Obama Is The Economy's Number One Fan

The old adage says that in every crisis there is opportunity. For the new Obama administration this apparently means an opportunity for government intervention in the economy on an unprecedented scale (WSJ-sup. req.):

From autos to energy to banking, President-elect Barack Obama is promising to intervene in the economy in ways that Washington hasn't tried since the 1970s, favoring some industries and products while hobbling others.

Under his financial policies, banks seeking government assistance would be forced to lend and to halt foreclosures. Automobile companies would be pushed to change their product lines to more advanced, fuel-efficient vehicles. Billions of federal dollars would promote solar, wind and biomass energy, while dirty coal power could be priced out of business.

Mr. Obama, in a video for a climate-change summit Tuesday, pledged to pursue energy policies that would reduce greenhouse emissions to 1990 levels by 2020 and reduce them an additional 80% by 2050. Obama Chief of Staff Rahm Emanuel, speaking to a Wall Street Journal conclave of business leaders Tuesday, said the economic crisis facing the country is "an opportunity to do things you could not do before."

"You never want a serious crisis to go to waste," Mr. Emanuel said.

Easily the most frightening words to yet come from the Obama administration to be. While some businesses are sure to welcome this new interventionist approach as they scheme to make sure it benefits them, overall it's likely to stifle innovation, risk taking, and growth. It all depends on just whose industry is being hobbled.

UPDATE--In another piece of economic interest from today's WSJ, Andy Kessler urges us to take a holiday from agonizing over the daily gyrations of the stock market:

So which is it now: an efficient mechanism or a manipulating liar? Should you listen to it warning of doom or anticipating renewal? I'd say stick wax in your ears and don't listen to the market until February.

Don't get me wrong. The freezing of the credit markets is wreaking havoc on the world economy. Corporate profits are dropping. Central banks are fighting off deflation and may not turn off the spigots fast enough -- which could ignite runaway inflation. But because of the credit mess, I am convinced the stock market is at its least efficient today. Don't read too much into any move. Here are the five biggest dislocations taking place:

-Tax-loss selling...

-Mutual-fund redemptions...

-Mutual fund cap-gain distributions...

-Hedge-fund redemptions...

-Margin calls...

If you want details on how each of these five factors are skewing the market's signals, read the whole piece. Me, I'm just going to try to make like an ostrich when it comes to the market for the next few months. Sometimes, ignorance is indeed bliss.