Re.: Monetary and Fiscal Responsibility;

Boy Scouts We Are Not …

Neither Prepared Nor Morally Straight

 

The benefits of Congress’ decision to extend the Busch Tax Relief Provisions were ushered in with two politically driven quid pro pro compromises …the first of which is an extension of unemployment benefits and the second …a 2% reduction in payroll taxes.

Such practices continue to exasperate the need for the U.S. to borrow, print and thus, in turn …further weaken an already rather lame U.S. Dollar.

Therefore, why should a perverse upward move in energy prices come as a shock to anyone other than those who still have their heads buried in the sand?

Where is a good Boy Scout to be found when the need for a more prepared mind-set would stand national security in higher states of readiness …say, in the unlikely event of a national disaster …the likes of a Rita …a Katrina, or even a Wilma? If memory serves me well, the nation was not prepared to respond adequately …if at all …and in that sense the lack of that response is a manifestation of America’s lack of preparedness …in every sense of the word.

Those natural disasters caught America …like the man made ones of 9-11 and the financial meltdown. And being taken totally off guard …caught with our pants down, America has learned little and taken less to heart moving away from these tradgedies.

In the spirit of being prepared … especially with regard to being financially and economically prepared to respond to such disasters …America is further losing its footing and is in no better shape to weather such tough challenges as it would …could and should otherwise as if America were to become a strong nation …prepared and ready to react and respond.

As it is, America is having a tough time regrouping in the face of political environments which threaten to divide rather than unite.

Regroup indeed?!

In fact all would tend to suggest that as our dollar is made to weaken further and we borrow more …America is being caused to lose its grip on its position as a global leader.

Alas, today …a weaker dollar has translated to higher oil and energy prices regardless of whatever demand realities currently may exist in an emerging global economic landscape. As is …unexpected geopolitical emergencies and natural disasters like rising global demand are realities that just will not go away …even when cooler heads are buried in the sand. In this regard, denial is becoming less of a viable option.

http://en.wikipedia.org/wiki/File:Opecrev.gif

Thus, on the horizon …in the rise of growing global demand is a key factor which simply cannot be discounted. The world is growing at an ever increasing rate. As such, demand, scarcity and price fluctuations are but a few parts of the parcel in a more complex equation which is constantly undergoing changes due to varying degrees of the number of buyers and sellers in the market …competing for a finite supply. Supply and demand are factors which are constantly affecting price relative to supply relative to availability or scarcity.  

Therefore, the weakness of the dollar is but one factor among several other additive factors which affect the condition of global market demand.

All things being equal, any interruption to supply that threatens to cause scarcity …is also enough to cause demand to rise …which, in turn …will cause price to rise.

If price continues to rise, think about what would happen to demand if the dollar were to strengthen in response to prices.

Wouldn’t a stronger dollar translate to lower commodity prices …oil not withstanding?

If demand for oil were to respond to a stronger dollar, that would make oil more affordable to emerging market economies …in terms which result from lower priced oil.

Therefore, it would be likely that demand for oil likely would go up.

I know that I would drive more if the price of gasoline were to fall.

Yet, for all that …a higher insatiable global demand might have greater affect upon the price of oil (…a key dollar-denominated commodity) in a strong dollar environment.

And in the face of a renewed and sharply increased demand…such would tend to argue that …in spite of a stronger dollar; higher demand would most likely result to hold or drive prices high.

All this could happen even if it were to be the case that the dollar would suddenly strengthen to fight inflation.

Hence …such an argument might be presented to explain the reason for the fed’s reluctance to fight Inflation …and continue in its undaunted path …continuing to weaken the dollar …in favor of maintaining its argument which has been maintained in a more growth oriented posture.

Why then fight inflation with a strong dollar monetary policy if, in the fight …your policy actually exasperates and leads to a reality which is which is contrary and actually stimulates inflation rather than prevents it. If that is the case …then it is game over …period and no monetary policy will work against inflation.

Put that in your pipe and smoke the Fed and the Ben Bernank …and try laughing as you ask your bank for a 15% loan in a strong dollar environment while you are putting $ 5.00 per gallon gas in your smart car.

This says nothing of the Fed’s balance sheet assets, but that’s an altogether different story better save for another day.

However, with respect to the Fed’s mandate to fight inflation, What about hyper inflation and super high yields?

And don’t say, such that it is; “…it couldn’t happen here …” because it already has happened …on Jimmy Carter’s and Paul Volker’s watch …when fighting shortages and long gas lines became the reality of a possibility which threatens to return and haunt us once again.   http://en.wikipedia.org/wiki/1979_energy_crisis

Re. Paul Volker, See also:   http://en.wikipedia.org/wiki/Paul_Volcker

In the mean time, don’t hold your breath while waiting for this to happen though.

