Tuesday, November 20, 2007

Examining The Presidential Candidates


Yesterday, I wrote about the U.S.-China Economic and Security Review Commission Report and mentioned a couple of earlier posts about the interplay between the U.S. and China.

Then, I spent an hour on the phone with Bill, a gentlemen down South, who has been active in politics behind the scenes. As might be expected, the discussion wandered around considerably, but always came back to politics and the economy.

This was not one of those "It's the economy, stupid," discussions. Rather it was about economic direction and policy and whether there was anyone among the candidates who really had a grasp on the long-term implications facing the U.S.
I'll spare you many of the side routes, although those were interesting, too. One of those revolved around the concept that the Secretary of the Treasury was responsible for the U.S. economy.

The Secretary of the Treasury is the principal economic advisor to the President and plays a critical role in policy-making by bringing an economic and government financial policy perspective to issues facing the government. The Secretary is responsible for formulating and recommending domestic and international financial, economic, and tax policy, participating in the formulation of broad fiscal policies that have general significance for the economy, and managing the public debt. The Secretary oversees the activities of the Department in carrying out its major law enforcement responsibilities; in serving as the financial agent for the United States Government; and in manufacturing coins and currency.

The Secretary of Commerce does have a say in things, too. Bill, wanted the candidates to be able to say who their choices for Secretary of the Treasury would be as a litmus test for their understanding of what should be done regarding our economic future.
I believe that what should be done was what should have been done when W.J. Clinton was president, but got sidetrack with his propensity to cozy up to the Chinese in matters trade, technology, and his own political treasury. Bush apparently was too preoccupied with matters Middle East to recognize the economic 5th column by politicians who loved the copious campaign financing and U.S. businesses who believed that they had found a cheap way out of their need to be competitive.

So they were all too happy to enjoy the "free lunch" that China was offering. And Libertarian economists were all too happy to say that China was "subsidizing" us and that we should be happy about it. [I've never bought into the concept that the Chinese were just being altruistic toward us.]
Well, the dollar is crashing and China is wreaking havoc with the resource markets and suddenly the Fed says we have to worry about inflation. The U.S. is discovering there is a bill for the "free lunch."

Back to selecting a president.... While all of the headlines are about terror and war, the real concern should be where the U.S. is headed over the next 20 years, economically. The Democrats talk jobs, but they really mean more government spending. The Republicans talk about containing terror, but they really mean more government spending.
But neither party really seems interested in examining the underlying economic dynamics affecting the U.S. There is a presumption that we can shift costs elsewhere and reap benefits here. But the world is beginning to say that maybe the dollar isn't a good bet for the international currency. Think not? Look at the dollar vs. the Euro and the cost of oil in U.S. dollars.
Here's my take [it took me awhile]:
  • Clinton - as low on the integrity scale as possible to get... but politically astute and ruthless. Would accomplish many things; question is whether much would be good for this country. Most feared by taxpayers and business; would exacerbate present financial strains on the U.S.
  • Obama - simply not ready for prime time... his one unique qualification being his racial background.
  • Edwards - the second coming of George McGovern; a lightweight in every sense.
  • Guiliani - tough, but has a tendency to surround himself with those of questionable morals. Would accomplish many things; question is whether much would be good for this country. Most feared by al Qaeda, Iran, et al.
  • McCain - tough, responsible, ethical, and honorable; but has his age and health are significant questions. Most likely to fight than negotiate with those in Washington, but would not be reckless in his approach with our adversaries... wouldn't be timid either.
  • Thompson - who knows?
  • Romney - smart, articulate, effective, but is Mormon... and the "Mormon issues" are already circulating. Would probably be most effective on economic issues, but is an unknown regarding terrorism and military issues.
Bill seems to think that Mitt Romney is the best choice for President because he has a focus on things business and economic and would play a better hand for the U.S. Possibly.... I'm not sure if there can be a fundamental shift in Washington politics until it become painfully obvious that the U.S. is just another country out there when it comes to economics... when the U.S. sneezes, the rest of the world hands it a tissue.
The idea that we can simply produce ideas and fortunes will come our way is as fragile as the goodwill of countries like China to honor our intellectual property... not very likely.
It is more likely that the U.S. will gradually lose influence in Europe and Asia and even Australia while China becomes the predominant power in that part of the world. What's 100 years to the Chinese? Meanwhile, we can barely see an horizon 100 months out... and we lose interest in 100 weeks.
So, is Romney the best choice to lead this nation? I'm not sure Moses could lead this nation where it should be going... even with direction from on high. I'm pretty damn sure Hillary can't and wouldn't... and shouldn't.
Besides, carbon credits are the future... just like plastics used to be.


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There is always an easy solution to every human problem—neat, plausible, and wrong.
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Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)