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April 13, 2009
Obama Sees Light at the End of the Tunnel
It will take months, perhaps years, to know for sure, but President Obama may have recently had a Robert McNamara moment concerning the economy.
According to an article in the Washington Post:
“President Obama said today [April 10] that the nation's economy is showing signs of progress as a series of his policies begin to come on line, despite mounting unemployment and other problems that continue to plague the country.
In brief remarks to reporters after a meeting with his economic advisers at the White House, Obama said there are signs of hope appearing amid the gloomy economic landscape. ‘What you're starting to see is [sic] glimmers of hope across the economy,’ Obama said, adding that it is too soon to make any firm pronouncements.
…Obama said, "We've still got a lot of work to do. Still,’ he said, ‘the signs of progress are unmistakable.’”
During the Vietnam War, as the U.S. kept pouring troops into South Vietnam, then Secretary of Defense Robert McNamara made his infamous projection of ultimate success using a similar metaphor. Seeing victory ahead, McNamara said, was like seeing light at the end of the tunnel. That essentially ended the old "light at end of tunnel" analogy's career, making it useful for nothing but derisiveness.
Last week, Obama stopped just short of McNamara’s "seeing the light." Obama's “glimmers of hope,” qualified by his addendum that there is "a lot of work to do," comes close to McNamara's "end of the tunnel."
McNamara measured progress toward victory in body counts. Each month, advisors to the ARVN (Army of the Republic of Vietnam, i.e., South Vietnamese units) submitted a “Big Mac” report that noted the body count of dead Viet Cong and North Vietnamese Army personnel. Such were the standards that convinced McNamara that there was light at the end of the tunnel.
Obama listed his metrics of success this way.
“With mortgage interest rates at historic lows, refinancing is up. Obama said that his administration is working out the details of a public-private investment mechanism aimed at buying toxic assets, allowing banks to clear them from their balance sheets, which should facilitate more lending. Also, he said, efforts to increase small business loans are apparently paying dividends: in the past month, there has been a 20 percent increase in the largest Small Business Administration loan program, the president said.”
So let’s see if we have this right: personal refinancing of otherwise unserviceable loans; repackaging of toxic assets (what happened to the shift to calling them “legacy assets?); the hope of more consumer and commercial indebtedness; plus increased small business borrowing represent glimmers of hope for the economy.
It’s the Obama Working Hypothesis for Economic Victory: More debt, through more spending, leads to the recovery of economic health.
Obama's pronouncement comes amidst an estimated minimum $1.75 trillion increase in public debt this year. And, if his proposed budget for 2010 passes, that $1.75 trillion will be eclipsed.
Money being printed night and day to cover the government's expenses -- zeros as far as the eye can see -- these will inevitably bring inflation and dollar devaluation. It’s basic, indisputable, economic physics. In fact, inflation will be necessary to just make the interest payments on the tsunami of public debt that’s compounding while you read this.
For over 2,000 years, medical practitioners used bloodletting as a treatment for many illnesses.
President Obama today sees increased private and public debt as a sign that the cure is underway and good economic health is that light at the end of the tunnel.
In McNamara’s case the light at the end of the tunnel sat atop the T-55 NVA tank that eventually crashed through the gates of Independence Palace in Saigon.