The US Economy Is Like the Yankees
By reasonable standards the Yanks are performing quite well, with a 7 game lead in the AL East after the 5 game sweep/thumping over the Red Sox. Not everything with the Bombers is optimal and the future is always uncertain, but there seems to be just as much cause for optimism as for pessimism. I am hearing nothing about what a bust the Big Unit is or how awful A-Rod is relative to his pay. However, for every disappointing outing by Randy Johnson or error by A-Rod, there seems to be some unlikely productivity out of an upstart Melky Cabrera or an aged Bernie Williams. Such is the US economy. It is on top and has been performing quite nicely for while. Employment and consumer spending has held up despite all predictions to the contrary. Productivity is doing OK to good. Capital spending is booming, as are industrial production and corporate profits (today's corporate profits are tomorrow's wages and pension payments). Broadly speaking a heartening picture, but what do we hear about? Gas prices and the slowly imploding housing market. These things are the A-Rod and Big Unit of the economy. Sure we pay these guys tons of money and they aren't producing to expectations. Disappointing. Fine. So what? Is it their current performance prima facie evidence that they will never perform optimally again? Does their performance jeopardize the entire franchise? Are the Yanks a lost cause by virtue of A-Rod hitting .279 or Johnson having won just 14 games? The evidence would suggest not. Analagously, will $3.00 gas send us into 1930s style depression? Are we to believe that without cash-out home equity refinancing Americans won't be able to buy back-to-school supplies for the kiddies? The broad picture would not lead us to this conclusion. But everybody loves to hate the Yankees, loves to bash those big contracts that the Boss doles out. And the MSM just loves to hate the economy, loves to bash those tax cuts that are a spur to savings, work and investment.
The Yanks are headed for the postseason, likely the ALCS and perhaps the October classic, and the economy likewise will turn in yet another boring, solid, merely excellent Q3 and Q4.
The Yanks are headed for the postseason, likely the ALCS and perhaps the October classic, and the economy likewise will turn in yet another boring, solid, merely excellent Q3 and Q4.
posted by Donny Baseball at 1:59 PM
3 Comments:
The economy is not that great if you adjust for the value of the dollar. Take the projected GDP for this year, multiply it by 0.66, and see compare it to the GDP from four years ago. The weak dollar is the root of the pervasive pessimism we see today. Everybody can see the economic figures put out by the government. Why most of us are not cheering? Because after one does the math, one realizes that we are not better off today compared to yesterday. Since this is a direct result of the weak dollar policy of the administration, we can extrapolate that people are not happy with Bush. And what do we see from the polls? 40% approval rating. It all fits. The real issue is always the economy.
I generally agree in wishing for a stronger dollar and would rather it be stronger b/c I don't think we'd be talking so much about inflation if it was the case. Nonetheless, I don't see the dollar as a major element in assessing the economy's health. In truth, the USD has not changed all that much from wher it was at the begining of 2004 or late 2003 for that matter. I would rather have the purchasing power of a stronger dollar, but by foregoing that we have had a boost in export competitiveness, which shows up in our industrial production numbers. So in truth, the weak dollar is helping factory workers. Furthermore, the weak dollar is a result of monetary policy, not fiscal policy. Bush has his hands on the lever of fiscal policy (to a degree), not on monetary policy. It doesn't surprise me that people can extrapolate the weak dollar to dissatisfaction with Bush but it doesn't impress me as logical either. In fact, by increasing the after tax returns to capital within the borders of this country, fiscal policy has done what it can to strengthen the dollar. I think we saw that in teh USD's 2005 performance. Alas, inflationary monetary policy has been too overpowering in the end. My bottom line is that the USD is a factor at the margin, but that the core health of the economy is our entrepreneurial vigor, our relatively benign tax and regulatory environment and our openness to global trade. These things remain intact and form the core of our competitiveness thus the economy's performance. I don't know a proper Yankees analogy for the USD, but it is a cloud not a storm in itself - maybe the USD is Matsui's injury, it is not preferrable, but life goes on.
I believe it is a dark cloud that could turn into a storm.
The weak dollar may have helped the unemployment numbers, but are we better off by exporting more and getting less in return?
If Bush wants a strong dollar, he would get it. Bernanke knows who is his master. I maintain that the Bush administration's weak dollar policy is at fault.
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