President Obama, in demeanor and in training comes across as the ultimate insider.  Although he has tremendous rhetorical skills, a level of skill unmatched since JFK in fact, he has for the most part abandoned those skills since he became President.

During his campaign he used his rhetorical power almost exclusively.  He inspired millions of Americans who were, rightly so, in fear of their future.  The economy was in collapse with no end in sight.   Obama’s rhetoric  soared during his campaign.  He offered the prospect of hope, that the American future was not gone.  Powered by his ability to inspire hope and optimism he became the first non-white  President of the United States.

But after taking office this soaring, emotional rhetoric disappeared.  Occasionally the President would produce an inspiring speech reminiscent of his campaign, but these were isolated incidents after which the President would withdraw back into a cool, official shell that projected the efforts of an ultimate, US Senate insider.

This has been a big mistake for a man whose primary skill may be the ability to deliver an emotional narrative that can inspire the majority of Americans to force change.   It’s long past time for the President to start governing as an outsider. 

With this in mind, we reprint below a famous speech by President Franklin Delano Roosevelt, delivered during FDRs 1936 re-election campaign.  It’s astonishing to see how closely FDR’s situation parallels that of Obama.  And it is equally astonishing that Obama, a man of soaring rhetorical skills, does not use FDR as a model for how to use those skills to govern as an outsider. 

“On the eve of a national election, it is well for us to stop for a moment and analyze calmly and without prejudice the effect on our Nation of a victory by either of the major political parties.

The problem of the electorate is far deeper, far more vital than the continuance in the Presidency of any individual. For the greater issue goes beyond units of humanity–it goes to humanity itself.

In 1932 the issue was the restoration of American democracy; and the American people were in a mood to win. They did win. In 1936 the issue is the preservation of their victory. Again they are in a mood to win. Again they will win.

More than four years ago in accepting the Democratic nomination in Chicago, I said: “Give me your help not to win votes alone, but to win in this crusade to restore America to its own people.”

The banners of that crusade still fly in the van of a Nation that is on the march.

It is needless to repeat the details of the program which this Administration has been hammering out on the anvils of experience. No amount of misrepresentation or statistical contortion can conceal or blur or smear that record. Neither the attacks of unscrupulous enemies nor the exaggerations of over-zealous friends will serve to mislead the American people.

What was our hope in 1932? Above all other things the American people wanted peace. They wanted peace of mind instead of gnawing fear.

First, they sought escape from the personal terror which had stalked them for three years. They wanted the peace that comes from security in their homes: safety for their savings, permanence in their jobs, a fair profit from their enterprise.

Next, they wanted peace in the community, the peace that springs from the ability to meet the needs of community life: schools, playgrounds, parks, sanitation, highways–those things which are expected of solvent local government. They sought escape from disintegration and bankruptcy in local and state affairs.

They also sought peace within the Nation: protection of their currency, fairer wages, the ending of long hours of toil, the abolition of child labor, the elimination of wild-cat speculation, the safety of their children from kidnappers.

And, finally, they sought peace with other Nations–peace in a world of unrest. The Nation knows that I hate war, and I know that the Nation hates war.

I submit to you a record of peace; and on that record a well-founded expectation for future peace–peace for the individual, peace for the community, peace for the Nation, and peace with the world.

Tonight I call the roll–the roll of honor of those who stood with us in 1932 and still stand with us today.

Written on it are the names of millions who never had a chance –men at starvation wages, women in sweatshops, children at looms.

Written on it are the names of those who despaired, young men and young women for whom opportunity had become a will-o’-the-wisp.

Written on it are the names of farmers whose acres yielded only bitterness, business men whose books were portents of disaster, home owners who were faced with eviction, frugal citizens whose savings were insecure.

Written there in large letters are the names of countless other Americans of all parties and all faiths, Americans who had eyes to see and hearts to understand, whose consciences were burdened because too many of their fellows were burdened, who looked on these things four years ago and said, “This can be changed. We will change it.”

We still lead that army in 1936. They stood with us then because in 1932 they believed. They stand with us today because in 1936 they know. And with them stand millions of new recruits who have come to know.

Their hopes have become our record.

We have not come this far without a struggle and I assure you we cannot go further without a struggle.

For twelve years this Nation was afflicted with hear-nothing, see-nothing, do-nothing Government. The Nation looked to Government but the Government looked away. Nine mocking years with the golden calf and three long years of the scourge! Nine crazy years at the ticker and three long years in the breadlines! Nine mad years of mirage and three long years of despair! Powerful influences strive today to restore that kind of government with its doctrine that that Government is best which is most indifferent.

