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Today's Commentary: 09.24.04
Helplessly Hoping: Greenspan to Kerry
You have understand Mr. Kerry, everything from here on until the last vote is approved, is about politics. It would be very difficult for a writer such as myself to look at the economy and not comment on the long reach of the federal government. More specifically, the subtle manipulations of the White House are done for the best of spin. Don't let it bother you.
Instead, start focusing on how you are going to fix the mess you will be left with when he vacates the Oval office. Unlike any President in history, you will be given the grim and unpopular job of fixing this mess we are in and are headed towards. And I am speaking strictly from a financial and economic point of view, even if other actions are accountable for future problems of monumental proposition.
So it is important that you begin to make clear to the people now, that you will be extremely unpopular when elected. When you think about the job you are seeking, and if anyone with elective powers would as well, you must be crazy to want to follow Mr. Bush. The voters of this nation would have to admire your moxy, if nothing else.
But aside from global issues, things at home are getting more worrisome even as Mr. Greenspan suggests that everything is essentially fine. Maybe not as good as he'd like at this point, but there is little sign of inflation he says.
The pricing power he tells us is in good shape with manufacturers supposedly capable of raising prices if they chose to do so.
But why would they? Each time they do, less is bought but the same revenues are made. The current level of employment, a million shy of where we should be in this recovery, and that's not counting the disparaged and no longer eligible, is not going to rise. This phenomenon of comfortable productivity will persists as oil gets the blame for the even handed steadiness - or wariness - of the CEOs around this country.
The current offer of lending oil from the strategic reserves is not something you should worry about either Mr. Kerry. It looks political because of the timing but it is one of the reasons why the reserve was created. You may have a point though in the price manipulation you accuse the President of doing as he continues to build the reserves to capacity. Just shy of capacity is not such a bad place to be and those refineries need to stay online mostly due to Ivan.
Worry instead about what you are going to do in a world of $50 plus a barrel oil. The traders may be doing a lot of educated speculation or they could be led by another instinct, concern. These folks would rather hedge their bets than take any chances. This will be a reality you will need to deal with as America begins to tighten its collective belts. In fact, feel free to use that slogan, "America, we going to tighten our belts". In may just wash with the current dieting craze. The new carbless America.
The wonder is in the recent strength in the Dow Transports as compared to the Dow. In the past, it foretold of sunnier days ahead. But that was then. Now some have begun to suggest that they are about to fall. But I believe that so-called strength in the Transports can be expected as long as foreign goods entering into this country do so at such a torrid pace. Even Rodrigo de Rato, the managing director of the International Money FUnd took the widening deficit and the trade imbalance to task this past week. The chances are increasing for a shift in the economic world balance if the United States continues to run record deficits financed by borrowed money.
You have to understand, Mr. Kerry, that this is a cry for fiscal reform from a global economy that we should be doing a better job participating in, especially if we are the big dogs on the block. Japan he also suggested shared some of the blame although he didn't call them enablers he did scold them for not growing their own economy. When the high return on U.S. debt is there for the taking, why bother. So we have an economic egg-on-our-face scenario developing and that will not go away. The borrow and spend mentality has been addressed by Mr. Greenspan before and I am sure he finds it worrisome as well.
And if he is looking at the latest consumer confidence data released by the Conference Board, he might begin to scratch his head. The results of this recent indicator come from a compendium of sources, ten in all that gauge how good or bad things are and it fell once again. The struggling stock market, lackluster job growth, and oil all played a factor in discouraging the sunny disposition your opponent is painting on the economy. As I have said before, do not worry.
I mentioned Mr. Greenspan a couple of times so far. He seems to be looking for a rock to hide beneath as the corner he has painted himself in gets even smaller. Even as he raises rates, he undermines the growth of the economy.
As the dollar would inevitably fall if we continued on the current deficit raising path, the world would forgive and forget if you were elected. The belief that you will put the nation's best foot forward and explain that just when all seems hopeless it is exactly the time to begin to hope. Hurricane W. has devastated the economic landscape and made everything seem beyond fixing, but it is not.
In an effort to save face, Mr. Greenspan will become your biggest ally. His calm collectiveness will reassure Wall Street that things will perceptively change for the better. Because Greenspan knows it is about the money supply not the interest rate that every one seems to be fixated on lately. And he is keeping those pipelines well oiled, as it were.
So talk about the grim future we are about to face, Mr. Kerry and leaves us helplessly hoping that you can right the economic woes of this country.
Today's Commentary: 09.20.04
Bush by the Numbers:
A Look at Social InSecurity
Some worry, I suppose that the last bastion of the New Deal will fall if Mr. Bush gets his way. His way, as he has stated appears on the surface to be a workable answer to a problem that has begun to concern Americans as they head towards an uncertain retirement with pensions in the balance, a less than enthusiastic stock market, and a Social Security program that has been predicted to consume itself in some sort of economic black hole in the very near future. Perhaps a black hole, as it has been recently redefined, would be a good thing. Losing a famous bet to a fellow physicist, Stephen Hawking acknowledged that all that falls into a black hole is not lost - just changed.
But a reorganized, or regurgitated Social Security program should resemble, at least on the surface, the all-encompassing misunderstood program that it currently is. Not one owned by the people as part of an "ownership society".
The President has stayed right on his message about a concept of an "ownership society". He hasn't wavered from it much during this campaign even if he is hauling out a previous pledge from four years ago. Nothing during the ensuing time has moved us closer to his vision, a conceptual boondoggle in the making. And this part of the problem.
The White House is impressed with its concepts more than any other administration. To be able to talk at length about these unproven thoughts as if they were not only possible, but they speak of them as if they exist in some sort of parallel universe as all the proof we need that they will work is absurd.
The belief that politicians will take control of the program and provide fiscal oversight may be just as a farfetched although a change of thinking could well come from the current program without a complete overhaul.
Proponents of change to privatized accounts will tell you that allowing younger workers to control some of their contribution will allow more freedom in deciding how their money should be directed. In a nation that has come to be known as a "one or the other", the undecideds will prevail and far too many with the power to direct their future will not. Evidence can be found in how the vast majority currently direct their 401(k) plans - another ownership example gone somewhat awry.
Add in the belief that somehow, this program will transform itself without costs is also ludicrous. The program changes proposed once again by the President offer no payment structure for the shift. In the near-term, retirement ages will be further pushed back to help pay for the change.
With roughly a quarter of the recipients of this program either survivors or disabled, the program's health is essential. Currently, the program is overfunded. This surplus money, however is being siphoned off for current government programs. The two hundred billion dollars in excess revenue is instead replaced by IOUs that will be paid for by the same younger workers, the one's who will allowed - read forced - to foot the bill for both their own retirement and that of a generation whose savings were squandered.
Social Security should be left to amass the excess it collects, even if it means recreating the "lock box" terminology of campaigns past. Fortunately, there is little enthusiasm among lawmakers to make any real headway into reform. If there was any change, it would come from the very legislative bodies that, for now, chose to ignore the problem.
At Arm's Length: 09.20.04
Last week, I wrote about the Chinese influence on the price of raw materials. The very fact that this nation is growing, not only economically but also in terms of financial savvy, is beginning to alarm more than one global economist.
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