Stern warning on Kerry from prophet of profit (Predicts global economic disaster if Kerry elected)

The Australian ^ | June 24, 2004 | Robert Gottliebsen

[FairOpinion]

CHICAGO-BASED Joel Stern heads one of the largest global corporate consultancies, Stern Stewart, and is therefore a recognised expert on the likely behaviour of the world's biggest companies.

He has come to Australia to warn about what might happen in the US next year.

Last October (The Weekend Australian, October 18) he predicted incredibly accurately the huge rise in 2004 US productivity and profits (profits look like achieving a real rise of about 19 per cent); a substantial rise in US employment; and US growth rates of between 4.5 and 5.5 per cent.

His latest predictions are frightening.

Stern says that if John Kerry is elected president, then corporate America will freeze.

In the second half of 2005 there will be a sharp downturn in economic activity, which will affect the rest of the world. Share markets will suffer a severe blow.

But if Bush is returned, there's a 75 per cent chance the world will have a business boom lasting two or three years, driven partly by the US but also reflecting the strength of Japan, India and China.

Stern believes the China slowdown will be mild, but Europe will remain sluggish, even if Bush wins.

If Kerry wins, the situation in Europe could get very serious with unemployment in Germany and France likely to rise to 12 to 15 per cent – which could have serious political and social ramifications.

Why is Stern so concerned about John Kerry?

He says that while Kerry hasn't enunciated a detailed policy, his rhetoric so far is directed towards redistributing wealth from the so-called richer groups to the poorer.

That's likely to include a change in dividend and capital gains taxes, a possible rise in marginal tax rates and abandoning the Bush tax cuts that go through to 2009.

He would greatly increase government regulations and promote a much more anti-business environment.

Kerry would make global outsourcing much more difficult, but Stern believes global outsourcing is needed to keep the lid on US inflation and interest rates.

The difference between 30-year bonds and inflation-indexed bonds is now about 3 per cent, which means the market is banking on 3 per cent inflation.

All these moves would create enormous uncertainty among US decision makers, corporations and individuals, who would hold back their hiring and spending, reducing the likely US 2005 growth rate from above 4 per cent to around 3 per cent. The downturn would be concentrated in the second half.

Longer term, the changes Kerry would make to the US Supreme Court would make the American legal system much more interventionist in policy making.

Stern makes no predictions about the election, but he says Bush's campaign will be helped by a US economy which will continue to perform strongly, with a substantial generation of jobs.

Normally that would ensure the re-election of a president but the controversy over Iraq and the fact that Kerry is excellent as a television performer put a Bush victory in doubt.

On the international scene, Stern is particularly optimistic about Japan – where growth rates above 3 per cent are likely – and India.

He is also optimistic about ASEAN countries, particularly Thailand.

If Bush is re-elected and Stern is right about US corporate plans, we're looking at a substantial business boom until 2007 which would see stock markets rising strongly and consistently but with higher interest rates.

There is no doubt that if we have a world boom, Australia will be a major beneficiary.

If Kerry wins, and Stern is right about a US slump, then we won't escape the impact.

[FairOpinion]

This is the best article I have seen, summarizing the real danger to the US and the world economy a Kerry presidency would bring.

I think the author is 100% correct.

For security and prosperity, vote Bush!

(This article was posted at FR several months ago, fortunately in its entirety, because the original source is not available, it's in the archives, where it's inaccessible. I couldn't add "Repost" to the title, it would have made it too long)

[FairOpinion]

Just reposted the great article you posted in June.

I think people need a reminder.

[Cult of Personality]

Yep, it's a no brainer as far as I am concerned.

[MarkeyD]

I've been saying/thinking for a while that a Kerry victory means global economic depression.

[Prime Choice]

Stern says that if John Kerry is elected president, then corporate America will freeze.

That's putting it mildly. Considering Kerry's tax-lust, I believe corporate America will either flee or collapse under the Left's "economic plan."

The Leftists of this world have yet to understand that no nation can be taxed into prosperity!

[FairOpinion]

I am afraid, this was not emphasized by the Bush campaign.

People here still have the impression that Kerry would somehow be better on the economy.

The Republicans need to get better at getting the message out.

This article appeared in an Australian paper.

I haven't seen it so well explained in the US, even in the WSJ.

[clintonh8r]

This is essentially what I've been telling my clients.

[the invisib1e hand]

Stern says that if John Kerry is elected president, then corporate America will freeze.

Noo! Really? News flash: corporate America (and a good part of the rest of it, too) already is frozen, pending 11/2.

[Kirkwood]

Good post. Thanks.

[kingu]

Interesting opinion, especially considering democrats won't control the senate or the house. Without those, major changes in tax policy are completely unlikely to occur. But the perception of those changes could certainly affect business.

I think the real downturn won't be in the corporates but in the second and third tier companies. Whereas major changes in the law are unlikely, changes in policies throughout the departments of commerce could deeply affect small to medium sized businesses. In reality, this has been where the biggest part of the economic boom has been, and it is the most fragile in a Kerry presidency.

