Joe Duarte
11-10-2008, 07:32 AM
Obama's Dilemma: Stick to Politics or Adapt To Reality
Investors are faced with a new reality, as the transition of power from one president to another is likely to occur more rapidly than usual, at least on a conceptual basis, due to the nature of the current global situation as well as the influence of the 24-hour news cycle.
The transition from one president to another is usually a January phenomenon, but in the current time, it looks as if the Bush-Obama handover is getting an early start. The implications for investors, and for the world are numerous. And what happens over the next six weeks will likely shape the world, for better or worse, for the next several years.
To be sure, this is important, given the fact that we do live in extraordinary times, and that the U.S. is being tested as the leader of the world's financial system.
There are three major issues to focus on, the economic crisis, the situation with Iran, and Russia's return to the world stage as the main anti-U.S. alternative.
The situations with Russia and Iran are important, and will likely be at the top of the agenda for the new president. But for now, the pressing issue is that of the global economy.
The global financial crisis is still in full swing, with most nations now grabbing their respective bulls by the horns as much as possible, clearly taking the task away from international institutions such as the IMF and the World Bank, whose wishy-washy charters and internal squabbling proved them to be useless for the task at hand.
The key to the next stage is the upcoming G-20 meeting, to be held in Washington on November 15. This is where the participants will agree on the framework which they will use for future negotiations.
What's at stake is how much ground Europe gains in its goal of asserting more control on the way the U.S. runs its economic ship. This is a tall order, given the fact that the current U.S. administration wants no part of Europe's influence on its own economic affairs.
The European argument will be that the U.S. caused the crisis and thus can't control its own house, thus needs outside assistance. The fact that Obama's leanings on this have yet to be confirmed, will make this an interesting set of developments.
Little reported, though, is the fact that G-20 financial ministers met in Brazil over the weekend, and that a new consensus is starting to emerge, that of increasing participation by emerging countries in forging a global economic system. According to the International Herald Tribune: "Brazil, Russia, India, China and other developing countries say the global financial system drawn up by rich nations in the 1940s has failed to prevent economic crisis, fueling their argument that they should be given a role in devising a new solution. Heads of state from the G-20 will discuss such plans this week in Washington, where the Brazilian finance minister, Guido Mantega, said they would be under pressure to act fast."
According to the report, Mantega called for a new system to be put in place within "60-90 days," and most interesting is the tone that emerged from the conference.
Calls for more global coordination were thrown about, although no agreement emerged beyond the notion that individual country bailouts had not worked.
But, indeed, that's all that there seems to be, as most of the so called international institutions failed to assert their presences during the recent financial meltdown, due to the fact that most nations still look to their own self interest as a guide for their own affairs.
Most interesting to the Obama campaign is this concept. According to the IHT, the G-20 financial ministers agreed that "governments should increase fiscal spending or provide tax cuts to encourage growth."
Conclusion
The new president was elected with calls for "spreading the wealth" and tax increases for the wealthy, yet the reality of the situation calls for priming the economic pump, accross the board, and even the left leaning emerging countries are calling for all out stimulus from governments and tax cuts.
The world is rapidly changing, and what happens between now and the January inauguration, meaning the G-20 summit in Washington on November 15, and any agreements that emerge from there, will shape the reality of the economic policies of the Obama administration.
When Mr. Obama gets his White House tour and his face to face chat with President Bush, today, there is no telling what will be said, or what will be understood by either of them.
Yet, it's likely that Mr. Obama will walk out of his future digs with a whole new perspective of what's really up and what he's really up against. His first press conference suggested that for now he is going to do both, as his answers to reporters were very cautious, yet within 48-hours he was announcing that he was reviewing his predecessor's executive orders and was likely to reverse several of them.
The first real test is whether he adapts to reality or whether he chooses to hold on to ideology and political mantra.
We'll find out soon enough. And when we do, all kinds of interesting things will happen.
Investors are faced with a new reality, as the transition of power from one president to another is likely to occur more rapidly than usual, at least on a conceptual basis, due to the nature of the current global situation as well as the influence of the 24-hour news cycle.
The transition from one president to another is usually a January phenomenon, but in the current time, it looks as if the Bush-Obama handover is getting an early start. The implications for investors, and for the world are numerous. And what happens over the next six weeks will likely shape the world, for better or worse, for the next several years.
To be sure, this is important, given the fact that we do live in extraordinary times, and that the U.S. is being tested as the leader of the world's financial system.
There are three major issues to focus on, the economic crisis, the situation with Iran, and Russia's return to the world stage as the main anti-U.S. alternative.
The situations with Russia and Iran are important, and will likely be at the top of the agenda for the new president. But for now, the pressing issue is that of the global economy.
The global financial crisis is still in full swing, with most nations now grabbing their respective bulls by the horns as much as possible, clearly taking the task away from international institutions such as the IMF and the World Bank, whose wishy-washy charters and internal squabbling proved them to be useless for the task at hand.
The key to the next stage is the upcoming G-20 meeting, to be held in Washington on November 15. This is where the participants will agree on the framework which they will use for future negotiations.
What's at stake is how much ground Europe gains in its goal of asserting more control on the way the U.S. runs its economic ship. This is a tall order, given the fact that the current U.S. administration wants no part of Europe's influence on its own economic affairs.
The European argument will be that the U.S. caused the crisis and thus can't control its own house, thus needs outside assistance. The fact that Obama's leanings on this have yet to be confirmed, will make this an interesting set of developments.
Little reported, though, is the fact that G-20 financial ministers met in Brazil over the weekend, and that a new consensus is starting to emerge, that of increasing participation by emerging countries in forging a global economic system. According to the International Herald Tribune: "Brazil, Russia, India, China and other developing countries say the global financial system drawn up by rich nations in the 1940s has failed to prevent economic crisis, fueling their argument that they should be given a role in devising a new solution. Heads of state from the G-20 will discuss such plans this week in Washington, where the Brazilian finance minister, Guido Mantega, said they would be under pressure to act fast."
According to the report, Mantega called for a new system to be put in place within "60-90 days," and most interesting is the tone that emerged from the conference.
Calls for more global coordination were thrown about, although no agreement emerged beyond the notion that individual country bailouts had not worked.
But, indeed, that's all that there seems to be, as most of the so called international institutions failed to assert their presences during the recent financial meltdown, due to the fact that most nations still look to their own self interest as a guide for their own affairs.
Most interesting to the Obama campaign is this concept. According to the IHT, the G-20 financial ministers agreed that "governments should increase fiscal spending or provide tax cuts to encourage growth."
Conclusion
The new president was elected with calls for "spreading the wealth" and tax increases for the wealthy, yet the reality of the situation calls for priming the economic pump, accross the board, and even the left leaning emerging countries are calling for all out stimulus from governments and tax cuts.
The world is rapidly changing, and what happens between now and the January inauguration, meaning the G-20 summit in Washington on November 15, and any agreements that emerge from there, will shape the reality of the economic policies of the Obama administration.
When Mr. Obama gets his White House tour and his face to face chat with President Bush, today, there is no telling what will be said, or what will be understood by either of them.
Yet, it's likely that Mr. Obama will walk out of his future digs with a whole new perspective of what's really up and what he's really up against. His first press conference suggested that for now he is going to do both, as his answers to reporters were very cautious, yet within 48-hours he was announcing that he was reviewing his predecessor's executive orders and was likely to reverse several of them.
The first real test is whether he adapts to reality or whether he chooses to hold on to ideology and political mantra.
We'll find out soon enough. And when we do, all kinds of interesting things will happen.