Wall Street Weekly | 10/09/2009 12:45 pm

Sinking Dollar Fair Warning to Obama, by Liz Peek

Image: WhiteHouse.gov

Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 10/5)

Editor’s Note: Liz Peek is a financial columnist.

The New York Times ran a story this week about the art that the Obamas have chosen for the walls of the White House. Featured in the piece was a painting by Ed Ruscha. The chosen canvas has a red background with the words "wait a minute," "maybe yes" and "maybe no" floating across the space. What an appropriate choice for our young president, who is suddenly irresolute about Afghanistan. Having once pronounced Kabul as central to the war on terror (oops! make that the Overseas Contingency Operation), the president is now angling for a Goldilocks position: not too little, not too much, responding to polls that show waning support for our activities in that desperate country.

President Obama is uncertain not only about our military options, but also – dangerously – about economic choices. He recently affirmed while addressing a Wall Street crowd that "I’ve always been a strong believer in the power of the free market." That was good to hear, because almost none of his proposed programs suggest a love affair with capitalism. Instead, he has offered up one measure after another that substitutes government fiat for market economics – most notably in autos, health care and energy. The newest entry is the proposed Consumer Financial Protection Agency whose czar will be empowered to decide on "the manner, settings and circumstances for the provision of any consumer financial products or services." Moreover, he has revved up his antitrust department, sanctioned pro-labor policies burdensome to American employers and started a trade war.

This litany of business-unfriendly stances is taking a toll, not only on the president’s popularity, but on the dollar. The dollar took a sizeable hit this week (and gold soared) when the Australians boosted their key interest rate, signaling a recovery in that country. While earlier this year global investors drove the dollar briefly higher in their quest for safety, they have since had second thoughts. The euro, for instance, has gained 18% in value compared to the dollar since March. You don’t have to read the tea leaves to find reasons to sell the dollar – you can simply delve into the budget projections.

To put things in perspective, note that budget deficits in the U.K. are about to sink the Labour Government. The IMF puts the U.K. budget deficit this year at 11.6% of GDP and at 13.2% next year. The net public debt of Great Britain is expected to amount to 92% of GDP in 2014, up from 58% today and 38%in 2007. (The Obamacare folks should note that the IMF has called for the U.K. to rein in their health-care program, a leading budget-breaker.) The Brits are alarmed about this state of affairs, which is why they are about to junk their existing government. David Cameron, the Tory leader most likely to take over as Prime Minister, has warned that the country is in for tough times – severe cuts in social spending and higher taxes. That is not the usual campaign rhetoric, but the country is looking the future square on, and does not like what it sees.

Here’s the sobering news for the U.S.: we’re not that far behind the U.K. Our budget deficit will total 12.5% of GDP this year according to the IMF, and our national debt will soar to 85% of GDP by 2014. These figures are spurring talk that the dollar will no longer be the world’s reserve currency and that oil producers may move to price their product eventually in a basket of currencies.

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By Community Manager on 10/09/2009 12:42 pm

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Dear Liz Peek:

Once again, thank you for another wonderfully detailed overview of what is and is not taking place in our White House. As our country seems to be spiraling out of control on many levels it is comforting to know that our President has such contemporary taste in art. After all, this is a man who stated, "I will transform this country" so I take it he includes the White House walls as well.

President Obama has become a very interesting personality to me lately. At times he has seemed manic about getting things transformed in the White House rushing the $787 billion failed stimulus, the cap and trade bill, and now the healthcare bill. I refer to it as Obama rushing in to "lay an egg" and then leaves the nest to have others hatch it for him. We all know now that the stimulus didn’t really stimulate which should concern Americans as "Son of Stim" is now underway to extend the very policies that didn’t work the first time. What are we to expect next? "Son of Stim Three….then four?" I don’t know about you but I have never been good at banging my head against a wall and hoped that it wouldn’t hurt. I believe I would’ve helped our largest employer in January our small businesses in order to keep the jobs and create more. However, that’s beating a dead horse at this point because Obama simply doesn’t show signs of valuing our small businesses not then and certainly not today. That dead horse will rear its ugly head in the form of inflation and unprecedented unemployment numbers.

