Capitalism under Obama

Even during good times, economies are often changed dramatically by political decisions. If you want an example look at South America over the last 30 years. In the U.S., Capitalism is always under threat and the threat is higher when the legislative and executive branches are both in the control of liberal Democrats, who are big admirers of the European system of high social welfare expenditures and “managed” or better, mismanaged capitalism. Unfortunately, currently with the new American political order, the Obama Administration we might see a stagnation of the sort that other managed capitalist economies like Japan and most of Europe have experienced. Being optimistic I hope the pioneering free enterprise spirit of the U.S. can quickly reassert itself. Putting the recession aside, the big long-term problems of the country are a bankrupt social security system which we can thank FDR and bankrupt Medicare and Medicaid systems which we can thank LBJ. This is not to say that Republicans are faultless. However most of the time it is dangerous to have both the legislative and executive branches firmly under the control of the same party, whether Democrat or Republican. The reason we founded the system of separation of powers was to make sure this did not happen. Politicians like power and spending generates power. Democrats and Republicans like to spend money; they just disagree on where the expenditures should go and who it should go to. Democrats like social programs. Republicans like defense expenditures, energy, and farm subsidies. Although the economy is likely to suffer from high unemployment rate and low profits reports from corporate American, the market has already incorporated all this bad news into prices of the shares. In the real economy the pain of a recession may be spread out over several years, but investors bear the full expected impact as soon as the market sees it coming. Expect markets to rise rapidly faster than the economy imporves. Current times are a perfect example. This means there is no reason to be gloomy about our current investment prospects. Prices may continue to fall, but only if the news turns out to be even worse than the market expects. We are equally likely to be surprised by good news that pushes prices back up. It is impossible to forecast how prices will evolve, but we believe the market is currently offering investors unusually high expected returns as compensation for this uncertainty.

Optimistic News from Home Builders

Related posts:

1. Global Trade under Obama
2. Obama’s Tax Rate Slipup
3. Obama’s Health Care Reform
4. Obama’s Energy Reform
5. Will you receive a Tax Cut from Obama?