It Really IS The Economy, Stupid
Saturday, 01 March 2008
by Stephen P. Pizzo
As I rummaged through my morning paper I eventually reached the business section. I say "eventually reached" because I have yet to see a daily paper that does not bury the business section. The sports section is usually right there near the top, even though sports news has absolutely no impact on our lives, beyond possibly under-pinning beer and nacho sales.
But I digress.
Once I unearthed the business section I was struck by the single theme of each headlined story:
- Safeway cutting jobs nationwide
- Jeweler Zale to close 23 stores now - 105 by end of this year
- Honda to shut U.S. motorcycle plant
- BMW to shed 5000 jobs
- Dollar hits new low against Euro
- Nationwide home sales hit 13-year low
- Nortel to cut 2,100 jobs, shift 1000 overseas
- Bernanke warns of weak economy
(Well, thank you, Ben. Where would we be without your timely reports on the already painfully obvious.)
There was not a stitch of good economic news in this morning's business section to be found.
While my heart tells me this election should be about the war in Iraq and the mindset that got us into it, my head tells me that the subject better quickly become the US economy. If it does the war will end anyway. Let me explain.
First, recognition that the economy is not just heading into a one of its normal cyclical downturns. This time is different. And no candidate for the Presidency is worthy of your vote unless he can explain in the clearest and starkest terms how and why it's different this time.
Eight years of spend-borrow, spend-borrow, spend-borrow by, not just government, but by business and consumers alike, has done to our financial infrastructure just what termites do to a home when left to their own devices. The underpinnings of this economy have been hollowed out by abuse of credit, the perversion of financial instruments and a reckless disregard for consequences of all the above.
Which is why when Fed Chief, Ben Bernanke, finally broke the glass on the red EMERGENCY box in his office he found it empty. Inflation is raging like a peat fire, just below the surface. The ground under his very feet is getting too hot to bear. But he can't put the inflationary fires out with the usual Fed extinguisher, higher interest rates. Because. even as inflation consumes the value of the US dollar, business indicators are weak and getting weaker.
To boost a weak economy the Fed's tool of choice is lower interest rates. Bernanke has already cut the Fed Rate down to 3% and it's done no good. That leaves him a paltry 3 percentage-point bullets left in his gun before he hits the penultimate shot — 0%. After that he'll have to pay people to borrow money.
more...
http://atlanticfreepress.com/content/view/3495/81/