Wednesday, February 11, 2009

Obama surprisingly versed and ne sais quoi

I was extremely impressed with Obama's interview with Terry Moran today, whereby Obama explained his impressively accurate understanding of the credit crises and past attempts to solve it. The President mentioned how Sweden did the right thing and nationalized (known as the Swedish model) and saw great success, and he even mentioned Japan's dismal failure (known as the Japan model) by doing what we are doing now and how that lead to two decades of sideways markets.

...he then completely destroys that all by saying we're going to do what Japan did anyway.

There are a lot of economists who look at these banks and they say all that garbage that's in them renders them essentially insolvent. Why not just nationalize the banks?

OBAMA:Well, you know, it's interesting. There are two countries who have gone through some big financial crises over the last decade or two. One was Japan, which never really acknowledged the scale and magnitude of the problems in their banking system and that resulted in what's called "The Lost Decade." They kept on trying to paper over the problems. The markets sort of stayed up because the Japanese government kept on pumping money in. But, eventually, nothing happened and they didn't see any growth whatsoever.

Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again. So you'd think looking at it, Sweden looks like a good model. Here's the problem; Sweden had like five banks. [LAUGHS] We've got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would -- our assessment was that it wouldn't make sense. And we also have different traditions in this country.

Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America's different. And we want to retain a strong sense of that private capital fulfilling the core -- core investment needs of this country.

And so, what we've tried to do is to apply some of the tough love that's going to be necessary, but do it in a way that's also recognizing we've got big private capital markets and ultimately that's going to be the key to getting credit flowing again.

That segment was very impressive, but it ends with unbelievable incompetence. Just unbelievable. He is essentially saying, "Japan was wrong and Sweden was right, but we're going to do what Japan did anyway because otherwise Rednecks will cry about nationalization and I don't want to have to deal with that."

It is unreal...he literally admitted Sweden's model of nationalization is what saved them and then in the same breath said we will do what we know to be wrong and ineffective because our culture is different. I'm not sure if this makes him better or worse in my eyes. Would I rather he be ignorant of what is right, or intelligent enough to understand what is right and purposely choose wrong for political reasons?

Either way, today's major lesson should be don't Google "Swedish Model" when your wife is around. "I really was doing economic research" isn't gunna fly.

1 comment:

Scott said...

That last paragraph made me laugh out loud.