Country at a Crossroads

By John Browne, GoldSeek

The U.S. economy is in uncertain times. Analysts are split between those seeing recovery and those fearing a second downturn. This confusion is being echoed in the highest levels of government as President Obama simultaneously speaks about the need for more federal spending and warns of the dangers of increased debt. As the volatile markets indicate, investors are not only confused – they are seriously concerned.

The country appears to be going through a period of buyer’s remorse over the election of Barack Obama. The majority cobbled together by the President one year ago included the Democratic base, independents hoping for “change,” and many disaffected Republicans betrayed by the Bush Administration’s big-government neoconservatism. It is unlikely that most of these voters favored an overt push toward socialism; however, this is what they have received. As the ‘tea parties’ illustrate, voters are not only confused – they are seriously concerned.

These concerns are justified. The Administration’s hard-left turn was evident from the outset. Ignoring expert advice to spend on job-creating infrastructure, Obama spent wildly on entitlements. Now, with rising grassroots discontent, a falling currency, and threats to America’s AAA credit rating, there is some evidence that the Administration is trying to hedge its bets through tough talk. Yet, they still have not taken any tough action. As their gold stockpiling highlights, foreign governments are not only confused – they are seriously concerned.

Over at the Federal Reserve, no such soul-searching appears to be underway. Its chairman, Ben Bernanke, is clearly intent on avoiding deleveraging. He has charted a course of massive liquidity injections, financed by hitherto unimaginable levels of monetary inflation. He has even attempted to coordinate these expansionary policies on an international basis.

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