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Bruce McFarland: Barack Obama vs. the Green Bubble

Democratic Voices

Posted: March 16, 2009 8:04 p.m.
Updated: March 17, 2009 4:55 a.m.
Google Barack Obama Anti-Christ and you get 1.12 million hits. Today we'll discuss that and I'll criticize Bill Clinton and George W. Bush, explain Jon Stewart and Jim Cramer, as well as making a little sense of the financial meltdown and the Green Bubble. That's a lot to do, so let's get going.

Jon Stewart and Jim Cramer (8.27 million Google hits) dominated the news lately because of the on-air face-off Thursday on Stewart's "The Daily Show."

Jim Cramer is an ex-hedge fund manager who hosts "Mad Money," a stock advice/entertainment show on CNBC, the preeminent business/stock market channel on U.S. television. Stewart and Cramer had been sparring on their respective shows for about week culminating in last week's fireworks on "The Daily Show."

Stewart commented on the great harm caused by CNBC's purported unrelenting encouragement to "buy, buy, buy," while paying little attention to risk involved and the true value of the underlying assets of financial institutions. Cramer seemed visibly shaken by Stewart's chastening. He apologized repeatedly for misleading and misinterpreting the "news" broadcast on CNBC.

I, too, think CNBC could have done a much better job of reporting the risks to investors, but instead, they spent most of their time repeating what the business institutions spewed out in an attempt to make their companies look better than the competition. CNBC wasn't a news organization doing fact finding, it was a bunch of business cheerleaders promoting propaganda. In their defense, most everyone likes a market that goes up. Unfortunately, markets that go up without a sound financial basis are doomed to fall and fail.

This current bursting financial bubble was a direct result of the Bush administration and Alan Greenspan's attempt to revitalize the economy after the Internet bubble burst and 9/11 caused economic paralysis.

President Bill Clinton realized that national prosperity was inextricably linked to the ability of business to succeed and make profits.

Unfortunately, he gave far too much credence to Alan Greenspan's rhetoric about the business community being self-regulating - that is to say that Greenspan thought business people would accurately value companies and their company's assets according to tried and true risk/benefit analysis.

Unfortunately, many companies' desire to be relevant and competitive, i.e. more profitable than the next, led to hiring and exalting CEOs and executives that were willing to take more and more risks; thus assuring the possibility of higher profits. Somehow bankers thought they were running hedge funds.

In the Clinton times, many in the business community said we were in a new economy and valuation didn't matter. Companies that had never made a profit, and didn't even use a proven business model, were valued at many times that of companies that had been in existence for decades and had made money every year.

Wikipedia defines an economic bubble as "trade in high volumes at prices that are considerably at variance with intrinsic values." I think of it as a self-limiting, self-fulfilling economic prophecy ending in catastrophe, e.g., people see that seems to have a better model for selling books than bricks and mortar stores because of the high cost of retail space. Investors, looking for the next big thing, pour money into similar Internet businesses. Other investors see all the activity and think they are missing the boat so they look for more investment opportunities. Pretty soon, investors are paying way more than a company is worth to own it.

Eventually, people begin to have doubts about the efficacy of their investments and start selling. That's the beginning of the crash.

The Bush administration could find no other method to encourage spending, so they perpetuated the myth everyone should be able to own their own home and that home prices would continue to go up. So buy a home any way you can today, and soon it will be worth twice your money - it will almost pay for itself. This methodology also helped keep the financial big-cat supporters funding Bush initiatives. Home building, home sales and lots of unrealistic mortgages led to disaster.

The only way financial institutions could continue to make 30 percent profits a year was to take more and more risks. They began selling dubious financial instruments and reselling them, and like any good Ponzi scheme, it works until it stops working. In real estate, it continued to work until home prices peaked and financial institutions began realizing the commercial paper they were holding wasn't worth the paper on which it was written. Meanwhile, all the executives in the financial institutions had moved the company profits to their personal pockets.

That's where Stewart thoroughly bloodied Cramer: The financial experts at CNBC surely must have known that financial institutions held questionable assets that were highly over-valued way before the markets exploded, and yet they did little to address the problem and inform the public.

Barack Obama has now taken the helm of a financial ship that has lost most of its ballast, has holes in its sails, and has just seen the crew that steered the ship toward the iceberg jump ship and leave in the lifeboats. The fact that Obama seems to be actually attempting to right the ship makes many wonder if he has magic powers.

About Obama as the Anti-Christ: Leading fundamentalist Anti-Christarians disagree about the possibility that Obama is the Anti-Christ, but most feel that the End-Times prerequisites have not yet been met, and that Obama has appeared too early to be the Anti-Christ.

And no, I don't think Obama has magical powers, but I do contend that he may be the Anti-Bubble - the one national leader who realizes not only that business is vitally important to the peace and prosperity of the United States, but also that business unregulated leads to financial bubbles that inevitably burst, leaving those least wealthy paying for those who've stolen the wealth.

And the Bubble is Green in honor of today. Happy St. Patrick's Day!

Bruce McFarland is a Santa Clarita resident who represents the 17th Senatorial District in the California and Los Angeles County Democratic Party. "Democratic Voices" runs Tuesday in The Signal and rotates among several SCV Democrats. His column reflects his own views and not necessarily those of The Signal or other organizations.


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