Posted on 12/12/2003 10:45:16 PM PST by RWR8189
Raksha Arora writes for The Gallup Poll Tuesday Briefing and is a strategic consultant at The Gallup Organization. She earned a master's degree in business administration with a specialization in finance from The Stern School at New York University, and gained investment strategy and industry analysis experience while employed with two leading global financial services firms. She currently advises Fortune 500 clients on how to measure the costs and finances associated with human resources.
Is the federal budget deficit hurting the investment climate? The latest UBS/Gallup Index of Investor Optimism survey* reveals that it's not just a few alarmist economists who are worried about the deficit. According to the November poll, 75% of U.S. investors believe that the federal budget deficit is hurting the investment climate in the country, including 4 in 10 who say it is "hurting a lot." Interestingly, investors view the deficit to be a greater threat to the economy than possible terrorist attacks, corporate profits, or even general economic conditions.
In fact, the deficit is second only to the issue of questionable accounting practices in business, which is uppermost on investors' list of harmful situations. Nearly one of every two investors (49%) believe that questionable accounting practices in business are hurting the investment climate "a lot," compared to 44% of investors who feel this way about the federal budget deficit (another 32% feel that the deficit is hurting the investment climate "a little"). So even though Enron, Tyco, WorldCom, and their ilk have again been filling column space in recent financial news, investors are nearly as concerned with the problem of the ballooning budget deficit.
Twin Deficits and the Weakening Dollar
Last May, billionaire investor George Soros, famous for bringing down the British pound in 1992, went public with his short position on the U.S. dollar. Citing the current administration's shift away from a strong dollar policy in a bid to make American exports competitive, Soros criticized Treasury Secretary John Snow's stance as a "beggar-thy-neighbor" policy, not unlike the competitive devaluations during the post-World War I period that resulted in a global depression. As if to validate Soros' position, the dollar has been depreciating steadily and sank to a record low against major currencies last week.
While geopolitical uncertainties are to blame in some part for the decline of the dollar, the United States' twin budget and trade deficits are another factor contributing to a weakening currency. Historically, budget deficits have been closely linked to wars and recessions, and even as we emerge from a recession and gross domestic product growth shows unprecedented increases, the situation in Iraq and associated spending continues. Last month, the White House announced a federal budget deficit of $374.2 billion in 2003, more than double the deficit posted in 2002.
Bottom Line
Five years ago, the United States accumulated its first budget surplus since 1969, and political debate centered on how best to spend this surplus. But after the Sept. 11 terrorist attacks, a recession, three rounds of tax cuts, and increased military spending, that reality has changed somewhat. It will take tremendous fiscal discipline and strong economic growth to bring the budget into balance again. While the Bush administration has argued that at 3.5% of the GDP, the deficit pales in comparison to its Reagan-era highs of 6%, investors are not convinced. Three-fourths of investors believe that the increasing federal budget deficit is hurting the investment climate to some degree.
*Results for the Index of Investor Optimism -- U.S. are based on telephone interviews with a randomly selected U.S. sample of 801 adult investors, aged 18 and older, with at least $10,000 of investable assets, conducted Nov. 1-13, 2003. For results based on these samples, one can say with 95% confidence that the maximum error attributable to sampling and other random effects is ±4 percentage points. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.
This is the free trader non-solution to the problem that they don't actually believe is a problem.
I am spooked by three of four investors.
Surplus. Yeah, right. Only our government could take a situation where they are in debt for an amount that is many multiples of what they "earn" in a given year, and when they somehow manage to spend a tiny percentage less than what they "earn" for a year or so, they call it a "surplus" and they then have debates on how to spend it.
Hello? The Giant Enormous National Debt is on the line, all eleventy skillion dollars of it. It wants some more interest payments, and it wants them NOW. Just because interest on the National Debt is the single biggest line item in the Federal budget doesn't mean we can't have a surplus, does it?
The worst part of this whole mess is that it doesn't matter who your vote for, or what they promise as they run for office. Republican or Democrat, Conservative or Liberal, it just doesn't matter. They are all spendaholics. They all need a 12-step program for spendaholics.
I just wish that all of the members of Congress would take a couple of weeks off to study at the famous Barnum and Bailey clown school, so they could report to work in full-fledged clown outfits, with bright red rubber noses that squeak when you squeeze them, and big floppy shoes, and seltzer bottles that they could use to soak each other during their debates. Since they treat our country as a big joke, and throw around our tax dollars like they were Monopoly money, the least they could do would be to dress up for the role as the clowns that they are. Sure would make C-SPAN a lot more fun to watch!
Three in Four Investors Spooked by DeficitTitle should be:
Three out of four Investors are Idiots
Soros is the man, who is trying to keep the dollar devalued and is driving it down. The article is just silly.By announcing his 'big bet', Soros almost assured a tidy profit ?? ...
Last May, billionaire investor George Soros, famous for bringing down the British pound in 1992, went public with his short position on the U.S. dollar. Citing the current administration's shift away from a strong dollar policy in a bid to make American exports competitive, Soros criticized Treasury Secretary John Snow's stance as a "beggar-thy-neighbor" policy, not unlike the competitive devaluations during the post-World War I period that resulted in a global depression. As if to validate Soros' position, the dollar has been depreciating steadily and sank to a record low against major currencies last week.
While geopolitical uncertainties are to blame in some part for the decline of the dollar, the United States' twin budget and trade deficits are another factor contributing to a weakening currency ...
And how much money precisely has Soros spent to short the dollar, versus how much central banks and foreign holders have sold, versus how much Japan has bought to support the dollar?
Who really are the major buyers/sellers, and by how much?
Interesting article for the rest of you (un)usual suspects.
Fiat currency is Monopoly money. We have a fiat system for that very reason. They can spend as much as they want and then just print up more of it. Nobody in their right mind thinks that the national debt will ever be paid back. It's a joke so in that sense, you are very right -- they are clowns. The end of all fiat sysems is always the same self-destruction to bankruptcy. Until then, party on. The clown patrol rules.
Richard W.
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Let Me Tell You A Lie.org
Excerpt:The truth be told, do you know what group has accepted politically motivated contributions from the biggest political contributor of them all? Do you know what group gets to accept soft money while it tries to influence our political system? MoveOn.org, that’s who. With George Soros contributing at least $2.5 million to MoveOn.org they have accepted over 1000 times what the cap is for a donation in a single contribution. Political propaganda groups like MoveOn.org and Americans Coming Together have accepted a total of at least $15.5 million from Soros making him the biggest political contributor of them all, corporations included. So, it should go without saying that the Democratic Party is the beneficiary of the biggest of the big contributors. But listening to MoveOn.org you would have no idea that this fact is the unarguable truth.
Three in Four Gallup Subjects Invented by Jayson Blair
A gross underestimate.
But hey, someone has to hold the bag.
I think surplusses, since that takes $$ out of circulation, thereby stunting growth.
Said the spider to the fly.....
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