By the time you read this, the United States will have a new President to lead the way over the next four years and try to reverse an economic engine ...
By the time you read this,
the United States will have a new President to lead the way over the next four years and try to reverse an economic engine that is stalling and running out of gas. We welcome President Barack Obama as the 44th President and hope he can deliver on his promises, although, as we all know, it will take some time to deal with all of the issues out there. In a speech prior to his inauguration, he said it could take years before any major changes occur, which clearly is a signal that he realizes the situation in America is much worse than he thought.
President Obama will need to form strong alliances with other major global leaders, as the efforts to get the U.S. out of this economic mess will largely be dependent on growth in world economies. There has been some talk about President Obama's protectionist bias to save American jobs and industries, but the fact is, this will not be easy to do, as the U.S. needs to be open with other world economies and close its doors to foreign goods. The world is linked closely and there needs to be a strategy that will help American companies and workers, but at the same time not cause trade wars and retaliations between trading partners. This is my opinion, but I believe it makes a lot of sense.
There has been talk about the country's massive but declining trade deficit with China, but the reality is that you must also not forget that China holds over a trillion dollars of U.S. debt. Therefore, the last thing you want to do is to anger the Chinese and make them reconsider selling off their U.S. debt, which, at this time of credit and financial crisis, could be devastating for America.
Domestically, President Obama will have little time to rejoice after his inauguration, as he will immediately need to deal with getting much-needed funds flowing to the economy and getting approval for his proposed $850-billion infrastructure program. Yet, despite all the optimism for the new President and his plans for economic renewal, the investment climate continues to be highlighted by crisis in the economy, housing, and the jobs market.
The reality is that the banking crisis remains a significant issue not only in the United States, but also globally. The Royal Bank of Scotland announced that it expects to report a massive $41.3-billion loss for 2008 and will require a bailout from the British government in order to survive. The British government already owns a 70% stake in the bank, which is not what it wants to be doing.
In my view, I expect the focus will be on the Obama government in the foreseeable future, as debates surface regarding how to fix the many problems; yet the economy could continue to worsen. Obama will need to be aggressive and convincing to get the funds flowing; otherwise, the U.S. recession could be a lengthy one, extending into 2010.
Good luck, Mr. President.
Profit Confidential
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