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.

249 Reader Comments (so far…) Sign In or Register to comment

Frank Somsel,

Nada….nothing good to say at all. Couldn’t agree with you more Frank.

By Kathy Lee on 10/10/2009 9:06 pm

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Kathy Lee: I’m just telling it like it is. Thanks.

By Frank Somsel on 10/11/2009 8:26 pm

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Frank, After 9 months - considering the mess he took over- thinks are going great. Our standing in the world has improved.

What right wingers called the "apology tour" was a diplomacy tour seeking international peace. Right wing diplomacy goes like this "it is my way or the highway" "YOu better do as I say are we will kick your butt". "We will change the name of "french fries" we will call them "freedom fries"

By starry Nite on 10/11/2009 3:45 am

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Starry Nite — And the left wingers, and especially their leader says, "It is MY way or the highway". "You’d better do as I say are we will label you a right wing nut case, a terrorist, racist, thug, etc. "We will change the name of America to "The United States Of The Socialist Republic".

I’m glad you think "things are going great". Perhaps you think our standing in the world has improved. If I were this Administration right now I would be much more concerned about how the population of the U.S. feels about the trillions of dollars spent. The tax consequences on all of us for time to come. The unemployment numbers - no jobs — no homes — the government takeover of banks, car companies and the vision for this country. And, now their hesitation to offer immediate support to our troops ——-

I also notice that you think that Obama should receive the "Purple Heart" - I hope you are not serious — the Purple Heart is offered to only those of valor who have fought on the battlefield - who have, in many cases - given up their lives for their fellow servicemen and women - have thrown their bodies on mines to prevent the lives of those around them. Have the integrity, character and love of this country and their fellow man.

My father received a Purple Heart for his service to this country. This man, you mention, has in no way shown any of the characteristics I mentioned above. I’m sure he would be embarrassed by your suggestion. Just as he might be embarrased by any other award offered at this early part of his Presidency. Or not think himself deserving of either.

By Glenda Glynn on 10/11/2009 2:14 pm

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We will change the name of America to "The United States Of The Socialist Republic".

By Glenda Glynn on 10/11/2009 2:14 pm

The right wingers are so far right that they don’t recoignize that President Obama is not a leftist. President Obama has incurred the rath of the left because he is too centrist. He has given bi-partisanship a trial much to his detriment.

The Republican plan is to stop health care reform as they tried stop Medicare and Social Security. There plan is to attack the democratic plan. Some Republicans have given input and then they vote against it..

My farther also was a decorated World WAR II veteran and my brother served in Vietnam and I also served in the Military. I am sure that you understood my statement about the President Obama and the Purple Heart was said in jest and I can still do that because we still have the freedom of speech. He is however under attack from some of the American people such as you . I wish you educate your self to the meaning of socialism and a clear understanding of how we reached the current levels of deficit.

My view is that we spend money on other countries in humanitarian aid lets spend some on ourselves. Lets pass health care reform.

The bail outs had to be but should have had more strings attached.

President Obama is leading the country in the right direction.

Next thing the right wing will be looking for is what charity will get a donation from the President so they can go and attack these charities. Maybe send out the film crew again.

By starry Nite on 10/11/2009 2:41 pm

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Starry Nite..Your first paragraph is still up for debate. I will respectively disagree that Obama is a centrist. And, rather than get into a prolonged debate I will just say, I disagree.

And your second paragraph - I don’t think the Republicans are trying to stop Obama’s health care plan - I think they just want it to be done the correct way. I’m personally not against health care reform - I do believe, however, that those who have good health care should be able to keep whatever they have and the plan should be directed at those who have none. I don’t think anyone should be forced to change their health care or be forced into a single payer plan.

I will say thank you for your service to this country. Coming from a military family and married to a retired Air Force man I always take up for our military. I always take any criticism of our military seriously. So if you want to say anything in jest that is your freedom of speech. However, I take those remarks to heart. So we again have a differing opinion.

As to educating myself as to the meaning of socialism, I’m getting an education each day as to how it is implimented by the present administration.

