Change has indeed come to America and I am glad that Obama, a bright, eager, charismatic and progressive African-American has ascended to the White House on a record wave of voters’ turnout. After the dizzying celebrations of a defining moment where a gigantic racial barrier was overcome, it is time to get back to reality though.
Obama has a lot on his plate, chiefly to get the economy back on a sound footing. The economy was a major theme in several key battleground states, and helped hand the victory to Obama. With a severe recession, underwater housing market, crumbling social security and health care, energy crisis, two bloody wars yet to wind down, and record budget deficits, this is not a desirable job, by any standards.
Rewards are low compared to the stress and brickbats that will come from making decisions in this hot seat. As they say, the higher they rise, the harder they fall. When Obama takes over the reins, ratings should be the last thing on his mind. He has to get used to plummeting support and stinging criticisms if he wants to implement tough measures which don’t yield immediate results. You can’t please all the people all the time.
I believe Obama is aware of the tremendous tasks when he tempered expectations in his victory speech: “The road ahead will be long, our climb will be steep. We may not get there in one year or even one term, but America, I have never been more hopeful than I am tonight that we will get there. I promise you, we as a people will get there.” A powerful delivery… no wonder there were tears welling up in the eyes of his attentive audience.
Instead of reflecting the feel-good vibe from Obama’s historic victory, stocks fell sharply on Wednesday as the struggling economy worried investors. The Dow Jones Industrial average lost 486 points, the S&P 500 lost 5.3% and the Nasdaq composite gave up 5.5%.
Jobs, the most important bread-and-butter issue facing Americans today, remains a big challenge. The U.S. Department of Labor reported that more Americans filed new unemployment insurance claims last week as compared to economists’ expectations, indicating continued weakness in the nation’s economy.
The unemployment rate is expected to climb to 6.3% from 6.1% and match the worst reading of the decade. And economists all seem to agree the worst is yet to come. At some point next year the unemployment rate is forecast to pass 7%, a level not seen since 1993. Monthly job losses of 200,000 or more will be the norm as the full impact of the credit crisis is unleashed.
So get over it guys, there is no honeymoon for Obama to make good on his promises to point the United States in a different direction. While Clinton took weeks to assemble his administration, Obama has already unveiled likely candidates one day after election.
Some possible names being hinted to take over as Treasury secretary include Clinton’s last Treasury secretary Larry Summers, 53, as well as former Federal Reserve chief Paul Volcker, 81; and highly regarded investor Warren Buffett, 78. Another name being mentioned in the media for Obama’s economic overseer is Timothy Geithner, 47, president of the New York Federal Reserve.
Former Clinton White House aide Rahm Emanuel, 48, may also be chosen to be Obama’s chief of staff, a vital post that helps set the tempo of the administration.
Fortunately, cost of borrowing has fallen further. Two central banks in Europe made aggressive rates cuts on Thursday, their second in less than a month, as they try to stimulate economies that are rapidly slowing. First, the Bank of England cut its benchmark interest rate by 1.5 percentage points, more than economists predicted.
Then the European Central Bank cut its benchmark interest rate by half a percentage point, to 2.75 percent from 3.25 percent. Both banks also their rates on Oct. 8 in a coordinated response with other banks around the world.
Many experts predict that global stock markets will begin testing a new low before the situation will stabilize, but at the moment, I think the uptrend momentum has not fizzled out totally. There is a word of caution for those who intend to buy aggressively as some stocks, especially blue-chips have zoomed up in the past week and may become too pricey given the bleak economic outlook.
I am still taking a wait-and-see approach. Hopefully, in the coming days, Obama’s economic policies will be sound for investors. Will Obama continue with free market and free trade principles? Will he set up protectionist measures, impose stifling regulations and force jobs to move back to America? Will he adopt Clinton styled trade negotiations where threats of embargo was pressed on Japan to accept a specified quota on American exports? Stay tuned for more updates.