For nearly four years you have had an Administration which instead of twirling its thumbs has rolled up its sleeves. We will keep our sleeves rolled up.

We had to struggle with the old enemies of peace–business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me–and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.

The American people know from a four-year record that today there is only one entrance to the White House–by the front door. Since March 4, 1933, there has been only one pass-key to the White House. I have carried that key in my pocket. It is there tonight. So long as I am President, it will remain in my pocket.

Those who used to have pass-keys are not happy. Some of them are desperate. Only desperate men with their backs to the wall would descend so far below the level of decent citizenship as to foster the current pay-envelope campaign against America’s working people. Only reckless men, heedless of consequences, would risk the disruption of the hope for a new peace between worker and employer by returning to the tactics of the labor spy.

Here is an amazing paradox! The very employers and politicians and publishers who talk most loudly of class antagonism and the destruction of the American system now undermine that system by this attempt to coerce the votes of the wage earners of this country. It is the 1936 version of the old threat to close down the factory or the office if a particular candidate does not win. It is an old strategy of tyrants to delude their victims into fighting their battles for them.

Every message in a pay envelope, even if it is the truth, is a command to vote according to the will of the employer. But this propaganda is worse- it is deceit.

They tell the worker his wage will be reduced by a contribution to some vague form of old-age insurance. They carefully conceal from him the fact that for every dollar of premium he pays for that insurance, the employer pays another dollar. That omission is deceit.

They carefully conceal from him the fact that under the federal law, he receives another insurance policy to help him if he loses his job, and that the premium of that policy is paid 100 percent by the employer and not one cent by the worker. They do not tell him that the insurance policy that is bought for him is far more favorable to him than any policy that any private insurance company could afford to issue. That omission is deceit.

They imply to him that he pays all the cost of both forms of insurance. They carefully conceal from him the fact that for every dollar put up by him his employer puts up three dollars three for one. And that omission is deceit.

But they are guilty of more than deceit. When they imply that the reserves thus created against both these policies will be stolen by some future Congress, diverted to some wholly foreign purpose, they attack the integrity and honor of American Government itself. Those who suggest that, are already aliens to the spirit of American democracy. Let them emigrate and try their lot under some foreign flag in which they have more confidence.

The fraudulent nature of this attempt is well shown by the record of votes on the passage of the Social Security Act. In addition to an overwhelming majority of Democrats in both Houses, seventy-seven Republican Representatives voted for it and only eighteen against it and fifteen Republican Senators voted for it and only five against it. Where does this last-minute drive of the Republican leadership leave these Republican Representatives and Senators who helped enact this law?

I am sure the vast majority of law-abiding businessmen who are not parties to this propaganda fully appreciate the extent of the threat to honest business contained in this coercion.

I have expressed indignation at this form of campaigning and I am confident that the overwhelming majority of employers, workers and the general public share that indignation and will show it at the polls on Tuesday next.

Aside from this phase of it, I prefer to remember this campaign not as bitter but only as hard-fought. There should be no bitterness or hate where the sole thought is the welfare of the United States of America. No man can occupy the office of President without realizing that he is President of all the people.

It is because I have sought to think in terms of the whole Nation that I am confident that today, just as four years ago, the people want more than promises.

Our vision for the future contains more than promises.

This is our answer to those who, silent about their own plans, ask us to state our objectives.

Of course we will continue to seek to improve working conditions for the workers of America–to reduce hours over-long, to increase wages that spell starvation, to end the labor of children, to wipe out sweatshops. Of course we will continue every effort to end monopoly in business, to support collective bargaining, to stop unfair competition, to abolish dishonorable trade practices. For all these we have only just begun to fight.

Of course we will continue to work for cheaper electricity in the homes and on the farms of America, for better and cheaper transportation, for low interest rates, for sounder home financing, for better banking, for the regulation of security issues, for reciprocal trade among nations, for the wiping out of slums. For all these we have only just begun to fight.

Of course we will continue our efforts in behalf of the farmers of America. With their continued cooperation we will do all in our power to end the piling up of huge surpluses which spelled ruinous prices for their crops. We will persist in successful action for better land use, for reforestation, for the conservation of water all the way from its source to the sea, for drought and flood control, for better marketing facilities for farm commodities, for a definite reduction of farm tenancy, for encouragement of farmer cooperatives, for crop insurance and a stable food supply. For all these we have only just begun to fight.

