22 February 2009

Behold A Market Is Born: Do Not Fear, Rejoice?

It has been leaked that Obama will attempt to halve the U.S. federal deficit over the next four years. If we assume that total foreign investment will continue at its current levels, will this spur economic growth in the "private" sectors? According to economists, that's how it works. That capital has got to make money somewhere. This only works, however, if foreign investment remains constant. But will foreign investment remain constant?

The Chinese have a direct investment in this happening, but at some point, good money will not be thrown after bad money. On the other hand, Americans will have no choice but to cut the deficit. When direct foreign investment declines, business will have to contract but so will government spending. Perhaps the Obama plan is to minimize the impact of the decline in foreign investment by cutting government spending -- camouflaging it with a massive government spending bill first?

This reminds me of a recent comic where the artist found all of Obama's cabinet picks to ironic penance for previous positions -- Clinton unrepentant about voting for the Iraq War as Secretary of State, NY Federal reservist Geitner as Secretary of Treasury, pharmalobbyist Daschle as Secretary of Health.

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