Friday, November 12, 2010

It's the Global Economy, Stupid

PUBLIC ENEMY. Barack Obama might not be popular during the G-20 summit following the decision of The Federal Reserve to pump US$ 600 billion to the US economy; a policy which will weaken the US dollar and propel more hot money inflows, inflation, and asset bubbles to the developing world.

As the United States President, Mr. Barack Obama surely has too many thoughts in his mind, doesn’t he?

The major overhaul in US healthcare system reflected Obama’s responsiveness in domestic policies and fulfilled his campaign promise, while the way he handled the British Petroleum fiasco in Gulf of Mexico indeed had satisfied the environmentalists.

In foreign policy matters there’s an urgent need to embrace the Muslim world after George W. Bush responded the 9/11 attack with waging wars here and there. The relationship has never been bitter: In Iraq, the US enraged many Muslim communities by demolishing the country because of the Weapon of Mass Destruction that never exists. In Afghanistan people still cry for more American troops to be deployed, arguing it is the US’s responsibility to fix the chaos that Bush once initiated.

But it seems Obama’s mind is being crammed with too many foreign issues that the US has to deal with –and the economy is not being put as his major precedence. Perhaps we could recall one of the most famous remarks in the history of United States politics, which was coined by Bill Clinton during the 1992 presidential campaign against George H. W. Bush.

That phase of Clinton’s emphasized the need to put economic issues as the most important priority among others. As Bush at that time gained fame among his voters because of his foreign policy developments, Bill Clinton, impressively, become the eventual winner the election thanks to his audacious –and effectual– campaign slogan: It’s the economy, stupid.

That’s what Obama should know, because the dreadful economy at present is definitely the reason why his Democratic party conceded a defeat against the Republican recently. Obama’s report card in the economy is a complete mess: In US currently unemployment rate soars higher than ever, and the multi-trillion dollar bailout is not actually effective to fix the situation or jumpstart the domestic economy either.

Also, Americans are not too interested with the revamp on regulations of Wall Street, as they urge Obama to put more attention to the jobless people who desperately look for dollars to feed their family on Main Street.

While Obama is not popular home, The Federal Reserve’s decision to boost the US economy by purchasing treasury bonds worth of US$ 600 billion and keep the interest rates at a historically low level may make him a more unpopular figure overseas.

Yes, Obama may be welcomed with ecstasy by Indonesians as he gave his speech in fully-packed hall of University of Indonesia’s. But surely unhappy leaders of G20 economies would not be that kind to shake his hand with such warmth as the Indonesians did –and they surely greeted him with sinister smiles on their faces knowing what the US had done to the global economy.

The US is the major perpetrator behind the recent currency wars, depreciating its dollar in order to make its exported goods more competitive abroad, as well as continually keeping its interest rates low to boost its economy. As if the historically low interest rates are not enough to cultivate hot money inflow and prompt headache among developing countries, now The Fed is looking to print US$ 600 billion more to the economy –a move that will surely increase the US dollar supply in the market, press the US dollar to depreciate further, and ultimately bring the new chapter of currency wars.

The United States is playing dangerous game here in implementing such self-centered policies like those because the consequences of the policy are likely to put the stability of global economy at bay. Depreciation in US dollar currently leads to a considerable corrosion in many countries trade balances, while a near-zero interest rate already stimulates a significant surge in capital inflow among developing countries.

And regarding the US$ 600 billion injection to the US economy: Is this a trade protectionism in disguise? Weaker dollar will eventually make US goods more competitive abroad; stabbing many US trade partners in the process. Countries around the world would not be so happy with this. “You blame me as the global economy’s hitman and now look what you’ve done,” says China.

Does Obama really need to come to G20 meeting anyway? While the global economy is still recovering from an economic mess which the US started, the G20 economy members are supposed to implement integrated and joint efforts to fix the global economy together, not the other way around.

Yes, the G20 group should work in cooperation; and that’s why it was formed at the first place. But now such commitment is in question because currently the group’s de-facto leader seems to be more interested in pursuing egotistic policies to save the his economy alone, not the world.


Sumitro said...

Pu, kontribusi ke ekonomi Indonesia aja drpd. kritikin Pak Obama atau ngebahas ekonomi dunia ...

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