The Weiner Component V.2 #39 – Money & the President: Part 5: Barack Obama

Official photographic portrait of US President...

With his family by his side, Barack Obama is s...

With his family by his side, Barack Obama is sworn in as the 44th president of the United States by Chief Justice of the United States John G. Roberts, Jr. in Washington, D.C., Jan. 20, 2009. More than 5,000 men and women in uniform are providing military ceremonial support to the presidential inauguration, a tradition dating back to George Washington’s 1789 inauguration. VIRIN: 090120-F-3961R-919 (Photo credit: Wikipedia)

President Barack H. Obama was elected in November of 2008.  He assumed the Presidency on January 20, 2009, inheriting a country on the verge of a massive depression whose economic downfall could also have brought down the rest of the Industrial nations of the world.

 

Most of the banking houses within the United States were close to if not at the point of bankruptcy.  They had been involved for the last 30 to 40 years in a process of increasing the amount of available currency in the overall economy by financing and continually refinancing a large percentage of American homes, and in doing this raising property values virtually to the clouds.  Their philosophy at that time was for homeowners to use their properties as bank accounts by continually refinancing them.  During the year 2008 this Real Estate Bubble burst with property values crashing in some cases 60 to 80 percent.  Initially in 2008 former President George W. Bush had partially bailed out some of the banks before he left office; but the bulk of this problem was left to the new incoming President, Barack Obama.

 

Among other things the country faced, with the sudden fall of values and the fact that the banks suddenly stopped refinancing homes, was a sudden massive level of unemployment.  On the one hand many people owed more on their homes than they were worth and on the other hand, because of the sudden massive unemployment, many people were no longer able to afford to make their monthly mortgage payments, even if the value of their homes was above their mortgage debt.

 

It should be noted that if a large percentage of the banks were allowed to fail then the movement of money within and across the country would slow to a trickle destroying the economy for a number of years until a new banking system could be set up, however long that took.  In 1929 with the Great Depression the disintegration lasted until the 1940s, the outbreak of World War II.  This one with its added complications could last 20 to 30 years, if not longer.

 

Another immediate problem was the fact that the numerous Hedge Funds that had bought the original mortgages, each of which had been divided up into a hundred or more pieces and sold piece by piece to different Hedge Funds, had very sloppy records of these transactions.  The banks sold the mortgages and/or set up their own Hedge Funds. Then they continued to administer them but no longer owned the mortgages.  At this point mortgage money was no longer coming in.  The banks stopped receiving their fees and the Hedge Funds no longer received their incomes.  What emerged was an impossible situation.

 

The problem here was that no one owned enough of a mortgage to foreclose legally on a property for nonpayment of the mortgage.  Ownership, however, did not bother the banks, many began foreclosing on properties they did not own but did service.  Initially the courts felt that the banks would do nothing illegal.  When it was proven that the banks were acting illegally the practice was stopped by the courts and those banks were heavily fined.  People who had been foreclosed illegally in some cases received some financial compensation from the banks.  Other than that no one from the banks was charged with criminal activity.

 

President Barack Obama made hugh government loans to the banks.  He also bailed out the American auto industry.  These were all interest bearing loans.  Former President George W. Bush had signed the 2009 Budget the prior year into law.  President Obama needed an additional amount over 300 billion dollars to fund all the loans.  A Democratic Congress authorized the amount needed and the Federal Government  was eventually mostly paid back with interest.  The companies that did not pay their loans back went bankrupt.

 

President Obama made a point that the near-bankrupt banks could no longer compensate their executive with million dollar salaries.  Their leaders had, after all, brought these financial institutions practically into bankruptcy.  The CEO of the Bank of America complained vigorously that his company would pay back their loans as soon as possible so they could get back to paying their executives proper compensations.

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Immediately upon assuming the presidency the Obama Administration faced two massive problems: one was a high rise in unemployment; and the other was the fact that most of those homes whose value had collapsed had mortgages that each had hundreds of owners.  Actually no one held enough of a mortgage to do anything with it.  In reality this meant that no one really owned the houses.  Functionally if nothing was done to alter the situation then it would take at the very least one or two decades for the problem to be resolved.

