oak tree) get blitzed on the bottom line, markets and prices begin to stabilize, and that’s when economies are able to recover. Need proof? Refer to the 1929 crash and the S&L crisis of the late 1980s, both of which were fueled by speculators and financiers.
How this relates to our President is ironic. He called for America to begin a “nation building,” only this time on itself. Many pundits and radio hosts, most notably Michael Savage, have called for this very action from the beginning. Now that the bankers, speculators, and financiers have been caught feeding at the trough, he has been called to account by the very people who are out of his control: the public, at large. Obama’s approval ratings have plummeted so low he may not have enough time to recover in time for 2012, and now he may finally be seeing it.
His decision to release petroleum from the Strategic Reserve, his decision to pull troops out of Afghanistan by next year, and this most recent call to domestic action, appears to be a cry of desperation by an administration besieged by reports of infighting, and high-level resignations. When you have a former president who was only the second to face impeachment calling you out, you know you have a problem. For the President to survive this apparent crisis of confidence, he must do more than just take credit for killing the world’s most wanted terrorist, or try to give health care to every American. President Obama may now need to do something that may be fundamentally incompatible with both his core political beliefs, and his own personality.
He needs to look into the mirror, develop humility and be able to swallow his pride.