As "manic" as President Obama has been about transforming our lovely country into something many of us won’t recognize in a few years, he has now presented the side of being alarmingly indecisive. We know that Afghanistan deserved careful and precise evaluation. General McCrystal provided that evaluation over 40 days ago. In the meantime, all is quiet on Pennsylvania Avenue. Our troops are understaffed, morale is low and they feel deserted. It’s one thing to not agree with someone you don’t trust on such a sensitive issue. It is quite something else not to trust the judgement of the person you hand selected to brief you on what is necessary to win this war in Afghanistan. So, in that regard, President Obama is showing a new side to his personality one glaringly opposite from what we’ve seen so far. As Obama campaigned on world peace and has just today been rewarded for that it must be especially hard today, this afternoon, to push for a surge in Afghanistan. The prize and the surge somehow are not a good fit….especially for re-election concerns in 2012.

U. S. budget deficit hit a record high of $1.4 in 2009. In comparison, the previous record deficit was $459 billion which was set last year. Obama is coming out with a miriad of ways things will be paid for with new revenues and curbs in spending but the overhaul effort would eat up tax increases and spending cuts that could be used to bring the deficit down. In other words, Obama has placed our country between a rock and a hard place. Now that the CBO no longer has any economic concerns after his visit with Obama, you can bet that the economists are extremely worried! Some economists worry that the deficits could place upward pressure on our interest rates down the road. They know what comes next when you have to borrow everything you are spending….it’s called inflation.

Today’s poll shows that 29% of the nation’s voters strongly approve of the way that Barack Obama is performing his role as President. 35% strongly disapprove giving Obama a Presidential Approval Index rating of -6. Overall, 49% of voters say they at least somewhat approve of the President’s performances. 55% disapprove.

The White House says it wants deficits in the next few years to stabilize at or below 3 percent GDP. But by the White House’s own estimates released in August which predicted deficits averaging about 4 percent through the rest of the decade it would take several hundreds of billions of dollars in new taxes or spending curbs to just get the defcit down to 3 percent of GDP. So, buckle your seatbelts, America, and save every dime you can get your hands on, because you are going to need it to pay your 25% hike in your fixed monthly expenses (cap and tax) and increased taxes on the middle class. I’m not sure if this is the "hope and change" you were expecting but your taxes are going up and so are your monthly expenses. Americans aren’t spending their money because they do not trust this administration….when Americans don’t spend our country suffers.

By deber B on 10/09/2009 2:04 pm

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Deber B,

Great post. Approval rating down to 49% you say? Wow o wow. He is going down pretty fast and how long has he been in office? It comes as no shock to me, because I haven’t seen him do anything to date. SNL’s skit said it all. Wonder what the skit will be this week. I bet I can guess, but I won’t say it on this thread.

By Kathy Lee on 10/09/2009 4:59 pm

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Thanks, Kathy Lee. It’s always refreshing to get the other side of the story. Liz Peek brings out our ability as posters to engage in republican beliefs and opinions on the direction Obama is taking our country. I still believe that this job was over Obama’s head as he brought no experience in dealing with managing anything much less our country and issues abroad. A president is only as good as the people he surrunds himself with and Obama certainly has questionable czars and centers of influence roosting in the White House. Although I do believe he is working hard for America, I am still of the opinion that his far left leaning agenda will flatline our economy. There’s no way to avoid it now. Spend, spend spend….borrow, borrow borrow is a downward spiral in basic economics. With no clear plan to pay for Obama’s wreckless spending in the near future, we are doomed to engage devaluing of the dollar, inflation and, of course, higher interest rates. Finally, yesterday, Obama addressed the propped up mortgages held by the government and the promise of more to come. He is finaly addressing regulation of the banks, credit cards, etc. but did not advise us of the impending personal bankruptcies that will come on the heels of the current foreclosures. It stinks. All of this could’ve been avoided if he had at the very least propped up our small businesses with deep tax cuts and perhaps 1% loans to keep the jobs and create more jobs. I still don’t get it. The largest employer in our country got snubbed by this administration. My guess is that eventually, perhaps in Son of Stim three he will finally infuse the small businesses and the economy will turn around….but at what cost now?

By deber B on 10/10/2009 7:34 am

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Hi Kathy Lee- Do you think SNL is at the leading edge of public opinon? I thought their razzing of the pres was an interesting barometer that the lustre is wearing thin. HOw about you? All the best - Liz

By Liz Peek on 10/10/2009 9:40 am

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deber — Bravo! Bravo! And, to Liz Peek another of your wonderful thought provoking, well researched, articles. There is so much to be absorbed that the heads of all Americans are swiveling on their necks. No wonder so many people are saying "enough". Every day it seems another shoe will drop.

