Obama's Recession

Like me you were probably surprised to learn that the current recession was started by Barack Obama. The learned commentators on the right have seen through the smoke and mirrors to the real cause of this economic mess: The election of Barack Hussein Obama.  That’s good to know because you can’t fix a problem until you know what the source is. All we need now is a time machine to go back and not elect him.

The irrefutable logic rests solely on the movements of the stock market, yes that stock market.  According to Rush Limbaugh, Sean Hannity  and friends the stock market was cruising along fine and with it the economy until word got out that Barack Obama might actually win.  After that all hell broke loose. 

Setting aside the validity of the argument for a moment, the right must think Obama has some pretty powerful mojo working. He was able to send our economy into a tailspin before he enacted a single policy, before a single cabinet pick was announced.  I’m all for giving credit where credit is due, but this seems extreme.

The first and most obvious critique to this line of reasoning is that the stock market was on a pretty significant downward trajectory well before the election.  As the chart shows the Dow peaked at about 14,000 in September of 2007. From that point onward a clear trend develops that spells doom for 401ks everywhere. Things really take a turn for the worse right about the time that John McCain issued his now famous “the fundamentals of the economy are strong” thus ending any serious chance of his winning the election. 

One thing that needs to be pointed out again, and again and again, is that the stock market is not the same as the economy. The stock market is, well, a market place. The economy is all the goods and services that get produced. The GDP is a measure of the official human activity in the country over a given time.  If we have that clear we can address the claim that Obama caused the recession. 

It is now known that the recession started in December 2007. What is inconvenient to those trying to pin this on Obama is that he didn’t win the caucus in Iowa until January 3^rd, 2008. So it seems that Obama already has that time machine.  The reality is that the economy was never gangbusters during the Bush years. Aside from 2000 (we all know how that ended) and 2004 economic growth was pretty tame, certainly not something to brag about, but hey growth is better than contraction right.

The real reason that recession is not Obama’s fault (besides the fact that it started well before he was elected) is the credit bubble. People’s homes are not in foreclosure because the Dow is tanking. Heck, it might even be the other way around. There’s a thought, the stock market is diving off a cliff because of the economic troubles. Maybe the right wing blabber mouths (or “News Actors “as Keith Olbermann refers to them) didn’t notice the over the top rise in home values over the last few years. Maybe they didn’t notice that banks were taking these mortgages, bundling them together and selling them left and right. It would seem that they haven’t noticed that at some point in the last year these traders figured out that they didn’t really understand what they were trading. The fortunes of our economy hinged on huge financial institutions not realizing they were playing a financial risk version of Where’s Waldo with trillions of dollars on the line. The problem is they figured it out eventually, and they had no idea where Waldo was.  

So here we are with millions of people in houses they can’t afford that they were able to buy because lenders weren’t hanging on to the mortgages and therefore didn’t retain the risk should default occur. Prestigious trading houses were hoovering up (sorry couldn’t resist) these toxic assets because “Hey, real estate never loses value” and “It’s the only thing they can’t make more of.”

Clearly Obama needs to use his time machine to go back and withdraw his name from consideration. It’s his patriotic duty as President.