 

No one owned enough of a mortgage to do anything with it.  The people in these homes could go one living there without making payments, which in many cases was happening because of the unemployment, and no one could foreclose on them.  Of course no one knew which homes came under this and which did not.  But in time many homeowners figured it out.  They had made no mortgage payments and no one bothered them.  Many of these people were employed or became eventually employed and still made no mortgage payments.  Instead they ended up with more money than they ordinarily had when they were employed and so they spent this money in restaurants or other places essentially enjoying themselves and also helping economic growth.

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What the Obama Administration had been able to do was to turn a potential depression that would have been larger than the Great Depression of 1929 into what has been called the Great Recession.  By the use of money they made a potentially massive depression into a recession from which the country recovered while Obama was still President of the United States.

 

The mortgage dilemma which ordinarily should have taken a decade or more to resolve was solved by President Obama and the Chairman of the Federal Reserve, Ben Bernanke.  For a term of a little over two years, during President Obama’s second term in office, the Federal Reserve bought $50 billion worth of mortgage paper a month and then destroyed or discarded the mortgage pieces.  Fifty billion a month for a period of two years is one trillion, 200 million dollars’ worth of mortgage pieces.  In addition the government also added this same amount of money to the National Cash Flow.

 

In essence the Obama Administration bought the country out of a potential depression and recession.  Adding all this money to the economy did not cause any real inflation.  Instead it reduced unemployment to under 4% toward the end of President Obama second term in office and essentially brought about a return to a positive and healthy functional economy.  Interestingly neither Obama nor Bernanke flaunted this fact and not only did they get no credit for it, most people didn’t even know it happened.

 

In 1933 Franklin D. Roosevelt doubled the money supply in the U.S. but the Great Depression did not really end until World War II.  In 2015 Barack Obama more than quadrupled the money supply and ended the Great Recession.  The country learned a lot economically over the years.  Money was accepted by the Federal Government as a tool to end National economic disasters.  It was no longer an object of value.

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Shortly after Barack Obama assumed the Presidency the Republicans from both Houses of Congress met in caucus and concluded that they would make Obama a one term President.  Was this because he was Black or because he was a Democrat?  For whichever reason they would support nothing for which he could gain credit.

 

At this time, 2009, the Republicans were in a minority position in both Houses of Congress.  After the midterm election of 2010 the Republicans would gain the majority in the House of Representatives and keep it for the rest of President Obama’s term of office.  In 2014, for his last two years in office, the Republicans would also gain the majority in the Senate.  As a consequence after his first two years as President it would be impossible for President Obama to achieve any new legislation.  He would essentially run the country by executive orders.

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As a footnote included in the text of this essay we should consider what might have happened if the Republican candidate, John McCain had won the 2008 Election.  How would he have run the United States as President?  The probability is that he would have had the same problems that President Herbert Hoover had from 1929 to 1933.  The country would have fallen into and continued with a Grand Depression.  There is no way that McCain would have had the imagination to do what President Barack Obama did.

 

During his first two years in office President Barack Obama not only modified what might had been a massive depression he also got through Congress a great deal of positive legislation.  Obama signed the Patient Protection and Affordable Care Act, which was later known as the Affordable Care Act or Obamacare.  In order to avoid a repeat of the 2008 Property Bubble Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act that the President signed.  There was the American Recovery and Reinvestment Act of 2009.  In addition he signed Tax Relief, Unemployment Insurance Reauthorization, and the Job Creation Act of 2010.  For the military there was the Don’t Ask, Don’t Tell Repeal Act of 2010.  Sexual orientation was no longer to be considered in the military.

 

By 2011 the Republicans or GOP gained control of the House of Representatives.  After a lengthy debate the President signed the Budget Control and American Taxpayer Relief Act.  As the President and the House of Representatives could not come to any agreement of funding the government this bill was signed as a compromise.  The House wanted to cut entitlement programs and increase military spending while the Administration refused to support cutting entitlement programs.  What occurred was sequestration.  If the President and Congress could not work out any way to reduce government spending then beginning in 2013 the Sequester would come into being.  This would automatically reduce an equal percentage of all aspects of Federal spending.  It officially began on March 1, 2013.  Exceptions could be made but each required a separate bill from Congress signed by the President.  Sequestration is still with the Federal Government.

