US President Barack Obama is a very polarizing figure in American politics. American's either love him or hate him. They see him as an economic messiah that saved the US economy from certain doom in 2008, or they see him as the main obstacle to the US getting back on its feet. There are no two ways about it – you either hate president Obama or you like him. There're very few people who have a middle ground point of view about this particular US president. That should not be surprising. To be fair to president Barrack Obama, he did get elected in a particularly sensitive and uncertain time in US history. The US economy just cratered under George W. Bush in 2008. Banks were built out, there is massive unemployment, the economy was very, very soft, the US was knee deep in wars, you have to really feel sorry for the guy for getting the job when he got elected. He deserved a lot of slack. Well, it's close to the end of his second term and unfortunately, the US has recovered in name only. While it’s true that the percentage of the unemployed Americans is slowly going down to the level that it was in in 2008, most of the jobs being created by the US are in food service, retail, and other historically low paying industries. A lot of the jobs that were lost were middle management, white collar, high paying jobs – it's not a surprise that college graduates of even Master's degree holders are having to settle for waiter/waitress jobs and other low-level service jobs. Are these jobs completely worthless? Of course not. Depending on the restaurant you're working, you could earn a bit of money as a waiter – but you have to hassle, also, you have to contend with the fact that that's not what you went to school for. For all these reasons, there's a lot of animosity towards President Barack Obama. A lot of these, sadly, can be traced to spending priorities. Here are some facts to keep in mind about the Obama administration and US government domestic spending.
A lot of Obama backers would say, “Well, if you are just going to call president Obama as a massive spender, just take a look at the rate of increase in federal spending.” The problem is, as famous American writer Mark Twain said, there are damn lies in the statistics. This is a form of lying with statistics. Sure, the rate of increase has decreased, but you're still sitting at a massive amount of debt – we're talking about trillions of dollars. It's already bad enough for you individually to pay your credit card bill every single month. Can you imagine if you owe trillions of dollars in debt and you are paying interest on that? It's crazy. Even though the interest rates are fairly manageable lately, if you are sitting on trillions of thousand of dollars in debt, it will reach a point where all your income has to go to paying the interest, not the debt itself – that's where the drama is; that's the reason people are tearing their hair out about Obama's spending policies.
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Near the end of World War II, the US government's spending has really soared. This is understandable; the US was caught in a middle of a war, Europe was flat on its back, and the US had to make all sorts of loans, so it spent a lot. Now, the US government was spending a lot of money to temporarily resuscitate the US economy. In normal times, it would have left unemployment benefits run out fairly quickly. Now, people have been on unemployment for several years. With that said, that is a massive shot in the arm that keeps the US economy going. Otherwise, these people would have no income and the streets would be flooded with unemployed people – that's one line of argument. The other line of the argument is that by doing so, it's really keeping radius to temporarily high, it is getting in the way of economic innovations and there is this moral hazard. When the US government always seeks to bail out industries and bail out banks that got in trouble because of the consequences of those private entity's bad decisions. As the old saying goes, in the United States, profit is privatized, but the risk is subsidized. What's wrong with that picture?
The problem with rising spending levels is that it adds to the total dollar value of the debt and that debt and reach a point where even if you took all the US income in a single year, you cannot pay off that debt – that is a scary scenario. It can be argued that the US is already looking to fix this problem, how? Quantitative easing. This is a fancy term for what I would submit as an American version of third world currency devaluation.
Currency devaluation is a clever trick played by banks mostly of poor developing countries. The scam works this way. This general government would borrow this money from international banks like Gold Mann Sachs, Bank of America – all these banks would lend it this poor country. The politicians then on those poor countries would steal the majority of that money and the rest of the money would go to so-called pro-poor or poverty alleviation programs, infrastructure programs, whatever label makes you feel good you're going to put on these programs, it may sound great or very flowery. However, this doesn't really stimulate the economy and as a result, the bills come due and the scammers in office would then print out tons of paper money. When this happens, it devalues the amount of money already in circulation. Are you with me so far? This is called intentional devaluation. The US historically frowns on this practice at is what it is – it is a scam. Well the US government is doing the same thing with quantitative easing – it's “buying” its own debt. I don't know any more scamming than that. It's basically paying yourself in one hand and putting the other hand in your pocket. If this was not the United States, people would laugh at that country and not fall for the scam. However, sadly, China has its hands tight. It's sitting on trillions of dollars of otherwise worthless US treasury bonds. It cannot protest that this is going on because it would decrease the price of its bonds. Other countries the all over the world cannot say to the US to cut it out because they are holding US dollars as well.
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Remember, US dollar is the intentional medium of trade. So the world is crude and the US is grinning all the way to the bank – that's how the Obama government pays for itself. The real question to ask is, Is sustainable and what is the long-term impact? Well, let me leave you with this last thought: If that was your household and you have that much credit card debt, even if you have a massive income, there's no way you can cover that. The problem is that debt interest compound. I'm not just the straight interest that you have to pay is a compounded interest. With trillions of dollars, you can have a very low rate of interest, that's still money with interest piling up every single day so it's not going to have a happy ending unless the US seriously cuts back not just on active spending, but on unfunded liabilities like Social Security, Medicare, Medicaid and entitlement programs – that's what is going to kill the golden goose.
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