CNBC’s Propaganda

CNBC’s coverage this morning in the wake of Obama’s budget plan is laughable and pathetic. Obama’s “War On Wealth”? Are they presenting news and analysis or is simply a monied version of conservative talk radio?

On Obama’s budget plan, I confess ignorance to the fine details. Not only that but I paraphrase Seth Klarman’s wise comment in saying that it is neither possible nor desirable to have an opinion on every subject. To put a finer point on it: when you speak from ignorance or ideology, you eventually wind up talking out of your ass.

I supported Obama during the election but regular readers may recall that I haven’t had a nice thing to say about him since. His actions since he’s taken office hint that maybe Hillary’s jibes that she’s tougher than he is may have been the truth. Say what you will about G. W. Bush (and I have), but he always managed to quash the Democratic Congress and win his objectives no matter how hard the Dems protested. In the end, they always caved and Obama, despite overwhelming popularity and power base, seems cut from this same submissive mold.

It’s early yet but Obama looks to me as if he may have a glass jaw — how else to explain his begging to garner Republican support for a package that if Republicans controlled the government, they would pass in a heartbeat, though perhaps with certain changes.

I don’t know if Obama’s budget strategies are good or bad. I guarantee you every person who pontificates about it on TV doesn’t know its viability either — they can only surmise or believe but no one truly knows. The size and intricacy of the economy combined with the law of unintended consequences simply make it impossible to judge things on this magnitude before the fact.

What I do know is the previous methods of G. W. Bush didn’t work. It’s clear now the economic imbalances built up in the economy during his administration were unsustainable and dangerously destabilizing. The wealthy and corporate class got everything they asked for and we now live in the most dangerous economic time since the Great Depression (if any of you start to blame this on Fannie or Freddie or redlining, please PLEASE stop reading this and do just a hint of research).

I am reminded of Michael Pollan’s book, In Defense of Food, where he states science hasn’t figured out why certain food combinations are good for us but that doesn’t prevent us from eating those foods and deriving their health benefits. In the same way, we know (or have a pretty good idea at this point) that a society and economy based on financial engineering and speculation is a poor model. Is Obama’s model better? Who knows but we have to begin to move away from the old one.

Consider a concrete case study: the situation of Mervyn’s and Cerberus Capital. Mervyn’s had been around ever since I was alive so it’s a teeny-bit strange to see its hollowed-out stores around town. Now assume the capital resources involved in the Mervyn’s/Cerberus transaction were sizable but not to the extent that both could support operations on that capital.  Basically, there’s only so much money to go around — which one “deserved” it more, Cerberus or Mervyn’s? Cerberus and its partners strip-mined as much of Mervyn’s assets as possible and when the going got tough, only Cerberus survived.

What the talking heads on CNBC are saying is that people like Cerberus deserve to have this money because they drive the economy. But I’m not convinced we are better served by having Cerberus instead of Mervyn’s. I have long held that America has too much retail capacity but we have too much financial engineering capacity as well (yes, I say that as a financial blogger). I don’t know how many people Cerberus employs but it’d be hard to fathom that the private equity firm’s economic footprint would be wider than Mervyn’s, which employed 20,000 people over numerous communities. Of course, Cerberus’s economic footprint seems to be deeper than Mervyn’s. Judging from the Chrysler and GMAC bailout debacles, it seems the fun never ends with these guys.

Before readers get on thinking this is a class issue, this tug-of-war is even more prominent for the investor class. Look at how the locusts have eaten out the core of the financial sector — that’s shareholder equity the government is going to wipe out in Citi or AIG. I don’t know the breakdown of investor capital across the different sectors but is there any doubt that mutual funds and pension funds make up a large chunk of investor capital?

The middle class is a bit clueless so it takes awhile before we realized that war has been declared on us. In fact, we still haven’t realized it. Witness the behavior of the various processed food producers (General Mills, Kraft, Unilever, Hersheys, etc.). Most of them raised prices during the commodity run-up in early 2008 but now that prices have come down amid fears of deflation, many of these companies have no plans to roll back the increases. If the middle class weren’t asleep at the wheel, a quick boycott of offending companies would set them straight fast. Eventually the marketplace will correct this but until then, most of us pay the increased prices and unknowingly leave it to the grocers to push back.

But even the ignorant complicity of the middle class can’t save this jig. Consumers levered themselves to the limit and now deleveraging is occurring across all classes. At the beginning of the downturn, many pundits recommended high-end luxury stocks because supposedly, the wealthy aren’t affected by lowly subprime borrowers and will have the money to continue spending. How did that turn out? (Hint: not well) These are probably the same pundits who are now railing against Obama’s “War on Wealth.” But perhaps Warren Buffett has it right (he usually does) when he says that the wealthy prosper when everybody prospers. I think I’d rather listen to him as he’s enjoyed some success over the years.

In the end, a warning for readers: beware the propaganda. Not because it’s bad sloganeering or bad ideology but because once your mind has lent credence to the credibility of these fools, you may start believing them on matters closer to your finances. After all, CNBC is still a financial news network so they’ll talk about stocks eventually. Viewer beware if you start buying into their drivel on stocks as well.

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9 Responses to “CNBC’s Propaganda”

  1. Thomas Simon Says:

    I has been clear for a long time that the republicans have declared war on the middle class, starting with that hero of the GOP Ronald Reagan. Trickle down economy is the biggest poppycock ever sold to the masses. CNBC is still working hard on selling it, no matter that it is clearly a failed theory. The problem is that the middle class has a work ethic that pushes it to work harder for the same income/benefits as the going has been getting tougher and tougher (aside of a break during the Clinton years). If you work very hard, you do not have much time to reflect on the macro developments. Anyway we woke up and threw the GOP out, finally. We can not expect Obama and his team doing everything right.. But for sure, they can not do worse than W, or Reagan for that matter.