 

During his second term in office the President In addition to Sequestration increased U.S. troop levels in Afghanistan, reduced nuclear weapons with the United States-Russia New START Treaty, largely ended military involvement in the Iraq War and ordered military operations that brought about the death of Osama bin Laden.

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In 2012 President Barack Obama ran for a second term against the Republican, Mitt Romney.  What was fascinating in the election was the shortness of the Republican memory.  One of the things Romney promised was to do away with all the legislation that was passed to do away with the abuses that had caused the 2008 Real Estate Bubble.  All of that would wait another four years for when Donald Trump became President.

 

In this four year period President Obama promoted the LGBT Americans with his Administration filing briefs that urged the Supreme Court to strike down same-sex marriage bans as unconstitutional.  Obama also urged gun control after shootings.  He strongly supported climate change and immigration.  Militarily he ordered intervention in Iraq and continued operations in Afghanistan.  He supported the Paris Agreement on global climate change and initiated sanctions against Russia after the invasion in Ukraine and interference in the 2016 Presidential Election.  He also, after over one half a century, normalized U.S. relations with Cuba.  President Obama left office in January with a 60% approval rating.

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When President Barack Obama assumed the office of President of the United States the population of the country, according to the Census Bureau was 306.77 million people.  At the end of his eight year term it had grown to 325.34 million people.  An increase of 18.57 million persons.  People or whose antecedents’ had come from all over the planet changing the population so that Caucasians were no longer the majority of the population.  They continued as a large minority within the population.

 

It should also be noted that in 2009, at the end of the George W. Bush Administration, the National Debt was 10.6 trillion dollars, doubled from the end of the Clinton Era.  By January of 2017 it was 18 trillion dollars.  It had been extremely expensive keeping a Grand Depression from happening.  The alternative for the American people would have been total disaster.

 

The Weiner Component #156 – Fear & the Economic Situation

Official photographic portrait of US President...

Official photographic portrait of US President Barack Obama (born 4 August 1961; assumed office 20 January 2009) (Photo credit: Wikipedia)

Starting slowly, probably around the 1970s, the process of splitting real estate loans into a few parts began, and then, with the election of Ronald Reagan as President of the United States in 1981, the concept took off on a refined bases, with each real estate mortgage being broken into innumerable parts and having each piece put into a different hedge fund and sold as a safe investment. It was considered safe because any single or few losses on any one of these hedge funds would be so small that it wouldn’t be noticeable and would not really affect the amount of the dividend.

 

Two things occurred from the 1980s on: one was the election of Ronald Reagan to the presidency of the United States and the imposition of a total Free Market Economy and the other was an incessant need in the general society for a much greater cash flow.  We were in a period where there was not enough money available to serve the overall needs of the population.  More cash was needed for the economy to function.

 

The agency of Federal Government that was supposed to be keeping track of this problem and monetarily serving the needs of the nation was the Federal Reserve.  It’s Chairman from 1987 to 2006, Alan Greenspan, like the President believed in a totally Free Market that would automatically adjust itself.  Consequently he and the FED did nothing to alleviate the problem. 

 

This in turn left the need prevalent and either purposefully or inadvertently it was picked up by the banks which were also deregulated by the Reagan administration.  They, at first, gradually and then, with ever increasing speed, using real estate as their base, picked up the speed of creating new value or money throughout the society.  This was to continue through late 2008 when the banks had far     exceeded the amount of money needed for the society to properly function and the Great Real Estate Crash occurred.

 

What happened was that the banks, by their lending policies from the 1980s until late 2008, over 28 years, created trillions of dollars of additional value based upon the public housing industry within the United States.  In addition deregulation also allowed them to freely invest their deposits into the agencies or funds that directly serviced this expansion.

 

By 2007 most bankers were aware that property values had far exceeded a sane level and that a crash was probable.  But by 2007 most of the bankers had been making high commissions on the property market for most, if not all, of their banking careers; they were in denial that conditions could ever change. 

