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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?


To: mishedlo who wrote (13781)10/20/2004 10:05:55 PM
From: FiveFour  Read Replies (1) | Respond to of 116555
 
Soros on Bush:

georgesoros.com

A Personal Message from George Soros

Why We Must Not Re-elect President Bush

Prepared text of speech to be delivered at the Columbus Metropolitan Club, Columbus, Ohio, October 13, 2004.

This is not an ordinary election.It is a referendum on President Bush’s first term in office.He ran on the platform of a humble foreign policy in 2000.Then came 9/11, the Bush doctrine of preemptive military intervention and the invasion of Iraq .If we re-elect him now, we endorse these policies and we shall have to live with the consequences.As I shall try to show, we are facing a vicious circle of escalating violence with no end in sight.But if we reject him at the polls, we shall have a better chance to regain the respect and support of the world and to break the vicious circle.Our future depends on it.

Why should you listen to me?Not because I have a lot of money -- although it helps to get my message out -- but because I have an unusual background and experience that may help throw some light on our predicament.

I was born in Hungary , lived through fascism and the Holocaust, and then had a foretaste of communism.I learned at an early age how important it is what kind of government prevails.

I left Hungary and I studied under the philosopher Karl Popper who explained that both fascism and communism suffered from a fatal flaw: they claimed to be in possession of the ultimate truth.But our understanding is inherently imperfect so the ultimate solution can be imposed only by force.It is better to live in an imperfect society that holds itself open to improvement through freedom of thought and expression, elections, markets and laws that are open to modification.

I chose America as my home because I value freedom and democracy, civil liberties and an open society.

Karl Popper taught me what an important role misconceptions and mistakes play in shaping the course of events and this came in useful in anticipating events in the financial markets. .

I became rich as an investor and speculator, and I have devoted half my wealth to fighting communism and fostering open and free societies throughout the world.I have set up a network of foundations which currently spends about 450 million dollars a year all over the world.I have learnt quite a bit about promoting democracy.

When George W. Bush was elected president, and even more after September 11, I saw that the values and principles of open society needed to be defended at home.September 11 led to a suspension of the critical process so essential to a democracy – a full and fair discussion of the issues.President Bush silenced all criticism by calling it unpatriotic.When he said that “either you are with us, or you are with the terrorists,” I heard alarm bells ringing.And now thatPresident Bush claims that John Kerry is sending the wrong message to our troops when he is criticizing our conduct of the war in Iraq, and Vice President Cheney claims that the terrorists want John Kerry elected President, my fears are confirmed.The Bush campaign is undermining the civilized discourse that is the foundation of our democracy.

Instead of making us safer, President Bush waged war on terror the wrong way.There is a fundamental flaw in the President’s thinking; the fact that the terrorists are manifestly evil does not make whatever actions we take automatically good.Recognizing that we may be wrong is the foundation of an open society.President Bush admits no doubt and does not base his decisions on a careful weighing of reality.For 18 months after 9/11 he managed to suppress all dissent.That is how he could lead the nation so far in the wrong direction.

The invasion of Afghanistan was justified: that was where bin Laden lived and al Qaeda had its training camps.The invasion of Iraq was not similarly justified.It was President Bush’s unintended gift to bin Laden.

There is a widespread belief that President Bush has made us safer by invading Iraq .The opposite is true.President Bush failed to finish off bin Laden when he was cornered in Afghanistan because he was gearing up to attack Iraq .And the invasion of Iraq bred more people willing to risk their lives against Americans than we are able to kill – generating the vicious circle of escalating violence I am talking about.

President Bush now tells us that offense is the best defense and we are safer at home because we are fighting the terrorists abroad.It is one of the most atrocious arguments I have ever heard but it is finding a certain resonance in an electorate fearful of the terrorists.

Bush’s war in Iraq has generated many more people willing to risk their lives to kill Americans than there were on September 11 and our security, far from improving as President Bush claims, is deteriorating.

War and occupation create innocent victims.We count the body bags of American soldiers; there have been more than 1000 in Iraq and that is a terrible tragedy.But let us also consider the Iraqis who get killed daily.There have been many times more.And I am not talking about the insurgents who are trying to kill our soldiers but innocent victims, including many women and children.Every innocent death helps the terrorists’ cause by stirring anger against America and bringing them potential recruits.

