Obama Policy: Destroying Wealth or Posturing to Save Treasury?

If the U.S. Treasury blows, there will be nothing worth saving.

Every man has his sword on his thigh
—Song of Solomon

* * * * *

What if one were to naively believe Jim Cramer's suggestion that, Obama administration policy is intentionally designed to destroy wealth? What does this belief say for the stock market? In other words, how do some circles within policy-making bodies apparently view this asset class called equities?

Could prospectively negative policy (assuming it's true) toward the asset class lowest in the capital structure possibly imply assets much higher up the chain are, themselves, at risk of spiraling into oblivion? Windbags like Cramer simply fail to connect the dots. For instance how many times during the stock market's unprecedented run-up, 1995-2000, were ratings agencies and their observers suggesting the U.S. Treasury's AAA debt rating was at grave risk of being downgraded? These days such suggestions are commonplace.

Few complained while the build-out of our securities-based financial system was occurring at breakneck speed. Easy credit created through over-the-counter derivatives markets (supposedly facilitating risk intermediation) fueled the stock market higher. Yet at the same time it guaranteed we would reach the present moment of profound financial fragility.

The real issue is not "wealth destruction" in the stock market. Rather, it is keeping in place systemic underpinnings critical to capitalism (for one, confidence in debt markets). Truth is if the U.S. Treasury blows, there will be nothing worth a dime waiting in the wings to take its place. Policy (or lack thereof) sometimes is a matter of posturing. So, if financial interests once made benefactors at the expense of Treasury find themselves against the wall, maybe a larger purpose will be served. Among other precious things, maybe in the future private interests will place greater value on behavior conducive to long-term stability.

Let's take this one step further. Arguing for policy prescriptions supportive of a status quo whose invariable consequence promotes swindle and economic instability (the likes of which we are only beginning to fathom) is not only insane, it is criminal. Those who would balk amidst posturing meant to expose the vulnerability of larger gears in the global financial machine might better check their treason at the door.

—Tom Chechatka