And, as to your last remark about the right wing and chairty donations from this President. I really don’t give a tootle’s toot who he gives it to - unless it’s ACORN - then I hope they do have a film crew present.

By Glenda Glynn on 10/12/2009 7:26 pm

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Barack Hussein Obama is as far left as any president can lean.

By deber B on 10/15/2009 6:37 am

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Starry: Our standing in the world has improved? Iran and N. Korea shoot missles at will. The Taliban slaughters our soldiers everyday. No countries will help. Obama has no idea what he is doing.

Remember when Obama was campaigning in Europe and all of those people couldn’t get enough of him. I guess that faded when it was time for the 2016 Olympics. I can understand losing, but last place. I guess that improvement you spoke about didn’t last long.

Obama calls his own (if it is), country arrogant. Thousands of Americans have died so Muslims can open up a tattoo shop in Iraq. How much time does a president need to turn the tide? He’s done absolutely nothing but embarrass himself and his family. The Republicans will dominate the elections next year.

Things are going great? What about the 3 million people that have lost their paychecks since Obama took over. He promised jobs 9 months ago, where are they?

By Frank Somsel on 10/12/2009 12:34 am

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no, starry Nite, actually things are NOT great. The fall report card is starting to come in….the really bad news that Obama has been expecting.

Finally, an article has been written on the next wave of foreclosures. The personal bankruptcies will follow and will rock our bailed out banks….

MORGAGE DEFAULTS GROWING IN HOUSING’S TOP TIER….

Rick Moran
The real estate meltdown is far from over.

What started as a correction in the overheated, overinflated housing market is affecting all sectors of the real estate industry now. Many banks are in a state of near collapse as a result of the commercial real estate depression. And in the traditional loan market, defaults have nearly doubled.

Now, even homeowners in expensive neighborhoods are going under, as this Wall Street Journal article by Nick Timiraos explains:

About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new data from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home value, now account for 35% of foreclosures, down from 55% in 2006.
The report shows that foreclosures, after declining earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. "The slope of that curve in recent months is much sharper than it was recently," said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up.

The Zillow research compared homes against the median values for their local market and broke each market into three tiers by value. Zillow then looked at the share of monthly foreclosures in each tier over the past decade.

Foreclosures are rising in more expensive markets as home values in those areas fall, leaving more homeowners with mortgages that exceed the value of their properties. Prime loans accounted for 58% of foreclosure starts in the second quarter, up from 44% last year, according to the Mortgage Bankers Association. Subprime mortgages accounted for one-third of foreclosure starts, down from one-half last year.

There really is no end in sight. The administration is trying desperately to artificially prop up the value of homes by forcing banks to renegotiate terms and softening up loan guarantees by Fannie Mae. But housing prices continue to fall. And as they do, more Americans wake up one morning to find the value of their house is less than the loan they took out to pay for it. At that point, it becomes an economic albatross and drags the homeowner into default.

Some analysts believe home values must further plummet as much as 30% before we see a turnaround nationwide. That will probably take years - in which case, any recovery from the recession will be weak and probably short lived.

http://www.americanthinker.com/blog/2009/10/mortgage_defaults_growing_in_h.html

By deber B on 10/12/2009 3:59 pm

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President Obama obviously does not govern based on public opinion because you don’t approve of anything he has done.

Liz Peek- You have every right to be bitter but is it really President Obama’s fault ? Is he standing in the way of you getting back to the lifestyle of the rich and famous ? I mean all those consumer bills and banking regualtions are just so pesky. If the birthers are not sucessful you have 3 moe years.

By the way the SNL skit can be looked at several ways. I am a liberal I think President Obama is doing an okay job. I thought the skit was hilarious but for different reasons than you.

By starry Nite on 10/11/2009 2:37 am

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I think President Obama may deserve a purple heart for combat. He is well respected around the world but his country not so much.

