The Problem Is not A(lan) Or B(en) - It is W.

Tuesday, October 25, 2005

Having woken up from a good sleep after my (too) stiff Gin and Tonic I find out the world has not changed that much since the nomination of Ben Bernanke for the Fed chair. All the other problems are still here. Yesterday's boost in equity markets is still a miracle to me as I have looked in vain to find an investment instrument that would reflect or anticipate the future performance of the Fed chairman (or can this be seen in - declining - bond markets?)
If I take the dollar as a substitute - which weakened against all other majors - I would have to conclude that the world shares my view that the major problem is not whether one brilliant economist with loads of academic credentials replaces the other one but lies much more with the future course of American policy and the results of it on its economy. To repeat my headline: The problem is not A(lan Greenspan) or B(en Bernanke); it is Dubya (and to a certain extent J(ohn Snow.))
As Greenspan has warned often enough in the last 10 months the biggest threat to the US is its lax fiscal policy and the current account deficit. No links today; I hope this forces you into browsing the archive of this blog.
In my big picture which I had promised for today I feel sorry for whoever is given the task of cleaning up the mess made up from exploding federal (and local) debts, rising inflation, wars, a crappy education system and at least a dozen other major problems (browse my archive) like the housing bubble the - still - biggest economy of the world faces and which is ruled by a government that has not addressed one of them yet. Ben Bernanke will occupy a sad place in history and it will not be his fault.
Not even the most brilliant head at the Federal Reserve Board will be able to prevent the decline of the American empire as long as we see a continuation of the policies made by the persons currently residing in the White House.
The questions of the future are not so much whether Bernanke will be a hawk or a dove. The question is whether the US government will find out soon enough that in an interconnected world they cannot longer follow a petro-theist foreign policy financed with the money of others.
Take out ATP (advanced technological products = WEAPONS) from the trade balance; but do so only in the vicinity of a doctor; you are guaranteed a shock when you see how bad the decline of the US productive base has become. The US has only two things left for which there is a demand elsewhere: Arms and the dollar. While I am pessimistic that the demand for weapons will decline anytime soon (me old-style pacifist) I am thinking very much about my stance on the dollar. Until now I have seen the greenback supported by coming rate hikes and the weak performance of the European and the Japanese economy. But as higher rates always mean more risk (browse my archive) I think the 10-month long correction of the dollar could come to an end not too long from now as the world's first reserve currency will experience more damage from a US government that is viewed as hostile in rapidly expanding parts of this globe.
While the White House is still congratulating itself to the nomination of Bernanke - whose first remark was a loyalist kowtow to Bush - the world is not standing still.
My #1 barometer for political instability - gold - has risen 2% since yesterday. Oil has begun to reverse its downward correction, equities are pulling back and bonds do too. Consumer confidence has further slipped and the GDP figures on Friday may be not all that bad although certainly lower - but this time I will wait for their revision before believing into them.
Anybody around who wants to be in the shoes of the Fed chairman?

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