 

The Real Estate Market crashed or the Real Estate Bubble burst in late 2008 under President George W. Bush.  Virtually overnight the economy of the United States went into an instant depression.  There was suddenly mass unemployment, many people owed more on their homes than they were then worth.  Some people just walked away from their homes, others stayed, the hedge funds, which many or the deregulated banks had also invested in, collapsed from non-payment on mortgages.  Bush and his Treasury Secretary bailed out some of the banks; then his term ended and Barack Obama became the next President of the United States.

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Barack Obama would spend his eight years in office dealing with this mess.  For his first two years he had a Democratic Congress and their full support.  From 2011 on the House of Representatives gained a Republican majority and thereafter passed no legislation that dealt with the economic emergency.  In fact they passed economizing laws that actually increased the disaster.  President Barack Obama and the Federal Reserve Chairman, Ben Bernanke, using Creative Monetary Policy were able to change the depression into a recession.  The country is still dealing with this problem that the House of Representatives refused to deal with.

 

Conditions have improved.  Unemployment is now at about 5%, a long way from the initial 12½%  The Republicans still have done nothing to improve conditions, instead they have actually worsened them.  They are a great political party for complaining and blaming.  But what they are blaming President Obama for, is mainly for what they, themselves, have not done, passing fiscal laws creating jobs and upgrading the infrastructure.

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In 2008, the year of the Real Estate Crash, the Gross Domestic Product   was at 800 trillion dollars.  In 2009 it dropped to 700 trillion dollars.  By 2010 it was slightly above where it had been the year before.  By 2015 it was in the area of 17.95 trillion dollars.

 

Keep in mind that the GDP refers to the market value of all goods and services produced within the country during the fiscal year.  Interestingly the United States is now ranking first in the world’s GDP level.  That makes it, even now with 5% unemployment, the world’s richest nation.

 

If, as we’ve seen in the GDP, the overall wealth within the United States was continually increasing by 2010 above the 2008 Real Estate Crash level then why was the U.S. up to 12 ½% unemployment?  The answer, of course, comes into the area of spending priorities mostly by the United States Government and the overall population.

 

Congress, from 2011 on, with a Republican majority in the House of Representatives, was on an economizing bilge. The country underwent and is continuing to undergo Sequestration, spending cuts across the board in virtually every area.  The President, on the other hand, particularly in 2009 and 2010 underwent expansive spending programs to avoid a depression greater than that of 1929.  Basically what started from 2011 on was a redistribution of income, with gradually more and more money going to the upper echelon of society and less and less being available for the middle and lower classes, these amounts increasing yearly.

 

In 2009 and 2010 the Obama Administration spent inordinate amounts of money extending unemployment benefits, saving the American banking and auto industries, among other things.  From 2011 on gradually most of these programs ended and government began a struggle between the House of Representatives and the President.  In 2013 we had both Sequestration and a shutdown of the Federal Government from October 1 through October 16, 2013, for 15 days.  The shutdown was over the issue of government funding for Planned Parenthood in the 2014 funding bill.  The Republican House of Representatives attempted to force its will upon the President and the Democratic led Senate.  The President and Democratic Senate would not cooperate with the Republican led House of Representatives.  In many cases Congress has refused, or through different Republican disagreements, has been unable to act.

 

The positive movement that had occurred in the economy, turning a potential Great Depression into a Great slow-moving Recession came about through Creative Monetary Policy, government spending policy, by the Federal Reserve with the compliance of the President.  In essence it’s been a battle between the President and the Republican House of Representatives, with the administration slowly winning since national unemployment is today in the area of 5%.

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The question that arises: if the GDP (Gross Domestic Product) today is greater than it was in the period prior to the 2008 Real Estate Crash then why is the middle class in the United States continually shrinking and why are more and more people continually having a harder and harder time economically surviving?  The answer to that questions is that the National Income is like a balloon filled with helium, slowly and continually rising and becoming part of the incomes of the top few percentile, the upper 5 or so percent of the population.