Immediately after 9/11 there was a spontaneous outpouring of sympathy for us worldwide.This has now turned into an equally widespread resentment.The invasion of Iraq has inflamed the Islamic world.I am afraid that we have entered a vicious circle of escalating violence where our fears and their rage feed on each other.It is not a process that is likely to end any time soon.If we re-elect President Bush we are telling the world that we approve his policies – and we shall be at war for a long time to come.

President Bush likes to insist that the terrorists hate us for what we are – a freedom loving people – not what we do.Well, he is wrong on that.The more innocent civilians we kill, the more we reinforce the terrorists.He also claims that the torture scenes at Abu Graib prison were the work of a few bad apples.He is wrong on that too.They were part of a system of dealing with detainees put in place by Defense Secretary Donald Rumsfeld and our troops in Iraq are paying the price.Mothers who believe the President is making us safer by taking the war on terror abroad, are making a tragic mistake, and their children may have to pay the price.

How could President Bush convince people that he is good for our security, better than John Kerry?By building on the fears generated by the collapse of the twin towers and fostering a sense of danger.At a time of peril, people rally around the flag and President Bush has exploited this.His campaign is based on the assumption that people will believe practically anything if it is repeated often enough, particularly by a President at a time of war.It didn’t work so well for the Vice President the other night.“Significant progress” in Iraq sounded rather hollow.

The war in Iraq was misconceived from start to finish-- if it has a finish.It is a war of choice, not necessity, in spite of what President Bush says.It goes without saying that Saddam was a tyrant, and it is good to be rid of him.But in invading Iraq as we did, without a second UN resolution, we violated international law.By mistreating and even torturing prisoners, we violated the Geneva conventions.President Bush has boasted that we do not need a permission slip from the international community, but our disregard for international law has endangered our security, particularly the security of our troops.

The arms inspections and sanctions were working.In response to American pressure, the United Nations had finally agreed on a strong stand.As long as the inspectors were on the ground, Saddam Hussein could not possibly pose a threat to our security.We could have persisted with the inspections but President Bush insisted on going to war.

By now we know that we went to war on false pretenses.The weapons of mass destruction could not be found, and the connection with al Qaeda could not be established.What has not yet sunk in is that President Bush, Vice President Cheney and Condoleeza Rice knew that Saddam had no nuclear capacity long before we invaded Iraq .They were told by the intelligence experts of the Energy Department in 2002 that the famous aluminium rods, that were presented as the most concrete evidence that Saddam had a nuclear program, could not possibly be used as centrifuges for enriching uranium.Yet they used them as evidence.They deliberately deceived the public and the Congress and the United Nations.This was spelled out in an article in The New York Times.I don’t know why this information hasn’t received more attention.Perhaps the New York Times article was too long.More likely we simply don’t want to believe that our President deliberately deceived us.

When all else failed, President Bush claimed that we went to war to liberate the people of Iraq .All my experience in fostering democracy and open society has taught me that democracy cannot be imposed by military means.And, Iraq would be the last place I would chose for an experiment in introducing democracy – as the current chaos demonstrates.

If we had cared about the people of Iraq we should have had more troops available to protect them.We should not have used methods that alienated and humiliated the population.The way we invaded homes, and the way we treated prisoners generated resentment and rage.Public opinion condemns us worldwide.

The number of flipflops and missteps committed by the Bush administration in Iraq far exceeds anything John Kerry can be accused of.First we dissolved the Iraqi army, then we tried to reconstitute it.First we tried to eliminate the Baathists, then we turned to them for help.First we attacked Falluja over the objections of the Marine commander on the ground, then pulled them out when the assault was half-way through, again over his objections.More recently, we started bombing Falluja again.First we installed General Jay Garner to run the country, then we gave it to Paul Bremer and when the insurgency became intractable, we installed an Iraqi government.The man we chose was a protégé of the CIA with the reputation of a strong man – a far cry from democracy.

