Obama

One-hundred US dollars per gallon ? (updated)

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The current average price of gas in the US is $1.91.  The Obama administration together with a Democrat-controlled Congress plans to increase government spending to unprecedented levels which has many, including Warren Buffet, predicting inflation.  The assumption is that the US will charge taxpayers for part of the budget, borrow as much as it can from China and other countries, and create fiat money for the rest (fiat money is printed or otherwise created out of thin air).

President Obama’s popularity is still very high.  I’ve lived through a period of inflation.  What happens first is that the dollar will drop in buying power because there is too much money chasing too few goods.  The price of gas will go up.  Then the government in panic will try to control the price of gas instead of addressing the real problem of too much government spending.  The result of price controls will be a severe shortage of gasoline.  When these things happen, President Obama’s popularity will plummet.

Readers beware.  Do you think the economy is bad now and that the stock market is as low as it can go?  Forget it.  The business environment has become hostile and our president is either a calculating meglomaniac, who is creating this crisis on purpose, or a economic ignoramus, who hasn’t a clue what he is doing.

Update, External Links:

Something wicked this way comes, J. C. Smith (Is Obama creating the crisis to attempt a takeover?)

Natural Gas Rigs Shutting Means Prices May Double, bloomberg.com.  This article is about natural gas; oil and natural gas production are often intertwined; companies will also reduce crude production (e.g., Company Cheif:  Oil project suspension to dent supply) and hence crude prices will go higher.  Now a possible scenario is that rising prices due to low supply and inflation could converge and create a sudden spike in price; then the government will try price controls and that will lower production even more.  Then there will be actual shortages.

Is Buffet giving Obama a vote of no confidence?

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My friend the Brooks mentioned that Obama’s economic advisers were renown economists and Warren Buffet supported Obama’s ideas. Now I wonder if this is still the case given what Buffet writes in his letter to shareholders of Berkshire Hathaway:

This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone “all in.” Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.  Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.

“Inflation”, “mind-boggling aftereffects”, “once unthinkable dosages”, major industries dependent on the “public teat” who “won’t leave it willingly”?  These are not words of someone who still agrees with Obama.  By comparing the Federal budget policy to going “all in” in a poker game, Buffet is saying that Obama and the democrats in Congress are making a terrible gamble, echoing David S. Broder in the Washington Post (hat tip:  American Thinker), “When we elected Obama, we didn’t know what a gambler we were getting.”

This reveals the mind of the country’s foremost investor, and is undoubtedly representative of how investors feel and why stock markets continue their downward spiral.