Of course we will provide useful work for the needy unemployed; we prefer useful work to the pauperism of a dole.

Here and now I want to make myself clear about those who disparage their fellow citizens on the relief rolls. They say that those on relief are not merely jobless–that they are worthless. Their solution for the relief problem is to end relief–to purge the rolls by starvation. To use the language of the stock broker, our needy unemployed would be cared for when, as, and if some fairy godmother should happen on the scene.

You and I will continue to refuse to accept that estimate of our unemployed fellow Americans. Your Government is still on the same side of the street with the Good Samaritan and not with those who pass by on the other side.

Again — what of our objectives?

Of course we will continue our efforts for young men and women so that they may obtain an education and an opportunity to put it to use. Of course we will continue our help for the crippled, for the blind, for the mothers, our insurance for the unemployed, our security for the aged. Of course we will continue to protect the consumer against unnecessary price spreads, against the costs that are added by monopoly and speculation. We will continue our successful efforts to increase his purchasing power and to keep it constant.

For these things, too, and for a multitude of others like them, we have only just begun to fight.

All this–all these objectives–spell peace at home. All our actions, all our ideals, spell also peace with other nations.

Today there is war and rumor of war. We want none of it. But while we guard our shores against threats of war, we will continue to remove the causes of unrest and antagonism at home which might make our people easier victims to those for whom foreign war is profitable. You know well that those who stand to profit by war are not on our side in this campaign.

“Peace on earth, good will toward men”–democracy must cling to that message. For it is my deep conviction that democracy cannot live without that true religion which gives a nation a sense of justice and of moral purpose. Above our political forums, above our market places stand the altars of our faith-altars on which burn the fires of devotion that maintain all that is best in us and all that is best in our Nation.

We have need of that devotion today. It is that which makes it possible for government to persuade those who are mentally prepared to fight each other to go on instead, to work for and to sacrifice for each other. That is why we need to say with the Prophet: “What doth the Lord require of thee — but to do justly, to love mercy and to walk humbly with thy God.” That is why the recovery we seek, the recovery we are winning, is more than economic. In it are included justice and love and humility, not for ourselves as individuals alone, but for our Nation.

That is the road to peace.”

Beezer here.  FDR won re-election by the widest margin in Presidential history.  In 1936 FDR was hated by his wealthy and powerful peers.  He was one of them but he knew he had to abandon them and, as he said in his speech, he ‘welcomed’ their hatred.  President Obama too much loves the insider status.  He is trying to persuade the public with logic and reasonableness and he will fail unless he abandons those positions, no matter how comfortable they may be to him now that he is President.  It is within his ability to deliver the emotional, overwhelmingly powerful narrative America needs right now.  He needs to welcome the hatred of  powerful interests who have brought the economy low.  Doing so offers him the only path to effective governance, and to being loved by the majority of Americans.

China now represents the world’s second largest economy by most measures.  China’s $5.75 trillion GDP is a little more than one third of the $14.7 trillion US economy.  Yet its population of 1.3 billion people is four times the 317 million population of the US. 

Top 10 largest world economies

Gross domestic product in $ trillion
World Rank	Country	GDP
1	United States	14.7
2	China	5.75
3	Japan	5.4
4	Germany	3.31
5	France	2.56
6	United Kingdom	2.26
7	Italy	2.04
8	Brazil	2.02
9	Canada	1.56
10	Russia	1.47

In previous post here, it was argued that China and much of the Far East produced excess supply of goods for the North Atlantic countries (the US and the European Union which combined represent almost half of the world’s production), causing them to use too much credit in order to keep demand sufficient to absorb the Far East production.  This point of view maintains that the North Atlantic countries inevitably foundered on too much credit and went into a severe recession as a result. 

If this observation is true, then what can China do?  As the North Atlantic continues to struggle with recession the likelihood of it resuming sufficient demand for China production is small.   Chinese production levels must either decline, or new consumers must be found for China’s production.   Armed with a strong balance sheet and tremendous dollar reserves created by this lopsided trade with the US and the EU, China weathered the negative effects of the North Atlantic recession and as this is written China continues to grow smartly, although at rates slightly lower than the 10% plus rates of recent years.  But this cannot continue without North Atlantic demand resuming previous levels, or a rise in demand elsewhere.

