To: Bearcatbob who wrote (8943 ) 6/4/2009 4:41:44 PM From: Brumar89 Read Replies (1) | Respond to Capitalism spreading around the world but "social capitalism" grows in America the Indian Bombay Index soared 17% when the United Progressive Alliance party won big in the Indian parliamentary elections. This win by the business friendly UPA party is part of a major worldwide trend over the last decade. Capitalism is breaking out and expanding all over the world as people have seen the great things it has done for the United States and the standard of living of its people. There is no other economic model that has created the type of wealth and standard of living that Democracy and the free enterprise system has. We should not have to apologize for what we have given the world. the move away from capitalism in the United States to what appears to be a model of social capitalism by the Obama Administration. With social capitalism, the government will use regulations and politics to try to control the economy for the “good of all”. The move toward social capitalism will result in a deeper recession and a slower drawn out recovery when the economy finally recovers. We have now seen this agenda more clearly as the Obama administration moves to seize the commanding heights in the financial, energy, auto/manufacturing and healthcare sectors of the economy. Much of this agenda has been hidden in the fog of the economic crisis. Starting with the banking sector, the Federal Reserve and the Treasury have effectively seized control of the banking sector. Not only have they increased share control through the TARP program, but also through huge amounts of lending by the Federal Reserve under the various Fed programs, which amount to over one trillion dollars. In addition, the government is poised to reregulate much of the financial system.The US now effectively controls two of the big three auto companies with the takeovers of Chrysler and General Motors. They are the ones that are providing the debtor in possession financing (DIP) for the restructuring. If you control the DIP money you have huge leverage in bankruptcy. For Chrysler, they are moving the UAW healthcare plan ahead of the first lien bonds. This is important because it rolls back over 200 years of contract and bankruptcy law. As an aside, I believe this could have been accomplished by the government getting a bigger stake in the automaker for themselves and turning it over to the health care trust for the UAW workers. But this would not have been politically popular; instead they chose to try to weaken contract law. This shows us that politics trumps our legal rule of law. Now the Obama Administration is forcing the auto industry to build environmentally friendly cars that many people do not want. The Obama Administration has now gone on to try to seize the commanding heights of the energy and manufacturing business with a draconian program called Cap and Trade. Cap and Trade is a program designed to limit carbon emissions in the United States. It will force companies to get permits to produce carbon dioxide (CO2). Therefore, power plants, factories, chemical plants and refineries, among many others, will all need permits or will have to close down and move overseas. These permits will have to be bought or traded. This will result in favoritism and a form of corruption to get the permits. It will effectively put Washington in control of the manufacturing sector in the United States. If you want a new factory or to keep an existing factory open you will need carbon permits. We are all for reducing energy usage in the United States. However, this is a program that will reduce many Americans standard of living and make energy much more expensive. Not only will it make energy more expensive, but it could lead to huge numbers of job losses. In the future, factories and refineries will move overseas to Asia where it will be easier to get the carbon permits and more jobs will be lost. This is very negative for Houston because it will harm the energy and refining businesses a number of us depend on.According to Bill Gross of PIMCO, manager of the largest bond mutual fund, we are at a “demarcation point because it represents the beginning of government policy counterpunching”. This “counterpunching” by the government we have seen over the last four months will result in slower growth and higher risk premiums for United States investments. We are seeing this manifest itself in the form of the recent drop in the dollar that can be seen in the chart below.We are becoming concerned that many countries around the world are losing faith in the US dollar because of our huge borrowing and spending habits. The bailout programs have cost well over one trillion dollars of borrowed money. In addition, the stimulus programs and government spending have gotten out of control. Over the next two years we will need to borrow close to four trillion dollars. For 2009 the United States government will be borrowing 46% of every dollar they spend. we could have a dollar crisis sometime this fall or in 2010 that will cause a large fall in the dollar, higher inflation, and higher interest rates. Over time, this fall in the dollar could result in much higher inflation. We would continue to look for investments that will profit in one way or another from a dollar crisis.Something to watch for is to see if the Value Added Tax (VAT) gets traction in Congress. The VAT tax is a glorified sales tax that is popular in Europe. The VAT would be a huge tax on the middle class. The only reason it would be considered is that the federal government is desperate for revenue to close the one trillion dollar deficit we see going forward.
