America’s economy is in the wake of a financial crisis that was preceded by speculation in housing. The housing market has yet to recover and has in fact gotten worse under Barack Obama’s economic policy, according to the latest statistics from Standard & Poor’s.
Home prices fell in 19 of 20 Metropolitan Statistical Areas (MSAs) and both [10- and 20-city] Composites in November from their October levels. In November, only four MSAs – Los Angeles, San Diego, San Francisco and Washington DC – showed year-over-year gains. The Composite indices remain above their spring 2009 lows; however, nine markets – Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, Portland (OR), Seattle and Tampa – hit their lowest levels since home prices peaked in 2006 and 2007, meaning that average home prices in those markets have fallen even further than the lows set in the spring of 2009.
Making the situation even worse is a state of high unemployment, with American workers struggling through the transition of filling jobs as manufacturing workers for an industrial age that matured in the 20th century, to creating jobs as knowledge workers in a developing information age.
The reason a growing majority of Americans say the nation is heading down the wrong track may be due to Barack Obama not understanding the problem, which is the first step in finding a solution. Three areas in particular expose Obama’s lack of economic understanding.
- History – After understanding the problem in need of a solution, the next step is to devise a plan. And the best way to begin devising a plan is by asking the question: “Have you seen a related problem before?” America has been through a related economic problem, after the Civil War, when technology was forcing workers to transition from farm work in an agrarian age to manufacturing work in a developing industrial age. Making the situation worse was speculation in railroads that ended and led to America’s first Great Depression in the 19th century, about which Barack Obama is oblivious.
- Innovation – In his State of the Union address, Barack Obama revealed that he has no clue about how the government can create the conditions to inspire innovation in society. But as former Harvard students like Bill Gates of Microsoft and Mark Zuckerberg of Facebook demonstrated, inspiring hope for all Americans to succeed, helping them discover their full potential for economic growth, simply requires that members of society have the skills required to innovate. The knowledge need not be limited to those with the privilege of having a university degree, as recommended in the speech by Barack Obama.
- Railroads – As mentioned above, speculation in American railways ended in the 19th century, when the potential for railroads leading to further economic growth matured. But similar to Johnny Canal, a “Saturday Night Live” character who has achieved legendary status, from a skit about one man’s vision for a network of canals when railways were emerging, Barack Obama’s idea for government speculation in a high-speed railway system is unrelated to America’s underlying economic problem.
Americans need a leader in the White House who understands that the fundamental problem with America’s economy is a housing crisis that doesn’t need more government speculation by way of high-speed railways. No amount of government spending will ever be able to fix the underlying problem without a determined focus on the appropriate solution.
Next time we’ll discuss how all Americans can learn skills for systematic innovation in the knowledge economy to succeed.
Charles P. Kindleberger, Manias, Panics, and Crashes: A History of Financial Crises, Revised Edition (New York: Basic Books, 1989).
Barack Obama, “Remarks by the President in State of Union Address,” The White House, January 25, 2011.
George Polya, How To Solve It: A New Aspect of Mathematical Method, Second Edition (Princeton, Princeton University Press, 1973).
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