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12/06/2003 Archived Entry: ""

Cartoons!: Mark Fiore's rather heavy handed "The Simple Life"; on the other hand, Ted Rall rocks with "Let's Make Every Vote Really Count"; and Tom Toles does a nice job of lampooning the U.S. "drive for democracy" that has to confront the Shiite's actual demand for a free election -- in "Not Yet".

In my never-ending spousal competition with Brad -- the sort that lends spice -- I offer this antidote to the "Linux Rules!" crowd. Frankly, I also think Linux Rules and I appreciate that I am doomed to be out-classed by the B-unit who, after all, has a doctorate in Electrical Engineering compared to...well, my high school education and credentials in feminism. But I am taking the Hans Solo approach to our (faux) domestic dispute: "Never tell me the odds!"

I don't believe that we are on the road to economic recovery as every TV broadcaster announces at every upward bump in the DOW: I believe that the so-called "jobless recovery" we are witnessing (shades of Daddy Bush) is an inflation-driven bubble that will burst. People on-the-street already know that there is no recovery. How? Because, as the Salt Lake Tribune comments, "most people get their income from the labor market, not the stock market. The Dow is up 15 percent for the year, but unemployment is unchanged and wages are stagnant." The real danger, IMO, is that the US dollar is still greatly over-valued. When 9-11 caused the Bush adminstration and every local government -- state, county, city -- to spend like drunken sailors, it was largely funded by hyper-active printing presses in the Treasury Dept. (Actually, "drunken sailors" is a poor comparison: there is not enough alcohol and too few sailors in the world to capture a sense of their reckless spending.) The first beneficiaries of inflation are governments and their contractors/employees/creditors who receive the increased volume of money without the market reaction of increased prices. Their extra $1 still buys what a $1 bought before the presses cranked up. Inflation takes a long time to be felt, to trickle down through the economy to the poor schlubs who make an honest buck through productive labor. Brad and I are seeing the evidence of the trickle down. Every few months we visit family in the States and the change in the buying power of the US dollar has been remarkable. Last year, about this time, the Canadian dollar was worth .63 cents American. Today, the exchange rate is hovering about .76 cents despite the Canadian government's attempts to keep the value of our dollar down; the last thing Canada wants is for US business investment to flee and exports to dry up. (The Euro has also risen about 13% in the last year and continues to do so.) About twelve months ago, Brad and I began to witness a strange phenomenon: the prices of food in restaurants -- from the fancy to the fast food -- became almost identical in both the States and Canada: that is, a burger would be priced at, say, $5.99 in unadjusted dollars on both menus. The same was true of items in grocery stores and pharmacies. On our last trip (two months ago), the prices in unadjusted dollars were higher in the States than Canada. For example, a burger at MacDonalds cost, say, $3.99 US in New York State but $3.59 CN in Ontario. Inflation has trickled down to burger stands and food on the grocery shelf. It is not merely America's record deficit with no sign of abating: as the Sydney Morning Herald notes, "it requires capital inflows of more than $US2 billion ($2.77 billion) a day to finance the current account deficit." Nor is it primarily the ruinous trade/tariff policies that -- thank God! -- Bush has had to back down on...at least, regarding steel. More than anything else, it is the money supply. The Feds can't push interest rates much lower nor can they raise rates without panicking investors...and, when the mega-whack of dollars being held by foreign investors shifts in response to the greenback's teetering value, the bubble will burst. Again, to quote the Sydney Morning Herald: "between 1998 and its peak in 2000, foreigners' savings poured into US equity markets. When that bubble burst, the aggressive reductions in interest rates down to the present official rate of 1 per cent, accompanied by the Federal Reserve Board's assurances that rates would be kept low until the recovery was clearly entrenched, provided a one-way bet for investors in credit markets. Foreign investment in US bond markets totalled only $US400 billion in 1998. As the bond market bubble grew, foreign investment switched from equities to credit, with foreigners holding about $US1.4 trillion of US bonds by the middle of this year. Growing confidence that the recovery is in place, however, means that what was a one-way bet has become an increasingly risky one. The first sign of a rise in official rates would trigger an exodus of foreign investors." To paraphrase Bette Davis, "Buckle up, world currency markets are going to be a bumpy ride in the next year."

Thanks to Gordon P. for providing a follow-up article to our Top Ten List of the reasons Bush is expected to rekindle NASA's moon-landing program. Gordon puts his finger on why America has fallen so far behind in the space race. He write, "Quote that says it all: 'We made it so difficult for Europeans to collaborate with us that we have become a pain that nobody wants to deal with...' --- NASA Scientist Mario Acuna."

Best to all,
mac