Barack Obama will meet his economic team on Friday and hold his first news conference since becoming U.S. president-elect as the country awaited signs of how he might tackle the economic crisis. Obama, who stands to inherit the worst financial crisis since the Great Depression, faced pressure to announce his picks for key economic jobs, including Treasury secretary, though there were no indications of when he might do so. On Wall Street, stocks closed sharply lower for a second day. The Dow Jones industrial average tumbled 443.48 points, or 4.85 percent, after plummeting almost 500 points or about 5 percent on Wednesday — the biggest fall ever on the day after a presidential election. Though the timing of the Treasury secretary announcement was uncertain, names being considered for the job included Timothy Geithner, president of the Federal Reserve Bank of New York; former Treasury Secretary Lawrence Summers; and former Federal Reserve Board Chairman Paul Volcker. – Reuters
Dominant Social Theme: The adults ready the countercharge.
Free-Market Analysis: For some reason, it is widely accepted within the mainstream media that Barack Obama shall bring a sense of reason and purpose to responses to the economic crisis. He is meeting with people reputed to be at the top of the economic field, and the idea is that this group will accomplish what others have not: They will cure the crisis.
But here is the reality of the crisis: It will take time to unwind. It has been caused by central bank money stimulation and will have to outrun its own ruin. There are many who would question this point of view but it is obviously so. It is a free-market interpretation, but free-market monetary analysis predicted the current crisis in a way that other kinds of economics cannot. In fact, once the idea that money stimulation is central to financial difficulties, the rest flows logically and provides a framework for accurate economic analyses.
What is the model that is being used? Visualize a field of corn, not the edible kind, but one being grown for, say, ethanol. Now visualize that the field grows larger and larger as more and more money is made available by banks for the purpose of growing corn for ethanol. Finally, the farmer has planted so much corn, that he has ceased to plant lettuce and tomatoes, ceased to tend to his flocks, but let them be led away to slaughter at once. Now, finally visualize that the market itself rebels against the oversupply of corn and ceases to support it. There is too much corn and ethanol plants are foundering anyway.
This is the predicament in which the economy finds itself. There is too much of one crop and that crop is neither edible nor utile. It was grown as the result of mania, created by central bank's easy money. It will take time before good crops are planted again. In fact, all the monetary stimulation in the world cannot undo the decisions that have been made in the past. After a great euphoria, time must pass before a more rational marketplace is recreated.
Great central-banking stimulations are inevitably followed by downturns because the market has been so distorted by false money flows. Gold and silver tend to do well in such situations because they remain a store of value no matter the distortion in the rest of the economy. In fact, in such times, gold and silver prices (and affiliated plays) may rise radically. In the meantime, there shall be endless promises made and endless initiatives to revive an economy that will not expand again until the contraction has run its natural course. None of this shall find its way into the mainstream press in a big way. No, there will be endless articles about what central bankers are doing but not about what they have done. And all the explanations and strategy is brought to you courtesy of the very same braintrust that runs the central banks, and ran the economy, worldwide, into the ground in the first place.