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The Blue Money Report
"Money, like number and law, is a category of thought. "
~ Oswald Spengler

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Today's Commentary: 12.11.02
Sopra Fatto

In Italian, Sopra Fatto means over done and here refers to the simple state of the economy. After last week's cruel and unusually harsh firing of Treasury Secretary Paul O'Neill and Economic Advisor Larry Lindsey, the White House has made moves that are sure to signal what could only mean the follow through of a poorly planned economic policy.

Before we get to that, let's take a look around Washington for the holidays.

The Federal Open market Committee met today to exchange secret Santa names, doing little else in the wake of the 41 year low in interest rates. Actually, they have left themselves little in the way of movement which could impact the economy. Sure they could lower the rate more but the attempt would have little impact on the economy's current state. Or maybe they simply realize that far too many people are earning far too little on interest rates and their gift of 1% returns are sufficient for those who rely on fixed income returns. From the F.O.M.C., happy holidays.

The current state of the economy is up for much discussion. Most economists are questioning whether things are really that bad. We have growth albeit slowly and we have a healthy base of consumer spending, it is argued all too often. Low interest rates have added to the favorable mix, for everyone but those aforementioned that rely on a decent rate of return, and there is a prevalent belief that if things are left alone, a natural cycle of events will rectify any problems. So what is wrong with the economy that need to be fixed in such a rush as to possibly make things worse as opposed to better?

Our two policy presidency has decided that cutting taxes, the mother's milk of the Republican party, is the way to go and it is on behalf of the economy that these cuts will come. When the White House introduces it's $300 billion package, it will seem like a holiday gift until you read the fine print. Happy holidays from the White House.

John Snow, a virtual carbon copy of Paul O'Neill has been hired as the new sales associate for the President's plan. He has been nominated for the position of Treasury Secretary, bringing to the office little in the way of foreign experience and much in the way of what Mr. Bush wants. And what does the President want? he wants someone who will say what needs to be said, read: what the president wants him to say, regardless of merit. But the overseas markets have already begun to get a little jittery.

President Bush has succeeded in restoring the onus of a federal deficit on the American people, spending far more than the government is likely to collect in the form of revenue. This will put growing pressure on the dollar and will be the first challenge ahead of Mr. Snow. There was a time when the dollar's strength was immaterial as foreign investors loved the idea of investing in the growth of the American markets. As that growth has trickled, foreign investors have become skeptical of putting money into something that isn't as much of a sure thing. Alan Ruskin, research director at 4Cast financial consultancy in New York was quoted on the DowJones News wires saying: ""You're asking foreigners to finance public sector deficiencies rather than high-tech led growth, it becomes a whole different equation."

Mr. Snow may have stood next to the President and said that he is pro-growth and pro-jobs, but he failed to mention that he is also anti-deficit. If he is willing to swallow his previous stands to make nice with Washington, he will be of no help to us, the growth of this country, and the foreign markets whose appetite for everything American is what kept us profitable in the nineties. To those proponents of a weak dollar, happy holidays.

Stephen Friedman, principal with the equity firm of Marsh & McLennan, is slated to be the economic advisor, replacing Mr. Lindsey. Described as hard nosed and difficult to work with, he may also find himself at odds with the administration before too long. Mr. Bush has become an advocate of diminished government and has taken the union representing civil service workers to task suggesting that the private sector would be a better manager than the government. Mr. Freidman, on the other hand suggested before House Committee on Government Reform Subcommittee on National Security, Veterans Affairs and International Relations on June 4, 2002 that "The private industry has far outstripped the government's ability to offer competitive pay scales and reward packages to technology workers, and advanced degree financial professionals, thereby limiting the ability to attract and retain the required skills." His suggestions during this statement pointed to increased efficiency as opposed to relinquished service.

To achieve this, he "recommended that, at an early stage, the Secretary and Department of Defense's Comptroller should begin presenting the financial management transformation framework, as a work in progress, to the appropriate congressional committees, GAO, OMB, and other key influences". If you will recall, the GOA recently lost in court before a judicial appointee of the President, the right to find out who met with the Vice President during those early energy meetings held behind closed doors.

So in these two appointees we gain the chance that doing nothing is probably in the best interest of the economy as well as their own tenure in Washington. Happy Holidays Mr. Bush

On the other hand, William Donaldson, 71, a former chairman of the New York Stock Exchange between 1990 and 1995, founder of Donaldson, Lufkin, and Jenrette and Wall Street elder statesman was appointed as the replacement for Harvey Pitt, a man who was equally well touted as being the antidote for an ailing Security and Exchange Commission. He will be asked to head a relatively underfunded group of corporate bloodhounds at the very moment when the economy needs to hear that everything is on track to recovery.

If he is being cheered by Wall Street it may be due to his record at the N.Y.S.E. which advocated looser accounting rules for international companies and while he was at Aetna, he did waht was popular. Showed up, negogiated a fat severence and left after thirteen months with the company no better for his time. Happy holidays Mr. Spitzer.

The appointments are fine with me but the consistent rhetoric about the economy is becoming over done. There are not going to be any tax cuts for the middle class, payroll holidays or extensions of unemployment benefits. That has pretty much been spelled out over and over again. By the time the new year rolls around, we will be shuffling through the sands of the Iraqi desert and the economy will just have to wait. But waiting is probably what will do us the most good. To the economy, happy holidays.