[GSlob]

In Kerry scenario Joel Stern thinks 2005 US growth 3%. Sounds somewhat optimistic to me, unless all that growth is in legal profession. Edwards would hog all the 3% and then go for another 3%. And more or less sustained 3% in Japan... He must have some data for making such predictions.

[matchwood]

That makes perfect sense - with Kerry you get Europe; look at Europe today and you will see what America will look like within 2-3 years.

[SE Mom]

Sobering, isn't it?

VOTE on November 2nd to RE-elect President Bush!!!!!!!!!!

[joesnuffy]

Kerry hasn't enunciated a detailed policy, his rhetoric so far is directed towards redistributing wealth from the so-called richer groups to the poorer.

Absolutely Kerry is a Marxist...as is Hitlery "we are going to have to take things away from you for the common good' Clinton

As a politician and an a American John F Kerry is his daddy's boy...as a liar he is his sprititual daddy's boy....

both have gotta be proud...

The Star Spangled Mirror...Richard Kerry hater of America and things American

imo

[snowsislander]

And more or less sustained 3% in Japan... He must have some data for making such predictions.

It sounds about right. Here are the most current numbers from the Bank of Japan:

And here is the summary from the Bank of Japan's October Outlook:

[ The Bank's View ]

(Outlook for Economic Activity and Prices)

Japan's economy continues to recover. As exports and production continue to be on an uptrend, albeit at a slightly slower pace, corporate profits are increasing, and this has led to an increase in business fixed investment. Household consumption continues to hold up well reflecting the improvement in the employment situation and consumer sentiment. Thus, economic activity is deviating above the "Outlook for Fiscal 2004" described in the Outlook for Economic Activity and Prices released in April 2004. Developments in domestic corporate goods prices are deviating above the "Outlook for Fiscal 2004," while those in consumer prices are generally in line with it.

Looking forward, Japan's economy is expected to continue recovering and gradually move to a sustainable growth path. Though overseas economies are expected to grow at a somewhat slower pace due to the rise in crude oil prices and inventory adjustment in IT-related goods, they are likely to continue expanding. Under such circumstances, Japan's exports are likely to continue increasing, albeit at a slower pace. The ongoing inventory adjustment in IT-related goods is expected to be small. Production in the materials industry is at high levels reflecting the increase in demand. Thus, industrial production is expected to continue an uptrend given the low levels of inventory in the manufacturing industry as a whole. Profits of firms both large and small in a wide range of industries are likely to continue increasing as firms have reduced costs and strengthened their financial position. Moreover, structural adjustment pressure stemming from excess capacity and debt has been easing. Against this background, business fixed investment is expected to continue increasing. Household income is likely to start increasing gradually since corporate profits are increasing and the extent of excess labor perceived by firms is continuing to ease. Household consumption is expected to continue increasing gradually.

Domestic corporate goods prices are likely to continue rising in fiscal 2004 reflecting higher crude oil prices and the tightening of supply-demand conditions for materials. In fiscal 2005, the pace of the rise is likely to become moderate if crude oil prices do not rise significantly. Meanwhile, consumer prices are unlikely to rise for the time being due partly to the increase in productivity and the restraint on labor costs by firms, though the output gap is continuing to narrow in line with the economic recovery. The year-on-year change in the consumer price index (CPI; excluding fresh food, on a nationwide basis) is likely to continue declining slightly due partly to the fall in rice prices year on year in the second half of fiscal 2004. In fiscal 2005, the CPI is expected to increase slightly on a year-on-year basis reflecting continued improvement in the output gap. It should be noted that the forecasts for prices are subject to some uncertainty as future developments in prices may be influenced by changes in various factors, such as crude oil prices, productivity, and labor costs.

[Iscool]

I've been saying/thinking for a while that a Kerry victory means global economic depression.

That's the only thing Kerry's got going for him...Whether he's serious or not is another thing...

Most of us don't give a flip about the rich globalist corporations that this fella seems to represent...We, for the most part, are not ready to give up our sovereign States to become a 'state' of the world...

Australia, Britain, France, Germany and the U.S. did just fine without globalism...

[FairOpinion]

I think you are missing it -- the US economy will go down the tubes first, which will take down the rest of the world.

[Kozak]

Personally, I'm one of the "lucky few" that a Kerry tax hike is aimed at ( although it will probably hit a lot of people who don't think it's aimed their way). I WILL cut back my hours and take the marginal loss of income, because I'm just not willing to be a slave to the government. Most of us high earners are not exactly stupid.

[TruthNtegrity]

I want to use this in another attempt to convince my nephew to change his vote. He grew up in New York with an (R) Father but went to Cornell and Syracuse where he was indoctrinated after being turned into a tree-hugger.

Then again, maybe I'd better stay away from supply-side economics and try some other tactic. He's been pretty sarcastic with me during the last 2 conversations we've had. Basically, he can't defend why he's voting for Kerry so I think he's afraid I'm going to keep pursuing my "rabid Republican agenda" - his words, not mine.

Gosh I dislike Dims, even when they're family. I hate it that they can't defend their position!