The administration announced today, by a senior administration official, that President Obama is prepared to accept some Taliban involvement in Afghanistan’s political future. Excuse me but didn’t we go to Afghanistan to throw the Taliban out of that country. Isn’t this the "cart before the horse" again? And, why is it so hard to make a decision on specific troop levels to be sent to fight Al-Quida. General McChrystal’s troop request for 40,000 troops doesn’t sound unreasonable. And, I tend to believe that this military man has more intelligence as to war and troops than a new, obviously confused, non experienced President! And, I, might add, his new, obviously confused, non experienced advisors.

Did I hear it right from the same Senior Administration official that Obama is actually considering adding as FEW as 10,000 troops. I’m sure that will be of no comfort to our men and women in uniform who are in Afghanistan! And, now that Obama has won the Nobel Peace Prize does that mean that we will cut and run from this war as we did in Vietnam. All in the name of a "Peace" prize. And, all of those who have died for this battle will have died in vain. And what of the 3,500 Americans who died on Sept 11? Did they also die in vain? Are we to forget that they gave their lives because they just went to work one day and never returned to their loved ones. Are we to forget who killed them? How they were brutally killed? I won’t forget and I hope and pray this President doesn’t either. And to allow the Taliban to have a say so in Afghanistan, is setting that country backward. The Taliban, having partial control over any part of the lives of the good people of that country, just when those people are experiencing some freedoms they haven’t experienced in decades, is absolutely unbelieveable to me.

I personally don’t care what kind of art the Obamas have on their walls. At one point I was hoping that this President would finally understand that a great many Americans do not approve of his destruction of this country and of the trend in which we are heading. Maybe he and his administration think that they will finally wear down the disbelivers. I think not! I think his spending into oblivion, the unemployment numbers, the Health Care Reform, and now, a possibility of more spending, more taxes and more of this out of control governing, will just embolden his opposition.

Today, the President said in a speech before the press on the lawn of the White House, (in regard to winning the Nobel Peace Prize) "I don’t deserve it". Well, Mr. President for once, I agree with you.

By Glenda Glynn on 10/09/2009 9:01 pm

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Bravo Bravo, Glenda! Superb!

By deber B on 10/10/2009 5:23 am

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Dear Glenda Glynn- Good post, indeed. Check out Peggy Noonan’s piece in the WSJ today on Afghanistan- very thoughtful call for Congressional hearings, which seems totally appropriate. If Obama doesn’t commit to a "surge" he will be governing by the polls. Even in his darkest hours, Bush NEVER commited that sin. Elsewhere, the stupidest foreign policy fiasco we’ve produced is the situation in Honduras, where our government is opposing a free election - in order to save democracy. It makes me want to put my head through the wall! Thanks for weighing in- Liz

By Liz Peek on 10/10/2009 9:45 am

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Dear Liz:

The democrats won the election in part by pummeling Bush for Iraq. They opposed the surge which was ultimately successful because they said "he has taken his eye off the real threat" which was IN Afghanistan. Now that the surge has worked and the democrats are in office they have a dilemma. They cannot follow through with commitment to Afghanistan without angering the far left and they have already lost moderate centrists (which accounts for Obama’s approval ratings going from the high 60’s to hovering around 50). So, their backsliding position now is that the focus needs to be on Al Qaeda alone and not The Taliban. However, anybody who is paying attention knows that the extremists Taliban in Pakistan and Afghanistan are still a significant threat.

Obama’s decision, I am afraid, will be entirely political and probably, therefore, not in the interest of national security or our troops in the field.

Obama is between a rock and a hard place. Not good for any of us.

By deber B on 10/10/2009 12:20 pm

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I have to say that whatever makes someone harbor the belief that the president of the United States needs to be warned by a citizen fascinates me, but does not amuse. It is curious, at best. Peek needs to consider applying for the FBI - how about you Deb … actually, the CIA is most adept at gathering minutia, and figures.

By C jay on 10/10/2009 8:24 am

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Hi Deber! YOu are right on the money as usual! The President’s approval ratings reflect this country’s continued strong belief in self-reliance, and conviction that the government should play a limited role. Winning the Nobel prize reminds us of parallels - a good many of them - between Jimmy carter and Obama- light resume, naivete, big-government bias. Carter only served one term before Americans had had enough of being embarrassed on the world stage; let us hope that this president learns from that lesson. All the best- and genuine thanks for your valued contributions to this site! - Liz

By Liz Peek on 10/10/2009 9:38 am

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Hi Liz:

Winning the Nobel Peace Prize in some way has to be am embarrassment to President Obama. As he stated, "I don’t believe I have done anything to deserve this" well, it was right. This award was given by five liberal academics in Norway LOL! I agree with your comparison of Jimmy Carter and Barack Obama…light resume, naivete, big-government bias however I would like to add something…at least Jimmy Carter was a Governmor of a State albeit a poor one and he was NOT the product of an entrenched, corrupt political machine like Chicago. I knew Obama would be a one term president the first time he reached out to the world and apologized for our country. We really need a President in the White House who loves America and never feels a need to apologize for the many countries we’ve helped in terms of food, shelter, security, education and military support. I knew then that America had made a very bad mistake.

