Is Obama Good for Business?

[this article appear in the February issue of SME Magazine]

We extend our heartiest congratulations to Barrack Hussein Obama, the 44th President of the United States. Many of you would have seen his inauguration live on CNN, CNBC or one of the many stations worldwide. Many more would have followed his meteoric rise from a little known senator to the most powerful man on earth.

What does having the first African American in the White House mean to the millions of small businesses outside the US?

Faced by an economic adversary in the form of Mainland China, who is strong enough to put it in fear mode, the US is likely to assert even more pressure on China. Obama has already declared his intention to ‘make China play by international rules’. This includes pressuring China to strengthen the Renminbi to make exports more expensive and adding costs to production by virtue of ‘promoting greener environment’ and ‘human rights’ a.k.a. increasing wages. What this means to Asian businesses is: the cost of doing business with China, and by extension, cost of any business will rise under the Obama administration.

As a Democrat, it is wishful thinking that Obama will do even more for businesses in the US. He’s already threatened to reverse tax cuts for the wealthy (read: businesspeople) and promised to spend more money on the poor. While this populist move may serve him well, it means tougher times ahead for businesses, inside and outside of the US, even if he managed to turnaround the US economy as promised, despite the foreseeable hurdles he would have to overcome.

CHALLENGES AHEAD FOR OBAMA ET. AL.
When I hear Obama downplaying his promises on his inauguration day by saying ‘the challenges we face are real… they will not be met easily or in a short span of time’, I couldn’t help but smile. Another talking head. Another politician. So, who’s doing the real work?

But I don’t blame him. In the great democratic nation called the US, the President and his policies are subject to ‘legislative oversights’ and other bureaucratic approvals. And he’s proposing not one, but many changes. Even if you could believe that these are genuine changes and not some self-serving policies, it will still take years for some of these changes to be legislated. In the absence of concrete, structural changes, we can only expect even more ‘quick fixes’ in the short run, including more protectionism, and one-sided trade policies. Will these be good for us? What do you think?

ROOT CAUSE OF THE PROBLEM
We are now aware that one of the main causes of the current financial turmoil is the mindless promotion of home ownership by American politicians especially Democrats. So fluid are the arguments that people who can’t afford a home loan are offered one by banks. And when the bubble burst, as it was bound to, the blames went to Republicans and ‘their banker cronies’.

The Clinton administration investigated Fannie Mae for racial discrimination and proposed that 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low - moderate-income borrowers by the year 2001. The Clinton administration criticised the mortgage industry for looking at "outdated criteria," such as the mortgage applicant's credit history and ability to make a down payment. Threatening lawsuits, Clinton's Federal Reserve demanded that banks treat welfare payments and unemployment benefits as valid income sources to qualify for a mortgage. This isn't a joke - it's a fact.

We all know how Obama is going to spend the trillion dollars to ‘rescue the economy’. With deficits running in the hundreds of billions, one wonders where the trillion dollars will come from. Some printing machines of course! In my first year in economics class, I learn that when you have too much money lying around, it will inevitably lose its value. Prices of goods will go up. Those trillion dollars will create an inflation like never seen before. I’ve sold ALL my US dollars a month ago, despite my bankers telling me that the Ringgit will weaken further against the dollar. No time to be a hero.

FINANCIAL TURMOIL IS GOOD FOR US
I have always held the position that the current financial turmoil that has hit Wall Street may not be bad for us in the long run. In the short haul, of course we will all feel the credit crunch, and for those of us who export to the US, cancellation of orders. It’s painful. It hurts. But it is also good for us in the long run.

More than the US, it bodes well for our awareness of the ‘leakages’ in our financial system. And also questions our over-dependence on the US as a source of finance and reference. Even more importantly, it taught us to be prudent, not to spend money we don’t have, and to conserve, conserve and conserve! Have you wondered why the richest men on earth, tend to be misers?

Hope? For Americans perhaps. Change? Not necessarily for the better for us outside the US. For our sake, I hope I’ve read this all wrong. In the meantime, I’m tuning off CNN and sticking to the Cartoon Network, where at least there’s some semblance of reality.

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