It’s ironic that the first European president of the United States may end up a victim of the financial crisis that’s killing the eurozone. It’s even funnier that a president who thought that managing China would be easier than managing the United States could also be done-in by China’s slowing economy.
Last year at this time, Obama was bragging about the economic recovery and the stock market was rallying in response.
To some extent the president’s troubles last year can be pinned to his over-hyping of a fragile economy that didn’t see- and couldn’t see- the tsunamis that were about to take out Japan, the debt ceiling, jobs, summer driving, the White House economic team, China and the euro.
While the impact of the Japanese tsunami was likely pretty small in proportion to the world economy, it certainly helped create a sense of crisis that has yet to abate because the White House bungled the job.
The same is true of the debt crisis going on in the eurozone.
While every day without a meltdown contributes a bit to stability, the true reckoning will come when the eurozone recession begins to be subtracted from US GDP, jobs and votes for Obama.
Decoupling the US from the rest of the world is just a fairytale.
While US Treasuries remain the investment of last resort, understand that US Treasuries have done OK because we are at that last resort. Investors are fleeing to quality. And while some brag the US is the haven for investors still, it says more about the sad state of the world than it does about the quality of investing in the United States.
And make no mistake, the rest of the world is what Obama wants to emulate.
The truth is that we have had an incredible opportunity since 1991.
Free trade and free markets have given the world expanded liquidity. And we’ve invested it in dodges like Solyndra, the every-one-buys-a-home chimera, dot-cons that sold K-Tell oldies and research into global warming. We’ve gotten little-to-no return on many of those investments.
Neither has China.
‘’The world does need order,’” Obama’s favorite investor, George Soros said, “’and that order needs maintenance. The idea that markets can correct their excesses turned out to be false.’
“He continued: ‘Perfect order and global governance are not realistic expectations. However, it is a sad fact that Western democracies provide less successful leadership than China.’”
Soros was attending a meeting at the Traveller’s Club in Paris, an elite private retreat when he gave those remarks.
And people wonder where Occupy Wall Street got its organizational legs?
Look, the principle thing that China brings to the economic table is size not leadership. It’s got 1.3 billion people and its land mass could swallow India whole.
But there are a number of systemic problems that China has, including rampant corruption, a top-down dictatorship and lack of respect for human rights.
“Lawyers in China regularly face threats from thugs associated with local governments and/or corrupt courts,” says the China Reform Monitor. “Most recently, the South China Morning Post reports that on January 24 , six defense lawyers from the Heilongjiang Jiaxu Law Firm entering a courtroom at the Daoli District People's Court in Harbin were severely beaten by court marshals. Among the group were two pregnant women, one of whom suffered a miscarriage as a result of the beating.”
Yeah, great leadership George. Watch what these Dear Leaders do over the next 12 months.
All things can be papered over in the general upward slurge of economic growth, which China has enjoyed. But when growth slows, as it has in China, watch out.
Our columnist Mike Shedlock puts it this way:
Any country dependent on European sales is in trouble and that includes China.
In turn, China will need fewer imports of raw materials from places like Australia and Canada. China will also need less technology from Japan and that has Japan worried.
One has to be a major Pollyanna to think the US will be immune from all of this.
To top it off, a regime change is coming this year in China. It is highly likely China will shift away from construction, real estate, and fixed investment as a means of growth and that too will reduce China's needs for commodities from Australia as well as truck equipment from Caterpillar.
I suspect that Obama may be the first, but not the last president of the United States who could be done-in by not just their own poor policies, but also by the economies of the rest of the world.
It would be a fitting end for the first President of the Universe.