    As far as junk food makers General Mills, Kraft, Unilever, Hersheys, etc. are gauging people, it is no surprise. However, anyone who read Pollan’s In Defense of Food would never touch anything they offer anyway. I certainly would not. Remember, only eat packaged foods if their ingredients could have been recognized by your grandma. One of the great take aways from the book, at least for me.

  2. Larry Says:

    Socialism at it’s fiest. His background his friends and teachers are all radical socilaist and this is the great
    Obamma’s legacy. There has never been a socialist yet that din not attack the rich and want to redistribute the wealth ( as long as it wasn’t his). These income restrictions and stated policies are just the first step. His fear mongering is necessary to make the people believe all the other steps to come are essential. Socialist, Government controled, USA is on the horizon.

  3. Caise Says:

    Socialism at it’s finest? Obama is no socialist. His continuation of the TARP plan is helping the richest of the rich on Wall Street, the same people who paid to elect the Bush and Obama administrations. Check the money trail.

    Davy, excellent commentary on propoganda! The middle class and poor need to wake up and start participating in government. Though now, it may be too late, as their children and grandchildren will be paying ridiculous taxes and higher interest rates for the mess created the past 30 years.

    Buy sugar and wheat, short the American market. Best intermediate and long term trading philosophy

  4. Thomas Simon Says:

    Larry, it seems you are buying and repeating the republican propaganda about Obama being a socialist. Taking back tax cuts for the top 2 percent that was given by Bush & co to buy their campaign contributions is not socialism, it is sane economic policy during tough times. Cutting taxes on the middle class (on 70% to 95% of families, depending on how you count them) is definitely not socialism. You might argue that bailing out the banking system is socialist, BUT what policies created the situation that lead to these bailouts? Well, Bush’s of course, policies that were deceptively called “free market” policies. They were none of those, of course. Free market and capitalism can thrive only if there are rules and government oversight enforcing them, preventing corporate greed and risk taking running amok. Mind you corporate greed in itself is not bad, neither is risk taking. The goal of a corporation and its management is to maximize return to shareholders, nothing wrong with that. But if it is done with outright fraud (like Enron’s case) or via excessive uncontrolled risk taking (which lead to the present banking crisis) than it leads to disaster. Both capitalist enterprises and government have their role in a free market capitalist system. It always cracked me up when republicans were bashing government being inefficient and incompetent when they were in charge of running it. If someone, like most in the present GOP, does not believe in government whey do they want to run it??

    I agree with Caise, Davy’s commentary above is excellent. I wish we could read more of these type of analysis in the mainstream media. As for Obama versus Clinton, I always believed that Clinton would have been a better president, and I supported her until I could. But now our president is Obama, and anyone who wishes him to fail is a traitor in my eyes (that includes Limbaugh and all his supporters).

  5. Davy Bui Says:

    Hey guys,

    Thanks for the comments and compliments. I try not to get too explicitly partisan — I have no love for unions or do-nothing liberals (I used to see these folks all the time at rallies, more than happy to hold a sign but nowhere to be found when it was time to make calls or knock on doors).

    Actually, I joke with my wife that I’d be a Republican if they weren’t so anti-gay, anti-choice, and so nakedly pro-rich (lower taxes for everyone isn’t the same as lower taxes for rich people).

  6. Thomas Simon Says:

    Hey Davy,

    your comment on keeping your blog non-political is well taken. However, politics and economy and stock market performance are tightly linked. The market bumping up/down lately (mostly down in the past 2 weeks) has as much to do with politics as anything else, in my opinion. Interestingly, you comment about “one could be a republican, but…” describes me as much as it does you, and I believe it applies to a large number of independent minded middle of the road voters. It is because of the many “but”-s that the GOP is out of power now.

  7. Dax Says:

    Here’s an article (from, of all places, Playboy) that provides some insight into Rick Santelli’s “spontaneous” outburst on CNBC last week. It seems unfortunate to me that our two choices in business channels provide us with an editorial choice only between the Far-Right and the Extreme Right.

  8. The Enlightened American » Proof Meet CNBC’s Pudding Says:

    [...] CNBC’s Propaganda [...]

  9. Shawn Says:

    There should be an all out push by bloggers to the soon to come Wall Street eats first economy give Obama his health plan double dip recovery. Shouldn’t Wall Street insiders (not criminals) feel the pain of this recovery. They are angling for another stock market leads us to the rainbow. The American people only interest in this game is to clean it up. They have sytematically, (can you say RICO), looted the US Treasury and now they want American’s to beg for crums, again. This has got to stop. Start checking sources on CNBC, there grabbing business news and presenting it as fact. For example, a reporter said today that Ninetendo’s Wii system was unsuccessful because it lacked games. What the hell? I don’t no who said this or why its important, but it must be an embedded message for somebody. They throw this information around all day without stating sources. So unless news anchors are now allowed to be their own sources, this dog and pony show needs to be challenged. American’s only watch this station because their 401(k)’s are down. Wall Street insiders are known to call this dumb money, this is not an accusation, it is that Wall Street does not consider you a customer they consider you a capitive. You chose them now your stuck. The average worker (not a boycott) has no business dealing with Wall Street. Really has anyone’s 401(k) made money?

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