As President Bush begins his second term surrounding himself with people he can trust (to tell him only what he wants to hear,) there remain plenty of folks outside the White House bubble who stubbornly refuse to get on message.
How’s the U.S. Economy? The Bush Bubble Boys contend that it’s strong and getting stronger, thanks of course to the Boss’s humungous tax cuts. The wealthy, as predicted they say, are using their tax savings to create jobs, which in turn has put money in consumers’ pockets. That in turn has boosted consumer spending and the overall economy. That’s their story, and they’re sticking to it.
But once you leave White House bubble you find plenty of folks willing to tell you otherwise, (or, as the Bush administration would describe them, people who are “helping the terrorists.”)
First, about those rich folk - they are creating jobs, just not here. If you want one of those jobs you’ll have to move to China or India and agree to work for peanuts. But, you ask, if that’s the case where are consumers getting the money to pay for all stuff they are buying? Answer - the same place George Bush gets the $5 billion a month to fund his Iraq adventure.. they borrow it … borrow.. borrow. (Conversely the American savings rate has fallen to a mere two tenths of one percent. That means that a person earning $100,000 a year is saving about 50 cents a week, or $25 a year.) We are a nation living on the Never-never plan. Never, never pay off our debts. Just keep borrowing. A rolling loan gathers no loss.
"It's in this four-letter word: Debt," The U.S. economy is just awash in it We have a Fed that wants a booming economy, but the only way the consumer can continue to fuel the economy is through continued debt accumulation. I don't know if there's an easy way out." (Merrill Lynch chief North American economist Dave Rosenberg.)
But there are limits to even what avaricious credit card companies are willing to lend. So, as consumers reached their credit card limits they had to find another cow borrow milk from. Bush likes to point out that America is a nation of homeowners. Righto Boss. The trouble is consumers have spent the last five years milking all the equity and then some from their homes too. Remember the old days when a family celebrated the burning of the mortgage. Owning your home free and clear was the foundation upon which our parent’s and grandparent’s generations built secure retirements. No more baby. The American home has just become a credit card with a lawn.
“It's a dangerous situation -- potentially a bubble that dwarfs even the U.S. asset bubble that burst in 2000 -- and it will be a challenge for policy-makers to keep it from ending badly.” Justin Lahart, CNN/Money Senior Writer
So, what’s the plan once the American consumer hits financial gridlock? Don’t ask this administration because they are part of the problem. The Bush folk started spending and borrowing the day the arrived. They have run up over $2 trillion in debt so far and, thanks to Bush’s tax cuts; they need to continue borrowing just to keep the heat and lights on.
"Nobody can pinpoint when this process will come to an end. But it is very clear that it can't go on forever.”Carlos Asilis, a portfolio manager with the hedge fund Vega Capital Management.
No Carlos, (you un-American little bastard,) it can’t go on forever. It will, however continue through the Christmas season. We are spoiled bunch of consumers and not even backbreaking debt is going to prevent us from one more round of lavish gifting. Christmas 2004 will add a few more billion in consumer debt to the already radioactive piles of the stuff.
2005 Predictions: Early next year the Fed will resume raising interest rates - which will result in a jump in credit card rates - which will result in larger minimum balance payments - which will force more consumers into default and bankruptcy - adjustable rate mortgage rates will also begin to rise – which will increase monthly payments for already stressed homeowners -- those higher rates will cool home sales - which will in turn depress property values - which means the homeowners not only cannot squeeze another dime out of their homes – in fact, some will find the declining value of their home is less than their outstanding loan balance - which will increase foreclosures. Happy New Year.
More Stuff the Boss Doesn't Want to Hear
How are things going in Iraq? Fine, the White House Bubble Boys snap. We won in Falluja, gave those Evil-doers are real shellacking. Gonna have free elections in January. And the Iraqi police and military trained and just itching to take over responsibility from American troops. That’s the administration’s story and their sticking to it.
But karma is real and, sooner or later, comes home to roost. That’s just what happened last month when the CIA’ station chief in Iraq returned from a year in that country and filed his “End of Assignment Assessment” report and it was soooooo off message!
It was payback time for when the Bush folks blamed the CIA for the whole WMD “misunderstanding?” The CIA remembers that little incident and this time they intend to cover their ass. The day CNN airs footage of our ambassador being plucked from the roof of the burning US Embassy in Baghdad; the CIA wants to be able to prove that “we told you so.”
The CIA station chief’s conclusions will not come as a surprise to those of you who watch any non-FOX news channel. The memo notes that the insurgency is getting bigger, not smaller, stronger not weaker. This month alone over 50,000 of the newly minted Iraqi police refused to show up for work because they are tired of playing clay pigeons to insurgent marksmen. (Over 1000 of the have been killed this year alone – for $75 a week.)
“The station chief's cable has been widely disseminated outside the C.I.A., and was initially described by a government official who read the document and who praised it as unusually candid. Other government officials who have read or been briefed on the document later described its contents. The officials refused to be identified by name or affiliation because of the delicacy of the issue. …… Asked about the cable, a White House spokesman, Sean McCormack, said he could not discuss intelligence matters.. The station chief overseas an intelligence operation that includes about 300 people, making Baghdad the largest C.I.A. station since Saigon during the Vietnam War era.” ( New York Times 12/07)