On Fear and Flip-Flops

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Fear -- While many Americans are fearful of another terrorist attack, there may be a much larger bogeyman casting its shadow over Americans cloaked in new data from the Treasury Department. And while Pres. Bush focuses on reelection calling his rival a flip-flopper, it would appear he does not notice how like a fish out of water he is acting as a result of his speech writing ventriloquists.

Having studied some economics in college and taken philosophy of economics, I have for decades kept an occasional eye on the state of the American economy since the Reagan years. I have never had cause for alarm however, until George W. Bush put a year in office as President. In 2001, however, I spotted a trend that had to be watched. The trend was a rising national debt and what appeared to be an irresponsible fiscal regimen. In 2003, I became very alarmed, and began writing about the dangers of our national debt in a global investment environment which could potentially offer investors alternatives to our Treasury investments which is where we get the money to support the national debt.

On August 8, 2003, I published an article entitled, 2004 Election Issues (Public Debt) in which I stated the following:

Secondly, the debt greatly reduces the government's options and flexibility in dealing with various international and domestic crises. Contrary to the actions of some in congress, there is a limit to how much the American government can borrow before such debt seriously undermines the American economy. As already mentioned, investors may, in large numbers, cash in their bonds leaving the government strapped for cash. If the government simply prints more money to have more cash, inflation sets in.

So, why am I bringing this up again now? Because our Treasury Department has just released new data that is raising this issue to a new level of concern for think tanks, economists, and our own government officials. The Washington Post released an article today which had the following alarming statement:

On Sept. 9, as it must frequently do, the U.S. government turned to Wall Street to raise a little cash, and Paul Calvetti bet that demand for $9 billion worth of long-term Treasury bonds would be "huge."

But at 1 p.m., as the auction opened and the numbers began streaming across his flat-panel screens, the head of Treasury trading at Barclays Capital Inc. slumped in his chair. Foreign investors, who had been voraciously buying Treasury bonds, failed to show up. Bond prices cascaded downward, interest rates rose, and in five minutes, Calvetti, 38, who makes money by bidding on bonds at one price and hoping market demand lets him quickly resell them at a profit, had lost $1.5 million.

For those not versed in economic terminology, the words in the above paragraph "Bond prices cascaded downward, interest rates rose" means the interest rate on our 7.4 trillion dollar national debt went up in order to make our Treasury bonds more appealing. When investors buy our treasury bonds, they give our government the asking price on the bond as a loan in the hope of receiving a competitive interest rate return on their investment or, to sell their bonds in the future at higher price than the amount they invested (plus the interest they would have earned). When investors showed no appetite for underwriting the debt of the United States, our government has no choice but to increase the amount of interest (and lower the price) we offer for those treasury bonds in the hopes investors will loan us the money we need.

But it is not just the Treasury bonds that are cause for alarm. The W. Post article goes on to point out that

Measuring the combined purchase of stocks, corporate bonds and government debt, overall capital flows into the United States fell in August for the sixth straight month.
These are very dangerous signs for the American economy and could possibly become the most serious criticism of President Bush's refusal to bring his veto pen out of the desk and Congress' complete lack of discipline in spending more than tax revenues bring in. The Stock market has fallen several hundred points in recent months, the cost of doing business via record highs in oil prices has gone up, and pension plans across the country are threatened by corporate mal-funding and legislation.

It would appear, now that conservative think tanks, economists, and our own government are beginning to debate whether these data are a fluke, or represent a systemic problem that it may already be too late to address, my concerns are reaching the level of alarm. But will anyone write their representatives and complain? Will voters deny reelection to the stewards of our economic policy that has brought us to this point?

Flip-Flop President Bush is flip-flopping yet again. Since invading Iraq, President Bush has insisted that we would remain in Iraq as long as it takes to bring democratic government to Iraq which no longer threatens the United States. The Bush administration has indicated in a number of ways that it views Islamic governments as potential threats. That was the flip. Now for the flop. The BBC reports

US President George W Bush has said he would accept an Islamic government in Iraq as the result of free elections.

Mr Bush told the Associated Press in an interview that he would accept such results if elections were open and fair.

"I will be disappointed. But democracy is democracy," he said during an interview given on Air Force One.

Now that the President is saying emphatically there will be no draft in his next term to increase our troop levels, and for the first time he is stating on the stump that bringing our troops home as soon as possible, it would appear the President is preparing for a Sen. John Kerry foreign policy in his next 4 years. The only way to avoid reinstating the draft is to avoid anymore invasions of other nations without a huge international contingent force accompanying our own - a policy Kerry has touted from the beginning. President Bush also told N. Korea that the U.S. has no intention of invading North Korea. Apparently, the President is removing N. Korea from his axis of evil list despite N. Korea's refusal to disarm its nuclear weapons. It would appear the President is reverting to the Clinton policy with N. Korea. Vice President Cheney is on the campaign trail this week touting nuclear weapons going off in American cities as evidence that we are not safer today than we were before 9/11.

The Associated Press reports:

Milliken, [Michigan's Republican] governor from 1969-82, accused the Bush administration of rushing into the Iraq (news - web sites) war, pushing tax cuts that benefit the rich and blocking meaningful stem-cell research.
There are some Americans who will take the painful step to vote against their Republican Party's candidate. It remains to be seen how many.

Taken all together, it appears to this writer this big fish is about to take its last gasping breath out of water. I firmly believe the only way to save the flip-flopping George W. Bush is to send him back to Crawford, Texas where he can once again breathe a sigh of relief. But will voters go to the polls and vote to save President Bush and our Country by voting for Kerry, Badnarik, or Nader? Will voters on November 2, choose to elect new Congress persons who will read an anti-incumbency vote as a mandate for more responsible fiscal policy?

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This page contains a single entry by David R. Remer published on October 19, 2004 6:08 PM.

Korbach: A Commendable Agenda was the previous entry in this blog.

State of the Election is the next entry in this blog.

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