Posted on 07/21/2002 2:13:07 AM PDT by kattracks
President Bush told the country last week the economy is fundamentally strong. Fed chairman Alan Greenspan said all evidence suggests the economy is improving.Yet at the same time, the markets continue their steep spiral downward. Nearly $7 trillion worth of stock market value has been wiped out in the past 2-1/2 years, and the Nasdaq and the S&P 500 remain mired near five-year lows.
If the economy looks so good, what's wrong with the markets?
The President says we're suffering from a "hangover." As I listened to him this week, I had the uncomfortable feeling he was somehow blaming the consumer and the investor for the binge and bust, not just those most culpable for the current erosion in confidence - Corporate America and Wall Street, the regulators who allowed some executives to effectively loot their companies, and the crooks who cooked the books.
Investors want to see a rebound in earnings, but they also want to see real reforms and accountability - and only the government, Corporate America and Wall Street can deliver that, not the average investor or consumer.
Déja vu?
Listening to the Bush comments, I couldn't help but recall another presidential address, given exactly 23 years ago this week, at a time when our country was also facing severe challenges.
In that speech, the President said, "As you know, there is a growing disrespect for government and for churches and for schools and for the news media, and other institutions."
The President warned against a mistaken idea of freedom, "the right to grasp for ourselves some advantage over others." And the President declared, "The erosion of our confidence in the future is threatening to destroy the social and political fabric of America."
That President was Jimmy Carter, and he delivered his famous "malaise" speech as he struggled to lead a nation beset by soaring interest rates and inflation, an energy shortage, economic and market stagnation, a continuing Cold War with the Soviet Union, and what he saw as a crisis of confidence in the nation.
To put into perspective how much stronger our economy is today, compare:
- In 1979, we had an annual rate of inflation of nearly 11%. Today, it's down 1.2%.
- In 1979, the economy - as measured by Gross Domestic Product - grew 1% in the first quarter. GDP soared more than 6% in the first quarter of this year.
- In 1979, productivity, a key gauge of worker output and efficiency, fell 4% in the first quarter. Productivity in the first quarter of this year skyrocketed more than 8% - the best performance in nearly two decades.
- In 1979, the Fed funds rate, which helps determine mortgage and credit card rates, stood at more than 10%. Today, it's 1.75% - a 40-year low.
- In 1979, gas cost an average of $2.18 a gallon in 2002 dollars. Today, gas costs an average of $1.44 a gallon, more than 30% cheaper than two decades ago.
The 1979 economy was all about malaise - and having a reason for that lack of confidence. Today, we have every reason for confidence.
The contrast between the late 1970s and today makes it more than apparent.
The problem with the markets isn't the economy. The problem is the perceived lack of commitment by Washington, Wall Street and Corporate America to deliver real reforms and real accountability - real soon.
E-mail: loudobbs@nydailynews.com
Reduce government.
Perception = fear ... But flighty human nature could end these perceptions much faster, more quickly even than voters forgot why they liked the first George Bush in 1992.
We have no political crisis, no Cold War, no rising interest rates or inflation fed by oil price hikes, no crisis in American manufacturing. Corporates are readjusting their earnings with tighter accounting practices. Neither Greenspan or Bush can do much to change the fears of the investors. In two years, if you didn't buy now, you'll probably be kicking yourself. &;-)
Good question ... everyone is now aware that companies cook their books, but NEVER to the extent of Chef Boy-ar-government! Anyone giving credence to government numbers on inflation probably has never bought a car, or gasoline, or a Big Mac, or even a cantaloupe.
How utterly and completely appropriate an analogy!
I can mentally picture some corporate logo or icon waking up in bed after "partying" during the Clinton years, only to roll over and see that they've merged with a "Dot.Com"...LOL!
It ain't the economy, stupid
It is the criminality. Why put your life in danger by living in a crime infested neighborhood? Why risk your hard earned money in a game of pick-pocket roulette, where there is no risk for the person picking your pocket. Talking point "restoring confidence"..to a confidence game is a joke. Confidence is restored to a neighborhood, a city, a country or a market when criminals are rounded up and removed. Throwing money at the market is like giving loans to Cuba or the Taliban.
The Ministry of Truth is cooking the books.
For example, in consumer spending one of more favorable numbers has been autos. However, I don't believe that they have been subtracting the present worth of the 0% loans and the reduced rate lease incentives. So booking the retail price of the car badly overstated the value of the actual transaction.
Furthermore, one of the best performers in retailing is WalMart. As the flow of consumer goods shifts from traditional retailers to WalMart, less of the value chain stays in the US economy. WalMart's model is to move the container from the port to a big distribution center, break goods down and send them to huge, warehouse like stores with minimal service, and maintain strict inventory control over the import and distribute process. I don't think the GDP calculations reflect this shift in retailing processes.
Agreed. He needs to focus on revealing that companies like Enron which seem to be have become worthless today were in fact just as worthless during the Clinton years, but Clinton prevented anyone from finding out about it.
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