Better Weather Ahead...
Fed is scheduled to meet today, just a few of my thoughts on the economy.
The economy as whole is at a greater risk with the dollar in a relatively weakened state. Most of the core inflation is a result of higher oil and other imported goods prices. The Iraq war right or wrong is winding down, OPEC is increasing output reducing pricing pressures on oil. Raising interest rates slowly will increase the value of the dollar and we will have a two fold reduction in oil prices.
I am sure that Professor DeLong can tell me the actual percentages, but current defense spending as a percentage of GDP is not as high as it was during the early 1970s or as high it was under Reagan in the mid 1980s. Going forward the war on terror may require the increase of the defense budget as a percentage of GDP, but that today remains to be seen.
If we were going to have 'stagflation' I would guess that it would not be a guns and butter situation but rather a butter and drugs issue. As the population ages and congress continues to offer more and more health benefits to increasingly healthy seniors without means testing, then perhaps it is possible that from a tax burden and health cost burden that working individuals in all tax brackets could experience a significant drag on increased wages and employment in the economy as a whole.
A weak dollar trends toward inflation. I believe that if the Fed is to continue its drive to maintain stable prices it has no choice but to strengthen the dollar through the Fed Funds rate. As we consider the employment picture two things come to mind. First, 10 years a go we didn’t even believe that we could maintain the current level of employment without the employment level itself being inflationary. Secondly, if the Federal government was not the largest single payer of medical claims and if our health care was subject to greater price shopping employees would not see their increased earnings continually siphoned into heath care premiums. Health care is the real inflation in the economy.
A Thought
"Life is options up to a point, then it's decisions made." Peggy Noonan
The Dog days Are Here!
We are now well into the political season. Stories abound about this poll or that poll. This candidate has this lead, that advantage. It was very interesting to learn that in past two weeks two poles, one by the Los Angles Times and the other by the New York Times have shown Senator Kerry with a slight lead over President Bush. However, when the demographics of the pole are explored we learn that in one pole (LA Times) 38% of those poled were Democrats, while 29% were Republicans.
To add perspective to this break down the last information that I read stated that about 31% of registered voters are Republican and slightly fewer were registered Democrats. The demographic of the NY Times poll was very similar.
In an age where media outlets commission polls and report polls as news we, as consumers of the information, are left to discover and explore the real news about the news. These are definitely ‘Dog days’. Stay cool.
Summer is here
The first day of summer is usually a melancholy day for me. I, usually beginning on the first day of winter, celebrate the lengthening of days. I guess in my perfect world I would migrate back and forth between the North Pole and the South Pole, and then basking in the 24 hour celebration of the respective seasonal solstice celebrate my personal triumph over the physics of the universe. I try to tell my self that the day after the first day of summer is just as long as the day before the first day of summer but in my mind it really doesn't help.
I do not remember how old I was when I realized the significance of the day. I remember long days as child playing 'Tennisball'. Tennisball is a fusion of stickball and baseball. We played it with anywhere from two to 8 people equal number or ability on each side. The games started before school finished. I guess I remember the realization that would set in around the first week in July that we were not able to play as long as we could a few weeks before.
As the days went forward the nights came sooner and sooner. Eventually school started and though that wasn't necessarily bad, it was less time to play. Overtime the kid realized that the play was maximized as summer approached, and diminished from there.
My experience reminds me of the state of present day liberalism. They have moved past the summer of their influence. The Great Society has come, ruled, failed and faded. The pontificators of modern liberalism are left to exhortations that are shrill and don’t pass the laugh test. The President is a liar, unelected, illegitimate and appointed, all while their great hero admits that he lied under oath in a 900 page tome. Not that we didn’t already know that he had because, after all, he had already been disbarred for lying under oath.
Liberal forces in the public discourse get hung on misdeeds committed by US soldiers numbering in the 30 to 40 range while failing to show the atrocities committed by Saddem Hussein and his legions numbering in the thousands. Mass graves, tongues cut out with razor blades, perfectly healthy men having their right hands cut off, and then filming the horror in their faces when they wake from the anesthesia all recorded for posterity by the perpetrators. Liberalism has had its solstice and to go forward it must convince the average voter that they are something that they are not all while screaming that the President is a liar, something which he is not.