So where is ‘elsewhere?’   The answer might be China and it’s 1.3 billion people.  The very size of China represents huge potential demand side growth.  If China were to look inward in a serious way and raise incomes for its own population, the world’s largest boom in durable goods would ensue.  The easiest way to do this is to let its currency freely float in global currency exchange (Forex) markets.  Experts predict the Chinese yuan would rise dramatically, and such a rise against other currencies automatically increases the purchasing power of the Chinese people and it’s businesses. 

While China’s productive capacity has increased dramatically for more than a decade, much of this production is represented by goods finished in China from parts manufactured in other Far East countries, including Taiwan and Indonesia.   As the Yuan increases in value these components  become less expensive to Chinese companies assembling the finished goods.   This dynamic would mitigate a perceived negative effect on China exports caused by a rise in the Yuan’s value versus other currencies.

Letting its currency freely float, to be convertible in other words, may not be possible at present.  It would be a bold stroke, but the Chinese are cautious.  There are dangers and always under-appreciated or unpredictable effects.  A sudden Yuan appreciation and spike in organic domestic demand could fuel inflation due to supply shortages.  Products for export may not be so easily turned into products for domestic consumption.   North American markets, after all, are not identical to Chinese markets.

Which means any Yuan appreciation has to be done gradually.  It appears the Chinese are allowing the Yuan to appreciate slowly–too slowly for North Atlantic nations who strongly complain about the weak currency, mercantile growth path China has managed so well to date.   But the trend is pretty clear.  Cautiously the Chinese are letting the Yuan rise in value.  As it does it will have the desired effect of increasing Chinese incomes while also giving domestic industry time to alter production more suited to the Chinese consumer rather than for export. 

And at the same time it will allow the North Atlantic to recuperate from its credit collapse, in part by increasing production that had been lost to China’s mercantile policies.   This is a major shift that cannot be accomplished overnight.  Demand growth in China will require fewer exports from China to the North Atlantic.  Eventual demand recovery in the North Atlantic will require increased North Atlantic supply because Chinese production will be shifting to satisfy domestic demand.  Chronic trade deficits between the North Atlantic and overall Asian economies will diminish closer to balance. 

This evolution would benefit all of the economies as global production and demand patterns take on a more balanced nature.  But it would take a level of cooperation and trust that may not exist.  Still, it would be worth attempting for all concerned.

Classical economics concentrates on interest rates, rather than employment, when it considers the interaction between consumption and investment.  This theory maintains that increases in savings, and thus declines in spending, lowers interest rates which makes investment more attractive.   This lower cost thus enables more investment, this theory maintains.

Keynes substituted employment for interest rates.  He maintained that declines in consumption (an increase in savings) puts people out of work and therefore raises unemployment, whereas increases in investment (a decline in savings) puts people to work and lowers unemployment.   His emphasis is different and he argued that this difference is more than just semantic, but is fundamental particularly when considering government policy.

Fast forward to today.   Classic economics emphasizes interest rates and, therefore, concentrates on monetary policy primarily but also on tax rates in the fiscal policy arena.  In tough times you lower interest rates thus spurring investment or spending (monetary) and lower tax rates (fiscal) which should have the same effect of spurring investment and spending.  Under George W. Bush tax rates were cut repeatedly and interest rates were held low by the Federal Reserve.  These were supposed to be stimulative, increasing both consumption and investment.

Keynes argued the metric that needed the most attention was employment.  Government policies were to pay attention to how many people were employed.  The question was ‘Are more people working?’   If the answer was ‘not so much,’ Keynes said government policy should be to hire more people.  If classical methods of lowering interest rates and cutting taxes weren’t working as expected, Keynes basically said government should hire directly because his most important metric was employment.

The difference becomes critically important when a recession is caused by a banking collapse.  Keynes evolved much of his economic theory during the Great Depression of the 1930s–which was caused by a banking collapse.   He realized that classical responses of lower interest rates and lower taxes were likely to be rendered ineffective.   In such a banking collapse the normal responses simply don’t materialize.  Instead of increasing spending, including the spending represented by investment, any taxes saved went towards more savings and little if any went towards investment.  Instead of countering the drop in demand, the tried and true monetary and fiscal curatives made things worse, not better.

This was the lesson learned by the generation who lived through the Great Depression.  President Franklin Delano Roosevelt (FDR) learned the lesson and went about directly hiring on a massive scale.  His focus was jobs, not interest rates and not tax cuts.  In fact he raised taxes in order to defray the costs of the hiring.   He also supervised regulatory reforms, including FDIC insurance, that would lessen the risk of bank runs.  The policies worked well.  Unemployment dropped from 24% to 10% and national output reached pre-Depression levels in just over four years.  But deficits were there and calls for curtailing the jobs programs to cut government spending held sway so FDR dialed back the stimulus.  As it turns out the underlying economy was too weak still, and the national output declined severely once again.  These contractionary policies were quickly reversed and the economy began, once again, to grow.