The Bush campaign is trying to put a favorable spin on it, but the situation in Iraq is dire.Much of the Western part of the country has been ceded to the insurgents.Even the so-called Green Zone (a small enclave in the center of Baghdad where Americans live and work) is subject to mortar attacks.The prospects of the Sunnis participating in the elections in January are poor and civil war looms.President Bush received a somber intelligence evaluation in July but he has kept it under wraps and failed to level with the electorate.

Bush’s war in Iraq has done untold damage to the United States .It has impaired our military power and undermined the morale of our armed forces.Our troops were trained to project overwhelming power.They were not trained for occupation duties.Having to fight an insurgency saps their morale. After Iraq , it will be difficult to recruit people for the armed forces and we may have to resort to conscription.

Before the invasion of Iraq , we could project overwhelming power in any part of the world.We cannot do so any more because we are bogged down in Iraq .Our hand in dealing with Iran , North Korea and other countries has been greatly weakened.

There are many other policies for which the Bush administration can be criticized but none are as important as Iraq . Iraq has cost us 145 billion dollars to date and 75 billion dollars more before the end of the year.These are enormous amounts.To illustrate, 7.5 billion dollars could have fully implemented the plan to protect our ports and upgrade the Coastguards.And the costs are going to mount because it was much easier to get into Iraq than it will be to get out of there.President Bush has been taunting John Kerry to explain how he would do things differently in Iraq .John Kerry has responded that he would have done everything differently, he would not have invaded, and he would be in a better position to extricate us than the man who got us in there.But it will not be easy for him either, because we are caught in a quagmire.

It is a quagmire that many predicted.I predicted it in my book, The Bubble of American Supremacy: The Costs of Bush’s War In Iraq .I was not alone: top military and diplomatic experts desperately warned the President not to invade Iraq .But he ignored their experienced advice.He suppressed the critical process.Even in the presidential debate, the President kept insisting that any criticism of his policy in Iraq puts our troops at risk.But this is Bush’s war, and he ought to be held responsible for it.It’s the wrong war, fought the wrong way.

It is hard to believe that all the accusations I have leveled against President Bush are true.I wish they weren’t because then we wouldn’t be in the predicament in which we find ourselves.There is only one way out.To change leadership and change direction.Fortunately we have a credible – and to me attractive – alternative.I have known John Kerry personally for many years and I think he will make a very good president.

I came here to convince you how dangerous it would be to re-elect President Bush.I am particularly eager to reach moderate Republicans who might vote for Bush out of party loyalty.Much more is at stake than party loyalty and Bush hasn’t been particularly loyal to the values and principles of the Republican Party.Just as America has to repudiate the Bush policies so must the Republican Party.

I would welcome your comments at georgesoros.com . I am eager to engage in a critical discussion because the stakes are so high.



To: mishedlo who wrote (13781)11/1/2004 8:20:34 AM
From: marginnayan  Respond to of 116555
 
Slowdown? What slowdown? Base rate might rise to 6%
High money growth risks another boom-bust cycle and most forecasters are being too complacent, argues Tim Congdon

timesonline.co.uk
October 31, 2004

DOES another boom-bust cycle lie ahead? In the year to August the money supply increased 10.1%, the first double-digit rise since 1998. As the first chart shows, the pace of monetary expansion in Britain has clearly accelerated since 2002.

An unfortunate habit has developed of ignoring the money supply, as if analysis of money trends had become old-fashioned and fuddy-duddy. But every company in the land has to watch its bank balance and every investor has to make a decision about how much cash to keep in a portfolio.

For people who remember the boom-bust cycles of the 1970s and 1980s, a double-digit growth rate of money is worrying. The causes of those cycles are disputed, but there is no question that large fluctuations in money-supply growth were an important influence. Both the Barber boom of the early 1970s and the Lawson boom of the late 1980s were accompanied by extremely high annual rates of money-supply growth, usually in the high teens percent and sometimes even above 20%. By contrast, in the busts money-supply growth collapsed.

Happily, the money-supply growth rate now is not as out of control as it was in previous episodes of cyclical excess. But 10% a year is still too high. The experience of the past 40 years is that money and national income don’t grow at similar rates quarter by quarter or even year by year, but over medium-term periods of three or four years a link does exist.

