Saturday, February 26, 2011

Barack Obama 2012: Economy. Mikhail Kryzhanovsky, KGB

Economic strategy is as important as national security.
Appoint bright, educated and experienced people to the Cabinet and the Federal Reserve Board, who advise you on important economic decisions.
Press foreign governments on trade and currency issues.
Watch the markets 24/7.
Balance the budget (half goes to national defense - if there’s no war there are no jobs in America - 35% of US business works for Pentagon. 
 In general, the key word in domestic policy is accomplishment — budget balanced, taxes cut, jobs created. Use your budget power to the full extent because people usually hold you, not Congress, accountable for economic downturns. Whether you win or lose your second term in the Oval Office largely depends on your budget actions.

 Managing the Economy

1.Regulate spending, taxation, monetary policy and foreign trade  whichit has to be under strict political control - you have the right to propose legislation and veto any legislation you think incorrect. Keep in mind that Americans always insist on reducing government spending on foreign aid and space exploration, and they naturally hate any rise in taxes.
2.State and local governments, both through national associations like the US Conference of Mayors and Congress Members, always press the government to get more federal funds even at the expense of inflationary budget deficits.
3.Keep unemployment low and prices stable - these two factors are politically dangerous and failure here can bring a free-fall in approval ratings.
4.Take credit for economic growth, price stability and low unemployment even if you have nothing to do with it.
  Still have problems? Try international initiatives.

There are four inevitable factors that will limit your control over the economy:
1) You must share power with Congress — you can’t levy taxes or appropriate money all by yourself;
2) The theoretical nature of the science of economics — no single economic theory has ever explained the behavior of the economy in the future;
3) The imprecision of economic information. Economic statistics and indicators do not measure the immediate conditions of the economy, but rather the conditions that prevailed between one and three months ago, depending on the particular economic statistics. Consequently, if you take action on the basis of incoming economic information you may be reacting to a problem that no longer exists or that is much worse than believed.
4) There are forces outside the reach of the federal government, like international factors (oil prices and foreign trade policies), state and local governments economic decisions and mistakes, big business decisions that affect employment, inflation, the trade deficit and public opinion — which is always against cutting social programs.

 Budget  Deficit

A large budget deficit is a headache and has extremely negative effects on the economy:
1.  It limits the government’s flexibility to fight a possible recession; that requires tax cuts and deficit spending, which would exacerbate the debt problem. Since tax revenues fall during a recession and unemployment insurance and welfare payments rise, the budget would be under further strain precisely when deficit spending would be needed to pull the economy up.
2.  It reduces the amount of funds available for achieving the nation’s social and defense goals, because interest must be paid on the national debt.
3.  It can threaten the economy by “crowding out” corporate and private borrowers from the credit market. Because the government must borrow heavily to finance its deficit, it competes with business and individuals to borrow funds. The increased competition forces interest rates higher, causing loans (including mortgages) to become more expensive. As a result, business can afford to purchase less plant and equipment to expand and modernize their operations and fewer consumers can afford to finance purchases of expensive items, such as houses and cars. The resulting reduction in demand threatens economic growth.
4.  The US budget deficit has become so large that domestic savings no longer can provide enough capital to service the debt. Consequently, the government must borrow from foreign sources to make up the difference. This makes us dependent on foreign investors and raises the possibility of a “stabilization crisis,” which can occur if foreign investors lose confidence in the dollar and liquidate their US investments. Such a crisis could cause the dollar to plummet and interest and inflation to rapidly accelerate.


    Crises  means that your government as a system is exhausted and it’s unable to rule the nation and resources effectively in an extreme situation, including economic, natural catastrophes and war. A crisis has three stages — before the crisis, when the first signs appear; crisis development until culmination; catastrophe followed by impeachment. A crisis could be “programmed” at the very beginning of your term (mistakes in political and economic courses, inexperienced personnel, faulty planning) or it can appear later (too many mistakes, change of political environment, shifts in the economic or international situation). Crisis management includes pre-crisis management and handling of the situation. You must be ready not only for a government crisis but also for sudden military attack, mass riots and natural disasters.

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