CHAOS-ONOMICS: Strangely Attracted to the Truth
May 2
chaos-onomics.com
The name of peace is sweet, and the thing itself is beneficial, but there is a great difference between peace and servitude. Peace is freedom in tranquility, servitude is the worst of all evils, to be resisted not only by war, but even by death. -
Cicero
While listening to President Bush's speech last night I got the sense that this Bush has a plan to avoid his father's fate, don't stop fighting. The cynic in me rhetorically asks, "why worry about domestic economics when war boosts ratings so nicely?" A few days ago, in reference to the still expanding current account gap, I argued that, as of yet, this administration had no plans to restore balance to the economy's accounts. Last night's speech, in my estimation, is yet another sign that the economy's troubles will not be addressed any time soon. Instead the US will export "freedom" and "democracy" to those nations who fail to "keep the peace" by any means necessary.
As Cicero noted, there is a difference between peace and servitude, notably the lack of dissent. Leaning on James' Pragmatism again, i.e. however the controlling institutions are imposed, peace seems to be the condition where people feel the controlling institutions are serving their needs, while servitude is the condition where people feel the controlling institutions are serving the needs of the controllers. In a sense quantitative economics should act as a measuring stick, helping both controlled and controller measure the success of their relationship. Sadly, the focus on the real sector has been, in large part, transferred to a focus on equity indices which, in my view, risks a concentration of wealth sufficient to turn peace into servitude.
Thus my concerns with the military aspiration of this administration. How can one divine the difference between a legitimate grievance and a terrorist plot to seize control? The court of King George III was quite sure that the American rebels were the latter, although this view was hardly universal in England at the time. As the French revolution got underway, many saw the Girondins in the same light as the American freedom fighters, although when the decision to export their new form of political economy around Europe strained already weak national finances, the Jacobins brought their reign of terror, thus making Edmund Burke's reservations about the French flowering of liberty prophetic. Thus my favorable reading of Pragmatism, it is only in hindsight that one can accurately discern the truth.
With Afghanistan, in the main, back under rule of the War Lords, whose mistreatment of the people provided a breeding ground for the Taliban, and with Iraq possibly heading that way, the effects of this exportation of political economy is, in my view, off to a poor start. Will the people of Syria, Iran or North Korea, witnessing the plight of Afghanis and Iraqis, welcome our troops as liberators? Will the current administration retain its sense of the rightness of its actions, brushing aside resistance as the feeble whining of a few malcontents? I don't know the answers to these questions, but they seem to me to be the key questions for the next few years. It is a marked change to the notion of commerce as means of exporting culture.
Turning to the real economy, the just release employment report paints a picture of a still deteriorating labor market. As today's graph indicates, we are well on the path last seen in the late 60s early 70s of government as employer of last resort. With non farm payrolls declining by 48K in April (SA), the trend of fewer goods producers (-73K SA in April) and more government employees (+32K SA in April) continues. Should private sector employers continue to shed workers, the state will accelerate its hiring plans, thereby moving those workers from the roles of tax payers into tax consumers. With the Treasury planning to borrow some US$79B in the current quarter and given current employment trends the willingness of the rest of the world to finance our refusal to accept our medicine will be put to the test. Absent demand for Treasury securities, the Fed will be forced to monetize, thus explaining, perhaps, Greenspan's lack of support for higher deficits. The conditions are ripe for further US$ weakness and higher Gold prices. |