The chart on the right illustrates the pattern. If annual growth rates of either money or nominal gross domestic product (GDP) are used, the result is a chart with numerous spikes on two undulating series. The spikes are large and erratic, and give the impression that money and incomes are not closely related. The purpose of presenting four-year moving averages (as in the chart) is to eliminate the spikes and show the medium-term relationship better. (1% a year has also been added to the growth of national income to reflect the increased attractiveness of holding money since the banking system was liberalised.)

Modern monetary statistics were first compiled in Britain in 1963. Over the subsequent 40 years the money supply has on average risen 2% a year faster than national income. Money growth has been 11.5% a year and national income growth 9.5% a year. The four decades have seen not just booms and busts, but also oil-price shocks, strikes, market crashes and various other instabilities. Even so the relationship between money and national income has endured.

A key question arises from these facts. If double-digit money-supply growth persists in 2005, what will happen to inflation later next year, in 2006 and thereafter? Assuming that the same 2%-a-year gap between money and incomes is found, an obvious implication is that the growth of incomes will increase to 8% a year over the medium term.

Nobody knows exactly in which quarter the 8% figure will emerge, and nobody can predict the precise quarterly profile of nominal GDP growth between now and then. But the uncertainties must not be allowed to suppress the central point, that continued double-digit money-supply growth in 2005 and 2006 will lead to a marked upturn in the national income growth rate.

And what would that mean for inflation? The increase in nominal GDP can be broken down into two parts. One is the increase in real GDP — the extra goods and services that comprise GDP — and the other the rise in the price level of those goods and services. It is fantasy to imagine that Britain can make itself rich by printing bank notes or by banks lending more money and thereby creating new deposits. The increase in real GDP depends on what economists term “real factors ”, such as the number of people at work and their productivity.

By common consent, the trend growth of real GDP in Britain is not much more than 2.5% a year. It follows that — if nominal GDP is advancing by 8% a year — the price level will rise by roughly 5% a year. Admittedly, the measurement of inflation is complex. Several price indexes need to be watched, and the consumer-price index will be diverging from the retail-price index, which is less influenced by commodity prices than the former, which has different characteristics from the GDP deflator, and so on.

But the technicalities must not be exaggerated. The punchline is simple. If the money supply were to go on growing at 10% a year, it would eventually be associated with an increase in consumer prices of about 5% a year. This would be more than double the official target of 2%. The result would be acute embarrassment for the Bank of England and the government. A further risk is that, in order to bring inflation back down to 2% later, the economy would have to suffer a sharp cyclical reverse. (Falling house prices would inevitably be part of the trauma.)

Sceptics of the analysis might protest that the economy is already slowing in response to the rise in base rates from 3.5% in autumn 2003 to 4.75% today. But — so far — the slowdown hardly amounts to much. Retail sales jumped by 1% in September, contradicting the numerous claims that the British consumer will have to cut back because of excessive debt. It is true that people have borrowed heavily in recent years, but the increase in the value of their houses has been much larger than the increase in their debt.

One of the best readily available coincident measures of economic activity is provided by employment data. The October statistics showed that the number of people in work continued to rise in the last three months and was more than 200,000 higher than a year ago. Unemployment has been falling recently and, on the claimant-count measure (the measure obtained by adding up the number of people claiming benefit), it is at its lowest level since 1990. What sort of slowdown is this?

Many economists may be forecasting a slowdown, but the number and variety of the forecasters should not be confused with the reliability of their projections. Nobody doubts that the recent interest-rate rises will dampen the housing market and discourage consumption, but the key issue is “relative to what?”

In the year to mid-2004, the UK economy enjoyed a boom. There may now be a slowdown, with growth moderating to, say, a 3%-a-year rate from the 4%-a-year rate seen in recent quarters. But a growth rate of 3% a year would imply further declines in unemployment, more tightness in the labour market and a gradual rise in inflation pressures.

At any rate, the experience of the boom-bust cycles was that rapid money-supply growth was accompanied by buoyancy in both asset prices and spending. If money growth runs at 10% a year for a few more quarters, the forecasts of a slowdown in early 2005 will be wrong. The Bank of England will have to raise interest rates again, with base rates peaking closer to 6% than the 5% now expected by financial markets.

Tim Congdon is chief economist at Lombard Street Research, the economic consultancy

Copyright 2004 Times Newspapers Ltd.
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timesonline.co.uk