Given this summary, it was easy to predict that the stock markets would eventually decline as classical stimulatives were dialed back and direct hiring never even got off the ground to begin with.   Conservatives in Europe as well as those in the US House of Representative still fight against direct hiring, stubbornly maintaining that tax cuts and low interest rates will eventually result in investments and more employment.    Keynes ridiculed this point of view in the 1930s when he commented ‘In the long run we’re all dead.’

President Obama has promised he will propose several job creation programs in September.  Which will be fine as long as he remembers to use Keynes’ metric of employment.  If Obama’s programs don’t hire directly, guaranteeing millions of jobs, then he will fail.  As long as private balance sheets remain in savings mode, and data suggests they most certainly will for some time to come, the private economy is incapable of producing the needed jobs. 

If the programs put millions of people to work rebuilding and modernizing America’s critical infrastructure, as FDR did to fight unemployment in the Great Depression, then the nation will not only more quickly recover its economic health, but it will benefit from the infrastructure projects for decades to come.

Most people don’t realize that six corporate behemoths own the so-called major media.  From the Barry Ritholtz Big Picture blog.

These handful of giant corporations wield enormous power. Just think Rupert Murdoch.
The last thing they want is a candidate who will shake things up.

The people’s wishes? They are wholly irrelevant to these media behemoths. Indeed, these big companies have a vested interest in picking candidates who are good at acting like they care about the little guy, but who actually couldn’t care less about the average American, and have no problem picking his pocket at the first opportunity.

Beezer here.  The list of six is at the blog Free Press:  General Electric, Disney, News Corp, Time Warner, Viacom and CBS.  We’re not sure GE would still be on this list because they sold their NBC franchise to Comcast, the mega cable provider.  Basically these are Too Big To Fail (TBTF) media empires corresponding to the TBTF banks.  And those who are censored come from both the far right (Ron Paul) to anyone who is liberal, such as economist James Gailbraith.

From physicist Stuart Staniford’s blogsite earlywarning.

Each quarter the New York Fed publishes estimates of total outstanding household debt and each quarter I use it to update the above graph of household debt divided by disposable personal income.  The most recent quarter shows a pretty similar pace of deleveraging to the trend of the last few years (though Q1 was a partial hiatus).

The conclusions haven’t really changed:

• US household deleveraging is a slow, painful, but orderly process.
• It’s likely to continue for a number of years more.
• It’s a drag on growth but is not going to cause the end of the world as we know it. 

Pulitzer prize winning journalist, Steven Pearlstein (started his newspaper career at Foster’s Daily Democrat in Dover back in the early 1970s) of the Washington Post takes on the top executive suits for creating an out of control Republican Party.

When it started out all you really wanted was to push back against a few meddlesome regulators or shave a point or two off your tax rate, but you were concerned it would look like special-interest rent-seeking. So when the Washington lobbyists came up with the clever idea of launching a campaign against over-regulation and over-taxation, you threw in some money, backed some candidates and financed a few lawsuits.

The more successful it was, however, the more you put in — hundreds of millions of the shareholders’ dollars, laundered through once-respected organizations such as the Chamber of Commerce and the National Association of Manufacturers, phoney front organizations with innocent-sounding names such as Americans for a Sound Economy, and a burgeoning network of Republican PACs and financing vehicles. And thanks to your clever lawyers and a Supreme Court majority that is intent on removing all checks to corporate power, it’s perfectly legal.

Somewhere along the way, however, this effort took on a life of its own. What started as a reasonable attempt at political rebalancing turned into a jihad against all regulation, all taxes and all government, waged by right-wing zealots who want to privatize the public schools that educate your workers, cut back on the basic research on which your products are based, shut down the regulatory agencies that protect you from unscrupulous competitors and privatize the public infrastructure that transports your supplies and your finished goods. For them, this isn’t just a tactic to brush back government. It’s a holy war to destroy it — and one that is now out of your control.

Beezer here.  Read the entire piece, it’s uncommonly direct.  Unfortunately we’re all stuck with this bizarre turn of political chicanery created by big corporate lobbyists.  Stuck until 2012, that is, when voters will extract their remedy.  The hope is by that time voters will finally understand who their real enemies are.