 

In essence the rich are getting richer and everyone else has less money.  It would seem that the society is geared so that the rich pay a lower percentage of their incomes in taxes than everyone else does.  For example: Donald J. Trump, who is running for the presidency in 2016 as the Republican candidate, has refused to show his tax returns for any prior year.  Trump claims to have over ten billion dollars.  The probability is that he is not showing his income taxes because he doesn’t pay any of these taxes.  Being in real estate he would have endless write-offs and building depreciations.

 

But it isn’t just people in real estate who have these tax advantages, it’s anyone who earns over $464,850.  The income tax system is graduated up to that point; that is the more one earns, the higher a percentage of his/her income he/she pays in taxes.  Anyone earning over $464,850 pays the same rate as those earning that amount.  A person earning a million dollars or 25 million a year pay the same percentage of the incomes as the person earning the above figure.

 

While the number of individuals is not large compared to the overall population of 350 million people, yet the taxation system is rigged in favor of the very rich.  The more they earn over $464,850 the smaller a percentage of their income do they pay in taxes.

 

This change or decrease in taxes was brought about during the last five years of the Obama administration.  The Republicans actually lowered taxes for the very rich.  The Democrats were forced to go along with this in order to pass other similar required legislation.

 

The Republican argument for this action is that the rich need more money because they are the ones who invest in new industry.  Without them there would be no growth in the economy.

 

This argument that has been endlessly repeated over the years sounds wonderful.  But it is a myth.  It has never happened.  The rich invest their surplus incomes in old established industries that pay a set reasonable income or they, like Mitt Romney, bank some of it overseas where somehow they pay no taxes on the interest received.

 

Taxes are geared so the less an individual earns the higher a percentage of his/her income is paid in taxes.

 

The United States is the wealthiest nation in the history of the world.  Yet its unequal taxation system taxes the poor and middle class far more than the wealthy, they pay a higher percentage of their income in taxes.  It also has an underclass that is so poor they live in the streets and even though these people pay no income tax they also pay a higher percentage of their incomes in other taxes than the rich.  The national distribution of income is today a farce.  Someone like Warren Buffet has remarked that it’s a strange situation where he pays a smaller percentage of his income in taxes than his secretary.

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In 2016, the year of the next Presidential Election, this created a strange phenomenon within both political parties within the nation.  Currently there is a Republican majority in both Houses of Congress.  Very little if any needed legislation is being passed.  This situation has existed since 2011 when the Republicans took control of the House of Representatives.  In both major political parties there are large numbers of people who are totally frustrated with their Federal Government.  Many of whom are not overly well educated or generally too busy with their lives to follow what is actually happening in Washington D.C.  Their knowledge of the government is what they’re told by the news media, which can be tilted to the right or the left by which channel they are watching.  This doesn’t really answer their questions or needs. 

 

What exists today are large segments of the population which are looking for easy answers to what seems impossible questions or problems.  They want a simplistic solution which, in essence, is a return to a past which never existed.  They want a simplistic solution to their economic problems, to bring the manufacturing jobs back to the United States and allow people to earn more money so they will no longer be economically stressed out.  Whether this is real or not is beside the point; there is a strong desire among many for a simplistic change within the society.

 

For the Republicans the person who will do this is Donald J. Trump.  He claims that he will force the companies that have moved their manufacturing overseas or to Mexico to bring these jobs back to the U.S.  In addition he will get rid of all illegal foreigners in the U.S. and lessen competition so that there will be jobs available for everyone who wants to work.  He will also make the U.S. safer by not allowing alien radicals to migrate to the U.S. and keep Mexicans out of the country by building a wall between the United States and Mexico.  And so on.  He will bring us to a golden age that never existed in the U.S.

 

In essence Trump is feeding on all the basic prejudices and fears that seem to still exist in this country.  He is opposed to Mexicans, Hispanics, Muslims, Syrians, Blacks, Women having a right to deal with their own bodies, and the list goes on.  Trump has promised to take us all to-never-never land if he becomes president.  He seems to open up all the hidden prejudices in a large percentage of his followers.  He has also increased bullying among the children of his followers.