None the less, on the horizon and in order to fight inflation …a considerably stronger dollar environment would considerably raise the U.S. Fed’s debt service costs …those costs which the Fed is fighting (primarily on the short-handle) to keep low in order to simply be able to afford to merely tote the note ….so as to be able to continue to afford to pay on and service its interest-only obligation from holding the public debt’s principal.

As such, the U.S. Federal Government knows how and what impact a rise in rates would mean, and what affect that would have on its ability to carry such a ginormous principal.

In this primary consideration which threatens to overshadow the Federal government’s principal mandates, rising yields would cause the rising debt load to impinge upon the Fed’s ability to return chartered goods and services into a fragile recovering economy …unless it does one of a combination of no less than 9 things:

1. Raises Taxes (NOT AN EFFICIENT MEANS)

2.   Borrows and Prints More   ( NOT A VIABLE OPTION)

3. Turns to Private Sector Incentives and Solutions   (BING …BING …BING! Winner!)

4. Manages to effectively implement sound, more U.S. Favorable, comprehensive energy policies which enhance a healthy trade balance between global partners. (BING …BING …BING! Winner!)

5. For a time which is prudent; weaken and depoliticize city and state’s landscape which, by ways that have predominantly gone unchecked …have historically favored public unions …leading to build their strongholds which have ultimately blackmailed, milked and given way to a mind-set of entitlement in which public unions have become accustomed to enjoying a long-lived and now …overly entitled gravy train …without one shred of willingness to make concession nor compromise. (BING …BING …BING! Winner! )

6. Resolve the Wars (BING …BING …BING! Winner!) Let the Arabs Fight the Arabs! Why Pay for It Twice?)

7. Strengthen and standardize comprehensive Border and Border Security Policy. (BING …BING …BING! Winner!) Again: Why pay for negligence more than once?)

8.   Resolve Social Security and Medicare short falls. (BING …BING …BING! Winner!) Make Love …not War …But …if you must make war; Make Babies first …for Gods sake, no?

9. I don’t know. I would leave this open for the Boy Scouts in terms of what might fall into “Being Prepared …” …and that which would otherwise make for a strong and vibrant healthy private sector. Possibly switching and or incorporating a combination of means and methods with which to pay for both transportation and education at the same time …ways which would benefit and burden  both the public and private sectors alike both in up and down economies alike.

10. Defense Spending …I don’t know …better lump that into number nine.

The bottom line is that, when one looks at what has given rise to equity prices; one thing stands out. Corporate equity values have risen due to cost cutting …which has resulted in some of the finest …leanest …meanest fighting machines in the realm of all things capitalistic.

What’s wrong with Government is the spread in the realities which make for success in one realm and for failure in the other.

And in regard to the Private sector’s ask and the public sector’s bid …there is a blatant disregard of the spread of the chasm which separates the two in a single comparison.

So, if the picture of this comparison is that less is more; where is the federal government in this picture?  

Furthermore, what is terribly wrong and out of wack with this picture may be seen and understood more clearly …by merely looking at who has been asked to shoulder the majority of the added burdens which have arisen in this down-turn economy …future generations not withstanding?

I know that while the private sector has not be the one to suffer alone, it has been asked to do the majority of the heavy lifting …unfortunately coming much without kudos and regard in terms of its own interests.

In this regard, the private sector has suffered in step with all others.

The private sector sacrifices is the one segment of the economy has made contributions …primarily coming in the form of higher payments …those from higher real property appraisals …none the which are subject to go without …nor should they  go with objection …or protest in their own right …in light of the blight caused by sub-prime’s impact upon one neighborhood after another.

Yet, call it what you like; I call these sorts of impacts …forces which will ultimately come to force solutions which needs must also ultimately involve spending cuts.

And since an improvement in the economy is like a bet on insanity …if unrealistic politicians and their lofty, unrealistic and high-minded, social agendas prevail over and above more cooler heads …then, we all are in a world of hurt.

If Americans think hope and change is obtained by continuing to pursue a path which furthers the …causes that promote a continued embrace of more borrowed and printed fluff and government mandated …and politically driven round after round of bribery …er, I mean to say stimulus …hence reinforcing the spiraling downward direction of the status quo …

…then ours is a course of insanity.

There comes a time when one must wake up from delusion and realize a lesson …that taken from the law of diminishing returns.

For there comes a time when …one can no longer rely upon the principals of voodoo economics forever.

There comes a time when consequences backfire in habits of over-reliance.

And when these consequences come home to roost, their unsustainable consequences promise to swamp out and overshadow their schemes more moderate original intended purposes …which was to seek to use inflation as a path out of economic slumps.

Howbeit so noble …what we have here is anything but Voodoo economics.

We have come to rely principally upon habits which were formed in atmospheres which promoted measures and practices lacking due diligence …which also sought to justify and reward negligence in habits routines’ formed over many long years of oversight’s neglect.

And while bad habits are easily learned and obtained; they are not so easily worked free from …in reversing their affects’ impacts.

These take prayer and fasting.

Take a rather strange lesson from an otherwise foreign focus and vision …one generated in mixing an atmosphere of strong necessity with one of equally strong discipline and regimented resolve.

