Let’s say that there are a lot of people in the US whose financial status is less secure than it was 6 months or a year ago. Less valuable investments, reductions in work force, and a few other things indicate that economically, many people are worse off than they were in 2007. Most people are saying we’re close to recession, considering classical definitions. Can this status in the US economy be attributed to/blamed on monetary and financial policies of the current administration? Or are the forces that are at work larger than or impervious to actions taken over the last 7 years?
I think it’s a part of it. But the biggest part is the housing bubble and subsequent collapse, caused mainly by the drop in interest rates and the failure of risky mortgage lending. I can’t think of a policy that has a bigger impact on the economy than that, although certainly if we weren’t spending so much money already, we’d have more money with which to stimulate the economy in ways that would help rather than sending down a giant hole like in Iraq.
Wait, the housing collapse was caused in the first instance in part by the rise in interest rates from their historic lows in the ca. 2000-2006 period. When they were super low back then was when everyone wanted to be mortgaged to the hilt and everyone wanted to flip property. When rates began to rise after early 2004, ARMs began re-setting and there began to be fewer buyers.
Rates have recently dropped a bit, presumably in reaction to the Fed’s rate lowering.
You could blame GWB for re-appointing Greenspan and not reining in his cheap money policy, I think, without being too unfair. But the housing/credit combination has been a global phenomenon, too.
Part of the problem is the rising cost of oil. This produces an inflation which, note well, is not simply a result of a loose money supply or an overheated economy, but results from an external and real cost on the economy: If a gallon of petroleum fuel costs more, everything that needs to be shipped by gasoline- or diesel- powered vehicles (and what doesn’t?) is going to cost more; everybody who commutes to work by automobile or even bus is going to spend a larger percentage of income on commuting; and so on. You can’t solve that problem by fiddling with the prime interest rate.
W’s fault? Well, the price of oil is rising partly due to the world (probably) having passed the all-time peak of global oil production not long ago. (See here.) But it’s also due to the Iraq War and related events messing up some major sources of supply.
High resource costs in general (not just oil but minerals, ag commodities, etc.) are a drag on U.S. growth too. To the extent these are being caused by Chinese or Indian demand for copper, wheat, whatever growing at double or triple digit rates, that is also a somewhat coincidental factor for which GWB isn’t totally to blame (though his aggressive free trade policies and refusal to lean on the Chinese to let their currency float so their exports aren’t quite so cheap for Americans could be faulted, perhaps).
I think we can agree that there are many things that have led to the recessions, most of which have little to do with GWB. I don’t think he’s been the best steward of the economy, but he hasn’t created this mess by himself.
Does the fact that the Chinese currency doesn’t float have anything to do with it?
He doesn’t have much to do with the recession, but where he does take some responsibility is our ability to respond to it. That is where his policies have forced a monetary drain and will be a problem.
Rates have risen after a period of decline in the past without this impact. I think a bigger problem is the deregulatory mania. I’m not sure if this counts as financial policy or not. There were warnings about low mortgage quality, but Greenspan refused to let the Fed do anything about it, and in fact they forbade the states from doing anything about it. The unregulated investment banks leveraged themselves to absurd levels. The Administration didn’t make the bad investments or force the banks to make them, but if you don’t put a fence around your pasture someday the cows are going to go over the cliff. Without someone to tell them no, the banks had to copy the bank making the highest return, and highest risk, investment.
Of course it’s Bush’s programs. Tax repeal and spend.
That makes you poor and your money loses its influence, which equals inflation.
What of Bush’s “Ownership Society”? Did that amount to nothing more than a slogan? Is it fair to say in retrospect that it was foolishness?
It keeps their export goods relatively cheap, thereby encouraging Americans to buy more and more stuff from China, which hurts the trade deficit of the U.S. and adds to the decay in American manufacturers’ long-term market share/prospects.
Unusual… I had to read ten posts to see someone who I think said it right.
Chart the cost of oil relative to the Euro. Chart it relative to other currencies. Then compare it to ours. It might be revealing. I haven’t done it, but I’ve tried. I’ve seen some similar graphs and I thought they did a very apt job of showing the correlation between the weak dollar and our cost for a barrel of oil.
We’re in a pickle. We tried to have guns AND butter. And it worked for a while, but the expenses incurred devalued our currency. An IOU from the US is money, whether it’s paper currency or simply an IOU. Add that all the Middle East stuff is adding to the cost of oil - and that Exxon keeps turning serious profits…
So we need a stronger dollar. How do we do that? One of two ways. Pay down the deficit (or look like we will even a little) or we tweak interest rates (easier), but we’d have to tweak in the wrong direction. Right now, we tweak interest rates to help the housing crisis along and we weaken the dollar. Then gas goes up. Gas goes up, so do other things. And the ethanol thing (in response in part to cost of oil) is driving up food costs.
The President’s role isn’t usually a strong one. They (can’t say “he” anymore) sign legislation, lobby Congress, and send people to war. Even at that, the tax cuts, the war, that the housing bubble was seen as one and we wanted to “let the market correct itself”… When Enron collapsed it was a market correction. Didn’t keep us from implementing SarBox to keep it from happening again.
In short… is it his fault? Not entirely. But we’d be in a MUCH better situation to handle things had Bill Clinton’s fiscal policies carried forward. I fault GWB to the tune of 80 percent. This wasn’t a surprise to those paying attention.
Now we’re a bit hemmed in. We had the 70’s in part due to Vietnam. Now we are trying to have a repeat due to Iraq. War never pays - on whole - just a few people make a ton of money. War is NOT good economic policy. And doing it on the cheap without intending to pay for it for another decade (what’s really happening)… that’s his doing. With Congress’s help.
Isn’t there also is a kind of “inaction”? Just as the administration tied the FERCs hands when Enron was screwing over California, didn’t they prevent state Attorneys General from regulating mortgage lenders?
The POTUS can set all the financial policies all he wants, it’s the Federal Reserve that determines the economy.
Except for a budget that isn’t balanced. That also affects the “money supply.”
I’m tired of the reactionary tripe as cliche that the President and Congress have NO hand in creating economic reality.
DEATH to…um…various political figures.
To the extent that the economic situation can be blamed on any one person, GWB is a good candidate. There is perfectly good reason to believe that he is fronting for others, and that doesn’t change the fact that his tax cuts and spending policies (the POTUS does have a lot to say about these) have wound up costing a blue fortune in additional payments on interest on the national debt, as well as ever-increasing amounts due for future expenses. Does anyone think Iraq War veterans are going to be patient forever?
The ongoing drain on the nation’s finances isn’t going to haunt us; it’s haunting us right now, and GWB, who is in a position to do something about it, either doesn’t care or LIKES it. Some patriot. 
GreenspN fed certainly have their share of the blame.
Any idiot could see that all the re-financing of homes, selling homes to people with zero money down, etc was going to end in tears. I’d say a Republican controlled congress and President have blame for not limiting the damage.
Cut taxes and raise spending…that’s definately a Bush driven initiative.
Invade Iraq, and it will pay for itself with oil revenue. That was definately a Bush bonehead move. How much does that damn war cost per day?
Let’s devalue the dollar instead of fixing the US economic issues. Ya know, there is a direct correlation between a weaker dollar and increase price of gas at the pump. Hello inflation. Can’t blame this on global demand for oil.