Last week, steep declines in currency credit and stock market values made for the worst January stocks report since 2010.
It appears that investors are rejecting the notion that simultaneous mammoth increases in government spending and historic decreases in benchmark interest rates in the U.S. have put the world economy on a comfortable growth trajectory.
Yet, carnage in financial markets was not the most jarring event in January — President Obama’s State of the Union address was. He doubled down on an agenda that chokes off capital investment, crimps after-tax private sector incomes, and saddles an already overleveraged economy with even more debt — ignoring evident reality inside and outside America. He and his Democratic cohorts are wedded to rhetoric and policies that frighten badly needed investors.
Burdened with trillions more in debt piled on since 2008 in a benign period of abnormally low interest rates, the federal government now needs a strict diet, not more expanded, unfunded mandates such as Obamacare, whose true burden is not known because regulations guiding its implementation and performance metrics are evolving.
Abroad, America is diminished and tarnished by setbacks and scandals, large and small. Conflicts are spreading while America retreats, compounding risks to the fragile global economy.
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Embracing the seductive notion of peace with Iran, the Obama administration left Egypt, Libya and Syria to burn as it hastened exits from wars in Iraq and Afghanistan. The destruction in progress continues — no one knows how the power vacuum in this regional crucible gets filled. For the moment, U.S. prestige and influence are on the wane.
In the end of Tuesday night’s address, we learned that Mr. Obama will fight in ignorance of reality for plans his Republican foes certainly cannot accept — so we face continued gridlock through elections in 2014 and 2016.
The business model for America’s bloated federal government needs to be retooled. Unfortunately, the mechanics who might do that retooling will likely keep fighting among themselves for three more years.
America has already lost its Super Bowl
The buck already has stopped — soon the dollar may forever lose its premier status as the world’s reserve currency.
Since 2008, the Federal Reserve has purchased federal debt at unreasonably low interest rates, pushing down the cost of consumer purchases and lowering annual federal deficits. But it also degraded the value of the dollar.
The right to exchange printed pieces of paper currency for goods and services is precious. America now clings to this privilege with a weakening grip.
In 2011, the United States lost the coveted “AAA” debt rating as politicians bickered over matters that are still unsettled. In months to come, we can be certain the fighting will continue. What we do not know is how debt rating agencies may react once they determine that spending reform cannot happen, given political realities.
Professional investors steadily have retreated from allocating funds to Treasury securities since May. Meanwhile, the Federal Reserve’s balance sheet is stretched thin by its purchases of trillions of dollars-worth of low-yielding securities whose value would plummet if America were forced to defend the dollar by raising key interest rates.
Far away from battlefields, across each of the 50 states, Americans look into mirrors unable yet to appreciate how much the ongoing crisis in investor confidence will cost each of us, as U.S. dollar interest rates rise closer to historical experience.
We need more than pageants
Government under Mr. Obama has become a pageant in which Washington imposes a minority view — one that is anti-capitalist, anti-Constitution and anti-liberty upon We the People.
At present, the Obama administration is suffering self-inflicted wounds in pursuing reckless economic policies to soak the rich with more taxes and choke off industry with regulation, while spending even more money we do not have on ineffective bureaucracies.
The only thing standing between the tyranny imposed upon all Americans by then-House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid and the Obama administration is cold weather. This set of conditions will not stand still. As surely as the Earth revolves around the sun, the Arctic cold will leave America behind.
As Americans learn more about failures to reignite U.S. economic growth and threats from abroad in the wake of foreign policy missteps, warm weather may yield an “American spring” of protests.
At Tuesday night’s State of the Union address, the near two-minute standing ovation for Sgt. 1st Class Cory Remsburg, a wounded Army Ranger, tugged at even the most jaded heart. Few Americans could fill his shoes — through countless surgeries and days of rehabilitation, one hero reminds us how resilient and noble our military remains, even as politicians fail us by settling for expediency instead of chasing decisive victories.
We may not be physically disfigured, but each American is badly wounded in an undeclared war on capitalism that began Jan. 20, 2009.
• Charles Ortel serves as managing director of Newport Value Partners (newportvalue.com), which provides economic research to executives and to investment firms.