How Obama is bringing America down to financial Third-World status

Sebastian writes:

I’ve noticed you have hardly covered the financial crisis. [LA: mea culpa.] You are probably aware of the Administration’s tactics in the Chrysler restructuring: how a small fund holding secured debt, which according to US bankruptcy law must be paid in full before unsecured creditors, was intimidated into accepting a deal with the banks that have received TARP funds—money now being used to turn the government’s stake into preferred shares, i.e. ownership. You can hear an interview with the White & Case lawyer representing bondholders here. Obama’s people threatened to destroy their reputation and Obama himself mentioned them as standing in the way of a fair resolution.

Today I acme across a report on how investors are now looking for a premium before investing in the US to offset political risk normally associated with emerging markets or banana republics. I cannot think of a more objective indicator of America’s descent into Third World status. Political risk was an unknown variable to average investors in Europe and America. This was something only emerging market speculators or citizens of Columbia had to worry about. If you consider the inflationary risk of printing trillions that even mainstream economists in the NY Times have addressed, you have the one-two punch of Latin American finance. Though this policy of easy money was started by Greenspan long ago, it’s amazing to see how much worse Obama has made the situation in just 100 days by introducing overt political bullying. You may want to say a word about this as some of your readers, preoccupied with the latest cultural outrage (there are so many!), may not be as attuned to the world of finance. I find it amazing.

From the Guardian:

“There is a much larger political risk premium on investing in the United States than there has been in years,” said Sean West, an analyst at Eurasia Group, a research and consulting firm that studies political risks.

“What we’re seeing now in the United States is much more like what we see in emerging markets, where the government either by choice or as a result of circumstance is in a position to decide which companies or banks survive and which ones don’t,” he said.

“These were almost unthinkable risks a year ago.”

LA to Sebastian:

I’ve posted this in a new entry. I’m overwhelmed by current developments under Obama, the complexity of them, the number of them. Even if there were only one such crisis/takeover, it would be still work for me to understand it adequately; but when it’s several at once, there is a tendency to throw up my hands. I’m not defending that reaction.

Sebastian replies:

I appreciate that. There’s nothing to defend; it’s perfectly understandable. I’ve had to disengage from everything except the financial side just to understand it and keep up with work. I’m very thankful I can turn to a few web pages like yours and do a quick recap of the parade—like the way that 21 year old beauty contestant was treated by liberal commentators. That was disgusting and affected me. One of my guilty pleasures during law school was the TV show Angel. In some of the episodes one learns the true identity of people who are really demons and you get to see the full of horror of their soul. They come out of the wood work, ugly, deformed, vicious. That’s what the country feels like to me recently.

Posted by Lawrence Auster at May 08, 2009 12:33 AM | Send