I appreciate your kind words for my small contributions however YOU are the one who needs to be thanked for providing thought provoking articles every week.

By deber B on 10/10/2009 12:33 pm

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With the shrinking dollar, bailing out banks and car makers, and more families losing their homes and jobs, who’s paying for the paintings in the white house?? are they donated??? will the artist get a tax break for presenting them as gifts???? will we ever get paid back all the money the tax payers lent to the banks (who by the way are the ones who have caused the bankruptcy of so many Americans with their outrageous interest rates and other hidden fees). how many more children are going to go to bed hungry????

Where Health Care is concerned, all Americans deserve the same medical care that Congress and the Senate get, they have access to some of this country’s best and brightest and it doesn’t cost them a cent.

I know that when a President leaves office he receives a pension for the rest of his life, is that also true for Congress and the Senate????? Should someone who only served 4 yrs in office received a pension for the rest of their lives???? Even in the Military you have to serve over 20 yrs to get a pension, unless your disabled due to your time in service. What makes Politicians any better the Bill and Mary down the street????

Personally I don’t care what’s going on in any other country right now, there’s so much wrong with our own we need to be taking care of business at home and letting everyone else learn how to take care of their own.

It’s always America to the rescue, during wars, food, money, were always there for everyone else but what about the families in the Appalachian Mountains who still don’t have running water, some without indoor plumbing.

I’m all for lending a hand when needed but we need to take care of our own FIRST.

I ask these questions because I don’t know where else I can answers, or who to call to get the answers.

By Deniseann Taylor on 10/09/2009 1:36 pm

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As to where the paintings came from, it was in the article:

Works by those artists were among some 45 pieces that the first couple borrowed from several Washington museums to decorate their private White House residence and the West and East Wings, the White House press office announced on Tuesday.

“We have one rule: We won’t take anything off public display,” Mr. Cooper said in a telephone interview. Nor will the museum lend a work likely to be requested for an exhibition anytime soon. “That limited us to looking at things in storage,” Mr. Cooper added. “But there’s quite a bit.”

“Michael Smith came to us with a long list of artists and asked me what was available,” Kerry Brougher, chief curator at the Hirshhorn Museum, said in a telephone interview. “There are some very interesting figures. It’s more interesting and shows a greater diversity of art than I’ve seen.”

As for the rest, good points. I understand that x-Presidents now get lifetime Secret Service protection - a fairly recent development.

By Zera Lee on 10/09/2009 9:03 pm

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Zera, I skimmed the article and missed where the art work came from, so I apologize on my comments about them.

I was happy to hear that the Pres. is donating the 1.4 million to charity, I think he’s doing the right thing. It wouldn’t look to good for the seated Pres. to accept such a large amount of money.

Pres Obama from what I’ve seen and heard truly cares about the people of the United States, but I honestly don’t think bailing out the banks and auto industry is fair to the over all public. Some have come back and said they wouldn’t be able to pay back all the money they borrowed, that’s money out of the pockets of the citizens of America. I’m one of many who’s lost their home to foreclosure, and it hurts to even drive by my old house when I go to visit my kids. I worked so hard on that house, my rose bushes have all been removed and all the bush’s I planted are gone, I can’t work anymore due to health, but if I could I’d make sure I would be able to buy another house. I hate putting my money in someone else’s pockets, and when you rent you can’t paint the place to fit your life, or plant flowers in your front yard. It’s like living with your parents and they say "As long as you live under my roof, you’ll do it my way", their way or the highway

So far all the things that have happened, stimulus package, bail outs, none of it affected me and I don’t see anyone in my neighborhood who got help of any kind. Most have lost their jobs and unemployment is running out and their are no jobs to be found. America should take care of their own before helping everyone else. And one last point, why are we rebuilding the countries that we’ve been at war with, Japan, Korea, Viet Nam, and now the various countries in the middle east. I just don’t get it, we didn’t start any of those wars so why does the gov’t always spend our hard earned money on rebuilding those we are at war with. No one helped with Pearl Harbor, or 9/11, we took care of it on our own, with no help from anyone else.

By Deniseann Taylor on 10/09/2009 10:09 pm