 

For the Democrats there is Senator Bernie Sanders, a Democratic Socialist.  Over a year ago he changed his party registration from an Independent Socialist who always caucused with the Democratic Party to a Democrat.  Sanders now calls himself a Democratic Socialist.  This has enabled him to run as a Democratic candidate for the presidency in 2016.

 

I strongly suspect that Bernie Sanders initially expected to run as a protest candidate with no chance of winning.  However he inadvertently tapped into the younger generation of voter; those who had been too young to vote in prior Presidential Elections.  To these people and the others who have joined them he offers a utopian future. Free education from pre-school through college and free medical coverage for everyone.  He supports abortion rights and a more liberal drug policy.  He believes in gun control, immigration reform, LGBT rights, expanding social security, and tax reform.  Among other things he has stated: “We need to get big money out of politics and restore our democracy,” and “Climate change is real, it is caused by human activity.”

 

He has also brought large numbers of Independents and some older Democrats to his cause.  His campaign took off like a rocket shooting upward and Bernie could almost taste victory.  But he never quite caught up with his competition, Hillary Clinton. 

 

He is promising a new society with benefits for everyone.  And all this will be paid for by the rich who have up to this point exploited their position in society.  The image is wonderful but the reality doesn’t exist.

 

I suspect that the majority of the population agrees with most of if not all of Senator Bernie Sander’s goals.  But they would have to be paid for if they were to be put into laws.  And his solution to this is rather naïve.  He says he would put a tax on Wall Street’s excess profits.  Traditionally in United States history, going as far back as the Revolutionary War from 1776 on the practice has been to make someone else pay for what you want.  The Southern planters owed millions to English merchants which they never paid after the Revolutionary War.  Afterwards Daniel Shay, a Revolutionary War veteran, led Shay’s Rebellion where the inland farmers refused to pay taxes that were brought into being by the Tidewater merchants in the coastal cities.  In recent years there was an attempt on the California side of Lake Tahoe to tax the Time Share facilities to pay for the public schools in the region; it failed.  It’s always nice to get someone else to pay for what is needed or wanted but generally it doesn’t work.

 

The term Wall Street is an abstraction; it has no specific meaning.  Are they talking about the banks or the large commercial corporations, or any company that sells stock?  An excess tax on the sale or purchase of stock or company profits would bring about economic disaster.  A tax on profits already exists, increasing it could destroy incentive.  Senator Bernie Sanders funding solution sounds just but it is nonsense.

 

Hillary Clinton is much more pragmatic.  The very existence of Senator Bernie Sanders has pushed her farther to the left in her own position.  She may be able to achieve many of Bernie’s goals which he should be able to get into the 2016 Democratic Platform. 

 

Sanders, on the other hand, as President would face endless frustration, even if he were to get Democratic majorities in both Houses of Congress, which is a low probability.  In all likelihood the House of Representatives will retain its Republican majority.  And even if Senator Bernie Sanders were to get an all Democratic Congress he would still have trouble both passing and funding his program.

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In the early 1800s England began the Industrial Revolution in the cotton industry.  Eli Whitney invented the cotton gin which allowed the cotton plant to be quickly separated from it many seeds.  Machinery was developed for spinning the cotton plant into thread and machinery was also invented for weaving the thread into cotton cloth.  Overnight spinners and weavers became obsolete, their occupation ceased to exist.  Some became luddites, breaking into factories and destroying the new machines in an attempt to bring back the past when they had a functioning occupation.

  

 Even if Trump, by some strange miracle, were to get elected the probability is that the results of the 2016 Presidential Election would leave a number of people totally dissatisfied  with the changes that don’t seem to be happening,  You can’t bring back the past, real or otherwise. 

 

Can conditions be improved?  Jobs are available in the United States.  The problem is that they require training and mobility.  It now requires a trained skilled employee for the jobs that pay a decent wage.  For those who refuse to undergo any training or move to where these jobs exist there are public sector occupations that do not pay much but that take almost no skills to do.

English: Seal of the President of the United S...

English: Seal of the President of the United States Español: Escudo del Presidente de los Estados Unidos Македонски: Печат на Претседателот на Соединетите Американски Држави. (Photo credit: Wikipedia)

 

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