By starry Nite on 10/11/2009 3:02 am

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starry Nite, Obama is not well respected around the world. Where in the world did you hear that? There were five liberal academics in Norway who gave him the Nobel Peace Prize for crying out loud! They love huge government control, spreading the wealth, etc. You should read the internationl newspapers to get a real feel for how Obama is viewed around the world. From what I’ve read most feel he is arrogant as well as in over his head. The apology tour was not good. It is never good when the President of the United States can’t be bothered with telling other countries the many many things this country has done for other countries and continues to do so.

Since Obama has never been anywhere near a military recruiting office, I don’t believe he’ll be receiving anymore awards.

By deber B on 10/11/2009 11:36 am

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I spend most of my time in the Middle East and Europe. After years of feeling the hostility directed toward America and literally sometimes travelling in a Canadian t-shirt- things are finally better. I will say the only place I went that liked Americans (and in fact they LOVED us) was Ireland. And that was because they love Bill Clinton so much. Not even our close ally the UK was feeling much love. But anyway- why do you care what the rest of the world thinks anyways? Europe is totally socialist/communist and the ME is full of terrorists right? For anyone who does care- Europe pretty much likes Obama and the ME is reserving judgement, but likes what he says. When you read the "international" press I’m assuming it is mostly UK because they have the most available in English. And I will say there are definately some right-wing rags there that you would like.

By Sandy B on 10/11/2009 2:01 pm

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Sandy - sorry I didn’t get to read your last comment to me. Apparently it was zapped before I got the email alert.

However, since Ms. Peek has opened up the subject of the Nobel Peace Prize, I have a few thoughts on that subject…

First, I was in a state of complete shock when I awoke to the news on Friday. Who were the other 205 nominees?…Gitmo detainees?

The Prize, which once meant something important, has in the last few years become, officially, a late-night joke. And like it or not, Obama is the punchline.

A young writer, Tommy DeSeno wrote:

Barack Obama won the Nobel Peace Prize this morning. Over the last decade the only requirement to win the prize was that the nominee had to be critical of George W. Bush (see Al Gore, Mohamed El Baradei and Jimmy Carter).

President Obama has broken new ground here. Nominations for potential winners of the 2009 Nobel Peace Prize ended on February 1. The president took office only 12 days earlier on January 20.

Let’s take a look at the president’s first 12 days in the White House according to his public schedule to see what he did to deserve a Nobel Peace Prize:

January 20: Sworn in as president. Went to a parade. Partied.

January 21: Asked bureaucrats to re-write guidelines for information requests. Held an “open house” party at the White House.

January 22: Signed Executive Orders: Executive Branch workers to take ethics pledge; re-affirmed Army Field Manual techniques for interrogations; expressed desire to close Gitmo (how’s that working out?)

January 23: Ordered the release of federal funding to pay for abortions in foreign countries. Lunch with Joe Biden; met with Tim Geithner

.January 24: Budget meeting with economic team.

January 25: Skipped church.

January 26: Gave speech about jobs and energy. Met with Hillary Clinton. Attended Geithner’s swearing in ceremony.

January 27: Met with Republicans. Spoke at a clock tower in Ohio.

January 28: Economic meetings in the morning, met with Defense secretary in the afternoon.

January 29: Signed Ledbetter Bill overturning Supreme Court decision on lawsuits over wages. Party in the State Room. Met with Biden.

January 30: Met economic advisers. Gave speech on Middle Class Working Families Task Force. Met with senior enlisted military officials.

January 31: Took the day off.

February 1: Skipped church. Threw a Super Bowl party.So there you have it. The short path to the Nobel Peace Prize: Party, go to meetings, skip church, release federal funding to pay for abortions in foreign countries, party some more.

So there you have it. The short path to the Nobel Peace Prize. Party, go to meetings, skip church, release federal funding for abortions in foreign countries. Party some more.

Good grief.

By Callie O on 10/12/2009 9:34 pm

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Callie — Let’s see - a bunch of us could probably have won the prize - however, I haven’t gotten permission to release federal funding for abortions in foreign countries. The rest I could handle! :)

By Glenda Glynn on 10/13/2009 8:54 pm