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By Ann Grackin
After the red, white and blue confetti and balloons have
fallen, it is back to work! It’s time to role up our
sleeves and deal with the real issues:
- The US is the largest debtor Nation in the world.
- The US is the largest per capita consumer of energy.
- The US currency is in decline, assuring a decline in
our way of life and our world super power status.
There is a connection—and the bill is
due.
Well read Americans will have noted that Russia is considering
moving their reserve accounts from dollars to Euros. As a
CEO of a global company, I am sorry that we have not been
billing our clients in Euros. We would have gotten a 30%
raise this year (do I hear the sounds of profit margins in
that).
But the real issue is beyond the PR and labels of tax and
spend. Let the people spend their own money. The government
has been spending our children’s money at an alarming
rate, to the extent that the US will probably lose stature
as the financial and ultimately most powerful nation status,
right before our eyes. It is like waking up after the dream
and finding that ‘Bottom was an ass’.
Asian nations as well are considering this. Is this a plea
for the US to get their financial act in order? But desperate
currency holders, who have seen their nation’s reserves
dwindle by 30% and falling, beg the US to please get its
house it order. Remember, it was not so long ago that a phone
call from the US President (or the golden 3: Clinton, Rubin,
Greenspan) could stave off an international currency crisis!
In Shakespeare’s A
Midsummer Night’s Dream,
competing forces of fairies put magic drops in the eyes of
Titania so that she will love the first thing she sees.  Of
course, this modest and humorous character Nick Bottom comes
along—a donkey—who our heroine is smitten with.
But we have some strange drops in our eyes too! Visions
of sugar plum fairies dance in our eyes...Holiday shopping,
gas guzzling SUV’s, buying on credit. Will we wake
up in such a state too, with our economic woes inherited
by our children?
“Full of vexation I come, full of complaint...” [1] Average
Americans have missed the fact that we live in an inter-related
world. Isolationism has consistently been a hallmark of our
culture, as well as a sense of our huge power. Being the
politician of a super power creates a sense of imperviousness.
Which means, we don’t have the facts! Asian manufacturing
workers make less, so much less that there will be no catch-up
in life times—Auto workers in US, Germany and Japan
make about $42 an hour vs., say, Poland ~$7, or China ~$1.
Other manufacturing wages, according to the Bureau of Labor
Statistics, report that average manufacturing in the US is
$21.11 vs. China ~$.63! Don’t miss the decimal point
here. And according to China Today, a full two thirds of
China’s workforce is still farm laborers. This means
that they are not likely to raise labor rates much, with
farmers still wanting to migrate to the Cities.
In addition, whether you are Republican or Democrat, you
have to admit that the US government does not actually have
an economic strategy: cut taxes alright, but where is the
requisite shrinking of government to keep the bills paid?
As researchers and futurists, we look at the impending storms,
trends, etc....how the inter-related forces create new directional
trends. “How slow this old moon wanes ”.[2] It
is hard to see the new world that emerges while the slow
transition
is in spin. It is worth examining these forces in the Christmas
season, since Americans have an obsession with shopping and
spending—buying “plain Republican Coats” [3] or
Democratic Coats (I suppose a Democratic coat might have—feathers?
sequins, or maybe velvet?).
People think that the lower dollar will lead to more US
goods being sold (but most of these goods are made overseas).
But this is a simplistic story:
- The US pays its bills with low interest credit.
- Low interest credit is only accepted for the AAA bonds.
Junk bonds, higher risks, have high interest rates.
- Our congressmen currently visiting Iraq attest to a multi-year
stay, with us all alone, paying the bills.
So, what will be the impact over time of this situation?
More spending, obviously, less income, higher debt, and,
in order to keep bonds, a higher interest rate.
So what? When interest rates go up, the economy will slow
(some more). Housing market will slow, consumer interest
will climb. It is sad that people simply thought they voted
for a tax cut to put more money in their pocket. But the
offset will be less money in their pocket, since they will
have to pay greater interest rates on a variety of purchases!
Higher energy prices, higher interest rates, slowed economy.
The nightmare goes on, since the Bush tax plan gets really
interesting AFTER he leaves office, with even higher tax
cuts that kick in. Most Americans are not aware of this fact.
Think of it; Bush will not be responsible for addressing
the balancing of the budget. That is our midwinter nightmare,
which we hope will not come to pass.
Policy changes we have to confront now:
- Pay
as you go government. Insist congress re-establish Warren-Rudman
and address the exploding debt!
- Energy policies to reduce
our dependency on oil—especially
foreign energy sources that take us to hostile locations,
increasing pollution, and the cost of energy.
Things get a bit out of control in Shakespeare’s Midsummer
Night’s Dream, in this play. But this story has various
fairies who have super natural powers, and an author, Shakespeare,
who can make the plot turn out with a happy ending.
We, the people, do have powers, too.
Post Script....from the EU
While US Markets are down, overseas markets are doing very
well! How can business people in the US think that huge government
deficits can be good for their businesses?
With drops in their eyes, they miss that no one wants to
invest in US firms with depressed currencies at their heart.
Here in Europe, where I am working, I meet many Americans
who have even moved their own money to Euros. While huge
US firms like Wal-Mart, et al, and our markets decline,
overseas markets improve!
It’s simple math.
See daily alerts from The Wall Street Journal:
TOP ASIAN NEWS
From The Wall Street Journal
Asian stock markets closed mostly higher, with the key index
rising in Tokyo and hitting a new high in Australia. Hong
Kong shares soared on gains in the property sector.
TOP EUROPEAN NEWS
From The Wall Street Journal
European stocks moved higher Wednesday
as worries ease about the outlook for corporate profits.
[1] Act
I Scene II, A Midsummer Night’s Dream.
[2] Act
I Scene I, A Midsummer Night’s Dream.
[3] Richard
Nixon's reference to Pat Nixon's coat.
©2005 ChainLink Research, Inc.
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