That’s why the Germans have been rather more successful in adopting …with their engrained mind-set of discipline …a more prudent and reasonable rationale in their approach to borrowing limits …capping their annual budget deficits and public debt to correspond to certain guidelines which pertain to strict percentage-based guidelines of their economy’s actual performance …foregoing the urge to bet on the come …as it were …as hope seems to have become warped here in America.

This more responsible sort of balanced approach to fiscal due diligence and disciplined oversight of the budget processes returns a service to the people of Germany which kind of reminds me of the purpose which the President’s Pay Czar was intended to serve …

…Namely that of accountability …in light of an emphasis which was supposed to be centered about openness and clarity.

Ghee Wally; what happened to those ideas?

By the way …that’s what this upcoming 2012 election will do; if the President doesn’t get his CZarry ass aligned with the real rock stars of this country …those called American’s citizen-voters will be more than glad to do it for him.

However, if prudence is ignored without a more reasonable embrace, then …when this continues; it will reinforce the above self-sustaining spiral which will continue to further weaken the dollar …which will continue to push commodity prices to still higher record levels …etc., …etc., etc.

This is what one might say; “…What the Lord giveth, He taketh away …”

I would rather tend to believe that dollar denominated commodities which threaten to squash explosive growth potential in emerging world economies may ultimately be the major factors which will hasten, force and then cause an abandonment of the reliance upon the U.S. dollar as the Reserve World Currency of Choice.

Will the move to embrace a more stable world currency standard occur over night, or …will this transformation be more gradual?

Who knows what to watch in this regard?

Maybe, if anything …one could look at the move to offshore and reshape the corporate landscape. Could there be a hint in the New York Stock Exchange buy out?

Complete this statement; Information is ???

Regardless, a major US economic recovery is not a certainty either …especially in the wake of rising oil. Remember the effective drag on the economy which $ 160 per barrel posed during the Bush Administration?

Then, if your head is not buried in the sand; go figure.

I would rather think that if commodity prices are what influences demand the most; then, a weak dollar …making for higher commodity prices tends to favor economies which produce the most carbon based commodities …especially if food prices move in step with crude.

The affluence of oil talks in an atmosphere where the dollar walks.

If only Malthus were alive today and could weigh in and comment on this matter.

However, I guess I’ll just have to settle with watching the Ben Bernank and the likes of the less than fiscally responsible members of Congress who want to borrow and print the U.S. into oblivion rather than cut and run a more fiscally responsible budget …one within our means …those worthy of speaking and demonstrating an esteem for last November’s mid-term’s outspoken requests.

Until that happens, the citizenry or America will probably be content to eat sand …2012 not withstanding.

That’s that happens …even when cool heads become so far buried in the foreign sands of oil-rich foreign creditors …eventually mouths must open to swallow the food stuffs of a commodity based reality.

After all, isn’t that what is happening in Africa, Central Asia and the Middle East?

There comes a point even in America where economic oppression is enough to cause one to stand up and protest unreasonable excesses.

Who knows; this may be what may spread across the nation from Wisconsin’s example.

All things considered …the affects of economic oppression are inescapable.

And the least of these factor in to affect consumption …supply and demand …while the least of which are prices which follow the formers’ lead.

And this simply leads to a reality which is becoming tougher and tougher to swallow …for rising prices are an inescapable tax.

No matter how you try to deny it, higher commodity driven prices take money out of even deep pockets and cuts into otherwise free expendable income …which isn’t moving favorably to this squeeze-play either.

Corporate bottom lines and a will which favors such …will not be so forthcoming in consideration …especially, in environments of growing uncertainty and dollar instability.

In this regard, or lack thereof …there will be little considerations afforded to bleeding hearted liberals who have wasted so much time and scarce resources while grasping at meaningless straws …and wage and income indexes which tracks this phenomena will show up in rather sobering confirmations that show consumers are being squeezed all across the spectrum.

Hence; in my humble opinion, from today’s release of economic data …I can see the Case Schiller Data as being a much more reliable quotient of the weight of consumer sentiment than that which actually came out today.

Additionally, today’s complimentary Case Schiller Home Price Index shows a sixth or seventh straight and uninterrupted falling trend …a continuing decline in housing prices.

None the less, as mentioned …the Consumer Confident Index shows a modest rise in Consumer Confidence coming at a time which conflicts Walmart’s rather lack-luster guidance after it reported its quarterly earnings today.

This is a flag whose signal is and should not be ignored.

One step forward and two steps side ways …at best in this reality …or is it rather fantasy which speaks to our willingness to suspend our disbelief?

Where are we headed? Where are we being lead?

I say nowhere if our heads remain buried in the sand though.

That’s my take …and good luck Wisconsin. Good luck in balancing your budget.

All the best, and be thankful to live in America rather than elsewhere choice is forbidden.

Above all, get out the vote in 2012!

Bill

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