With the announcement that Larry Summers is leaving the Obama economic team there is much buzz in the media. The speculation is that this is an opportunity for the administration to patch up its rift with business by seeking out a candidate from the business world or hire an individual that is a member of an underrepresented group. To me it seems that the administration would be wise just to bring in the best and brightest regardless of what sector they hail from or their ethnic background. Right now we need leadership that understands economics, has business experience as well as know how to address the problems facing all of us. The replacement of Larry Summers will say more about the seriousness and direction of the Obama administrations’ economic focus and ability to execute than all the speeches on the economy that ring hollow to the general public.
While his replacement is important, looking at the exit of Larry Summers brings to mind a phrase from America’s favorite pastime baseball; three strikes and you are out! In recent months we have seen the departure of Peter Orszag, the former Director of the office of Management and Budget, a smart guy with direct access to every detail about what is transpiring in the economy; although all his economic work experience is either in the think tank or political arena. So here the umpire calls strike one.
Soon after Orszag’s announcement Christina Romer, the 25th Chairperson of the Council of Economic Advisors, left her executive office post, but will remain on the President’s “Economic Recovery Advisory Board, a nongovernmental advisory group. Romer was also part of the team that put together the economic recovery that we are supposedly experiencing. Romer’s position in the Obama administration not only gave her access to the same data as Orszag but also required her to craft policy that is implemented. Like Orszag, Romer is obviously well educated but has also only worked in academia, government and think tanks. So her departure leads the umpire to call strike two.
Now the headlines are reporting that Larry Summers is leaving his post in the Obama administration to return to Harvard to teach. This is the third high level departure from the administration in short order that has both crafted current policy and has knowledge and access to all the economic data. If the economy was truly on the mend and things were getting better I do not believe that Larry would be leaving just yet to return to insulated academia. The umpire calls strike three.
BREAKING NEWS..As I am writing this there is yet another departure from the economic area of the Obama Administration. It is being reported that Herbert Allison, who is part of the US Treasury Department, the current administration official overseeing the TARP funds will be making his exit as well.. Do we call strike four?
Layer on top of all this the fact that for the first time that I can recall congress is not going to present a budget before the midterm elections but instead will wait until next year.
What is it all these people know that we don’t or that the Media is not telling us. I suspect that the administration officials are making their exit before things come to a head and the “extend and pretend” economy tanks causing both headaches for the administration and dimming these people’s later employment prospects. As for Congress the figures must be far out of whack and they fear that it will affect the midterm elections. We are not being told what is truly going on here instead I believe that something wicked this way comes.
After all we were told that the huge nearly $1 Trillion “stimulus” that was going to fix things was predicated on the following: The unemployment rate would peak at 8%, which it obviously broke above. The Administration is busy touting statistics that things are improved or could have been worse, however, the figures are suspect and the American public is not seeing any recovery. All the people leaving the Administration as well as Congress all had a hand in constructing the current economic frame work.
No wonder things, be it precious metals and commodities, are rising. The reasons for people to run to these sectors are many:
1) Huge economic uncertainty
2) Massive deficits and deficit spending
3) Budget busting on the Federal and State level here and abroad
4) Huge outside deficit financing requirements
5) Hints at the next Quantative Easing (QE2) IE money printing
6) Large Tax increases on the horizon
7) High chronic unemployment with no end in sight
8) Continual regulations and taxes from Washington(who knows the unintended consequences)
9) Precarious situation in currencies
10) Winding down of the stimulus
11) Poor Sentiment
Disclosure: Long Gold, Gold Stocks, Silver and Silver Stocks as well as other sectors..