Written by Richard Butrick   

Krugman, the guru-in-chief of editorialists for the NYT, has launched [1] a defense of President Obama’s tenure in office ranking him as being possibly one of our best presidents. Here is his summary introduction to his thesis.

His health reform is imperfect but still a huge step forward – and it's working better than anyone expected. Financial reform fell far short of what should have happened, but it's much more effective than you'd think. Economic management has been half-crippled by Republican obstruction, but has nonetheless been much better than in other advanced countries. And environmental policy is starting to look like it could be a major legacy.

And here are his basic claims:

Health care: coming along nicely - 10 million more Americans covered.
Financial reform: The Dodd-Frank bill may not prevent the next financial crisis, but there's a good chance that it will at least make future crises less severe and easier to deal with. It’s “better than nothing.”
The economy: the US is still a long way from being fully recovered from the 2008 financial crisis but without the Obama administration policies it “could have been worse.” The initial stimulus should have been bigger and longer.
The environment: may be the signature accomplishment.
National security: at least we avoided gratuitous wars - a “big deal compared with the alternative.”

Krugman never address the overall strategy employed by the Obama administration in addressing problems in all the above areas except national security. The strategy? Code Red: (1) red tape (2) red ink and (3) red politics. In other words more regulation, more deficit spending and more Fabian sneak socialism.

The concern here will just be the administration’s economic policies though how national security (from fast and furious to IRS-gate to Benghazi to ISIS) can count as a feather in the Obama headdress is an eyebrow raiser.

These policies, by traditional conservative Chicago School of Economics (CSE) tenets, should have led [2] to inflation, collapse of the stock market and rise in unemployment - in other words a collapse [3]of the economy. And underlying all of that would be the collapse of the dollar [4]. So Krugman is right. Despite of the dire predictions of doom and gloom from the right and despite Republican “obstructionism” and attempted “scorched earth” economic policies, economic collapse has not occurred. So why isn’t Krugman right? Obama has avoided disaster precisely by avoiding Republican “scorched earth policies”. For this does he not deserve great credit considering the terrible economic situation he inherited?

Indeed, why hasn’t the huge increase in the national debt coupled with stupid government spending (from Solyndra to cash for clunkers and other failed [4] stimulus packages) caused the collapse of the dollar and the resulting consequences of market collapse, inflation and unemployment? Why haven‘t the dire predictions of CSE come to pass?

A country’s currency will collapse if there is nothing of value behind the currency - nothing of value that the country has that other countries want. After WW2 the US was the only manufacturing powerhouse in the world. The US dollar was backed by its manufacturing prowess. Holding dollars meant you could buy manufactured goods from washing machines to automobiles. Then towards the end of the 20th century the US became the IT powerhouse of the world. The dollar was backed by IBM and Microsoft and the huge boom in IT generally. By the turn of the century the US was no longer the manufacturing powerhouse of the world and losing its status of monopoly on IT software and hardware - though the Apple “dollar” helped the US dollar keep some of its clout. Throughout the whole period agricultural exports also added strength to the dollar as did US powerhouse financial institutions like Goldman Sachs and Morgan Stanley. By the turn of the century the US advantage in these areas was minimal at best. The US dollar was not backed by anything the world could not get elsewhere. Moreover, the need to import oil meant all forms of manufacturing and agriculture operated at a disadvantage. The dollar was losing its clout and there was talk of replacing [6] the dollar as the international medium of exchange. It also meant the huge deficit spending of the US would no longer be supported by other nations. The Obama red solution to the US economic problems was bound to cause a collapse of the dollar, the stock market and result in stagflation coupled with high unemployment.

But none of that happened. Krugman can gloat about the Keynesian policies of the Obama administration which entail running up huge deficits as having worked reasonably well. Manufacturing is on the rebound, unemployment is down, the stock market is up, the dollar is solid. And the underlying reason none of the gloom and doom happened?

In a word - fracking. The US has gone from the manufacturing dollar to the IT dollar to the fracking dollar. The US is now an energy powerhouse [7]. That means cheaper energy [8] at home and relative advantage [9] in all forms of production of goods.

And that, Mr. Krugman, is what has saved the Obama administration from the kick-the-can-down-the-road economic disaster. It is the fracking dollar. Fracking has saved the Obama administration from CSE predictions [10]. That has happened in spite of the spend-your-way-to-prosperity Keynesian policies and not because of their spendthrift policies.

[1] http://www.rollingstone.com/politics/news/in-defense-of-obama-20141008 ixzz3GmJYK1gS
[2] http://www.wbez.org/story/news/economy/chicago-school-economists-dont-love-stimulus-plan-0
[3] http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted=all&_r=0
[4] http://economiccollapsenews.com/2012/11/07/obama-victory-to-lead-to-economic-collapse-economists-predict/
[5] http://townhall.com/tipsheet/guybenson/2012/02/17/grim_milestone_the_third_anniversary_of_obamas_failed_stimulus
[6] http://articles.latimes.com/2013/oct/14/business/la-fi-shutdown-china-20131015
[7]. http://libertarianpastures.blogspot.com/2014/08/how-fracking-has-saved-obama.html
[8] http://cbcapitalresearch.com/2014/07/27/how-fracking-saved-the-u-s-economy/
[9] http://www.energyandcapital.com/articles/how-fracking-is-saving-the-economy/3810
[10]. http://www.cato.org/publications/commentary/how-fracking-has-saved-obama