Saturday, 20 August 2011

The US downgrade was not a downgrade of America's economy but a dowgrade of its leadership.

This week post, will not deal with data and financial action of the last couple of days, as it is available to all to see, enabling one to draw its own conclusions on the state of the US economy in particular and Developed countries economies in general.
This week post is an intentional attack on the clear lack of leadership and political failures responsible for the current society and economic woes in the United States.

From the anonymity of a personal blog, to the wilderness of internet liberty (which reach and powers have extended, beyond our wildest dreams, allowing communities to discuss and gather, lies to be refuted, and, even government to be toppled),it appears more and more that common sense has left most of mainstream media as well as Washington. “The Truth is Out There” was the motto of the X-Files, and indeed it is, within a growing population of internet bloggers, less contrived by political intervention, and thanks to a healthy competition in both quality and content.

Make no mistake; the downgrade of the United States was not a downgrade of its economic might, but more and simply a downgrade of its leadership.
While the Tea Party has risen to prominence in US politics, it has only been able to do so, because it has been in a position to fill a political vacuum and feeding itself on economic woes. It closely follows the steps of the Greenback Party which was born because of the Great Depression of 1873.
I have touched on the subject at length in my post "I promise to pay the bearer on demand..." - Panics and Populism.

The great irony today is, that, whereas the Greenback party opposed the shift from paper money back to a bullion coin-based monetary system, the Tea Party members are supporting the reverse.

But this leadership vacuum did not start with this current administration. The gradual erosion of the American leadership started a long time ago. Did it started under the failed leadership of President Richard Nixon? The point here is not to argue about the exact date of the start of the decay and play the blame game, but its consequences on the US economy and what must be done to address it.

Many years ago the American people had been warned by one of its greatest leaders, in the tradition of the founding fathers of the United States of America such as Thomas Paine or Thomas Jefferson, namely President Dwight D Eisenhower in one of his greatest speech, his farewell address, on the 17th of January 1961. It is a must read:
“Another factor in maintaining balance involves the element of time. As we peer into society's future, we -- you and I, and our government -- must avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.”

50 years on, American people did not listen and they had to face the embarrassment of US downgrade, much more representative of its lack of political guidance and wisdom than of its economic woes. As a currency issuer, it is a fallacy to believe the US can default, as it is a fallacy to believe that the FED is responsible solely for the dire economic situation of the American people.

American people have been failed not by the quality and ingenuity of its great business companies and business leaders (Apple, Google, IBM, the list is too long!) and people, but by its failed politicians and failed politics. The latest comments by Dallas Fed President could not be more evident to where the culprits are, for the current economic situation, namely Washington:
“I believe what is restraining our economy is not monetary policy but fiscal misfeasance in Washington. Pointing fingers at the Fed only diminishes credibility. The ugly truth is that the problem lies not with monetary policy but in the need to construct a modern, appropriate set of fiscal and regulatory levers and pulleys to better incentivize the private sector to channel money into productive use in expanding our economy and enriching our people.”

A great country needs great leadership, and the debt ceiling summer comedy debate between Republicans and Democrats made more damage to the image of American leadership in the world and its economy than to the safety of its Treasury Bonds. And I expect, like David Rosenberg, to the see the US 10 year bond yielding well below 2% in the near future but that is another story.

But there is hope. It is payback time, with the recent rebellion launched by great business leaders demanding accountability and leadership. From Warren Buffet to the CEO of Starbucks Howard Schultz, one can only hope that the tide is turning. Here is what Howard Schultz had to say: "Our national elected officials from both parties have failed to lead," he wrote. "They have chosen to put partisan and ideological purity over the wellbeing of the people. They have undermined the full faith and credit of the United States. They have stirred up fears about our economic prospects without doing anything to truly address those fears."

An Open Letter to Starbucks CEO Howard Schultz From American Small Business League President Lloyd Chapman

American small business have always been at the heart of any strong economic recovery America has had.
Here is what they have to say in relation to American leadership throught the voice of their speaker president:

"Congress needs to go back to work, focus on job creation and solve the crisis of uncertainty. That said, the most effective economic stimulus President Barack Obama and Congress could implement would be to direct more existing federal infrastructure spending to small businesses, our nation’s chief job creators. This is an issue my organization, the American Small Business League, advocates for on a daily basis.

The latest U.S. Census Bureau data indicates that small businesses create 90 percent of all net new jobs, employ more than half the private sector workforce, are responsible for more than half of GDP and more than 90 percent of U.S. exports. It is clear that economic recovery needs to be based on small businesses.

I think members of Congress realized this in 1953 when they passed the Small Business Act. Today that law requires that 23 percent of all federal contract dollars be awarded to small businesses. Yet since 2003, a series of federal investigations have found most of that money has gone to Fortune 500 companies and other large firms.

In Report 5-15, the Small Business Administration Office of Inspector General referred to the issue as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.

During President Obama’s campaign he stated, “It is time to end the diversion of federal small business contracts to corporate giants.”

The Small Business Act defines a small business as generally less than 500 employees and independently owned, which, by definition, excludes publicly traded companies. Therefore, President Obama could stimulate the economy with an executive order stating, “The federal government will no longer report federal contracts awarded to publicly traded companies as small business contracts.” Our research indicates this would redirect up to $200 billion annually in federal infrastructure spending to small businesses."

It is not too late to restore the greatness of America and cure its economic woes, and, if it has to go through a campaign donation boycott so be it.

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