Wednesday, November 10, 2010

Obama is Confused

Obama's comments leading up to the G20 meetings this week show a serious confusion about why America is stuggling. As usual, Obama blames someone else. This time Obama's targets are other countries with high levels of exports to the US and substantial positive trade balances with the US. He thinks they should stop doing this. Why? Americans are buying, so why should they stop selling to them.

What Obama does not understand is the reason why Americans buy and do not save. The reason is simple. Americans assume that government will take care of them in their old age through social security and medicare, so why save? Why not live for today and let future generations fund your old age? That's the Obama way.

The result is Americans borrow from abroad, don't save and consume like crazy. The only way to stop this is to dismantle social security and medicare.

China doesn't have social security or medicare nor do any important countries that are currently experiencing economic growth. Only Europe has an elaborate welfare structure like the US and it is now beginning to dismantle it piece by piece.

Obama just doesn't understand simple economics. Fortunately, the rest of the world does.

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