Politick

Beating (Around the) Bush in 2004

Based on the wave pattern, Yelnick would predict that Bush would not be re-elected. Seems a bit unlikely right now that that prediction will come true, but consider that Bush's support still seems largely based on patriotism for 9/11, not on inherently sound policies. The more Yelinick ponders this election, the simpler it seems.

All the Democrat candidate needs to do is be saner than Bush on 9/11. There is enough meat in (a) jobless recovery (b) deficits as far as the eye can see and (c) vague belief in corruption/cronyism that a credible Demo should be able to pound Bush. Another winning issue is why go to Mars, wouldn't it be smarter to invest that money in energy independence from oil?

Problem is, general feeling is that Gore would have pulled a Clinton post 9/11 i.e. shot a few cruise missiles and gone back to business as usual. Probably unfair but Clinton wimped out in '93 after the World Trade Center was bombed, again in '93 in Mogadishu ("Black Hawk Down"), in '98 after the bombing of our embassies in Africa (which led to the infamous get-Monica-off-the-news cruise missile attacks), in '00 after the bombing of the Cole, and most significantly of all, in '98 when Saddam threw out the inspectors. A major hurdle to overcome, actually.

Therefore the only two credible Demo's are Clark and Kerry. They need to be clearer that they support the war on terror but believe Bush has fought it in such a bad way he has lost the moral high ground. Clark has unfortunately (for him) waffled on this crucial issue. Kerry began his campaign strong here, although he too got too Senatorial (ie backpedaled) in the face of Dean's pacifism. Perhaps now that Dean is done Kerry will stop beating around the Bush.

From Texas, The World Looks Like Oil

What is curious about the weak dollar is that the harm has largely fallen on one place: Old Europe, Europe other than England. The land of the Euro. Specifically, France and Germany. The countries publicly opposed to the US policy in Iraq.

Asia has been largely immune from the weak dollar due to steps taken by their central banks to prevent their currencies from rising much. England, Australia and New Zealand currencies have strengthened against the Dollar, but only by around 20%.

The Old Europe economies are beginning to falter. If one wanted to play Big Belly Politics, and try to bring our erstwhile allies in line, one couldn't have found a cleverer approach. Reminds Yelnick of how the game is played among the big oil companies. From Texas, everything looks like oil.

Bush Administration: The Next Enron?

Zoran has been reporting how untrustworthy the economic pronouncements of the Bush Administration have been. He is now wondering whether this administration is the next Enron. Maybe this is what they teach in Texas? Bush gets away with this by announcing the good news loudly, but burying the later revision downward. Case in point: unemployment. After several months of reported improvements, we just had the shocker announcement of almost flat jobs growth. Buried in this announcement were substantial revisions downwards of prior numbers. Tonight on the State of the Union Address Bush repeated a high jobs growth number, which may turn out to be the <em>pre-corrected </em> number. But the revision will be buried in some other news ...

Another example: Bush's 'Strong Dollar Policy.' Dollar has dropped 30% since he took office, and almost 60% against the Euro. Scuttlebutt is that a weak dollar policy is one of the three legs Bush is relying on for re-election, along with low interest rates and tax rebates to spruce up the economy. Yet Bush's Treasury Secretary publicly talks of a 'strong dollar' policy. I am not sure we want to see what their weak dollar policy would be!

Jobless Recovery Bushwacks the President

Despite high GDP growth in Q4, we remain in a jobless recovery. As reported by Sy Harding in Street Smart, pundits had been expecting 100,000+ jobs increase in Dec, but got essentially no growth, plus a downward revision of reported job growth in prior months. Bush is now scrambling to figure out a jobs program.

There may not be much he can do. As the NYT reported, Bush is "confronted by a recovery unlike any other in modern history." Both the NYT and last week's print version of the WSJ gave a plausible explanation for the jobless recovery: the enormous increase in productivity due to new Internet technologies are allowing a rapid substitution of capital for labor plus the outsourcing of white collar jobs to places like India. A similar phenomenon occurred in the last jobless recovery, the mini-recovery from 1933-37. Then, the new wonder technology was electrification, which allowed ubiquitous electric motors to replace labor with new machines.

Betrayal of the Investor Class

The Investor Class has been betrayed by government policies of the past 5 years (see below).  These types of policies are part of the barnacles that build on a boom and cause the bust.  The Demo candidates for Prez are generally migrating more to the left (eg. Wes Clark's tax increase on the rich), giving Bush an opening to announce a series of policy changes that look good for the stock market and recapture the Investors Class for the Repubs.  Given that he has largely placed his bets economically, meaning there is little more he can do to juice the economy in this election year, look for him to announce a series of new policy initiatives in the first quarter that appeal to the Investor Class rather than help the economy in the near term, along the lines of freer trade, lower taxes, less regulation, even-handed enforcement of laws, and specific benefits for investors.  His immigration proposal, for example, although discussed as amnesty for illegal aliens, is really targeted at easing burdens on business.

Maybe these types of announcements will work to stem the deflationary tide.  If the market believes so, 2004 could rival 1994, the start of the mania, which followed the Republican takeover of Congress.

Demographic Destiny and the Global Scramble for Yield

We are entering a one time event in human history - population will peak and then drop in our lifetimes.  The demographics are clear - in developed nations, birthrates are below replacement, and in developing nations, they are plummeting towards below replacement.  The primary cause seems to be the education of woman, who then see much more to life then being barefoot & pregnant.  (Just in case anyone has any doubts, I find the liberation of women to be the a GOOD thing, the seminal achievement of this era.) 

One consequence is a radical change in investment.  We all tend to believe in regression-to-the-mean, so if rates are low, they will rise; or if bonds are high, they will fall.  The demographic trend may lead to a one-time direction that should last 40 - 50 years, and the fact it doesn't change will catch everyone by surprise. 

Another consequence is grave risk of the Japanization of developed countries - decades of slow growth or modest decline.  One massive driver of growth are the Tweeners - twenty-somethings who enter the workforce and buy their first car, house, appliances, etc.  Subsequent purchases tend to be trading up or trading in.  Without the Tweeners, economies grow much slower.   (Hence the wisdom of consumer credit - fuels the Tweeners, is paid back when they begin saving in their 40s and 50s.)   The Birth Dearth means the Tweener growth engine sputters. 

(As a policy implication, it may be time for the US to open the immigration spigot, particularly for the best & brightest Tweeners from around the world.)

Economists at CSFB have assessed the inevitable demographic trends and made five predictions.