May 1, 2007

The Laurel Comment
“Next time I tell you someone from Texas should not be President of the United States, please pay attention.”

Molly Ivins


Markets

Okay, so while the Dow Jones was setting record highs last month in the 13,000 plus stratosphere why were Canadian and European investors asking themselves this most important question? Where’s my money?

As many RRSP and other long term holders of U.S. equity and bond funds have realized, their nominal gains in the U.S. markets have been wiped out by the reality of the currency world. To wit, while the post Clinton world of Bush/Greenspan/Bernanke has brought great rewards to domestic investors, the money printing machine that has driven the housing boom and privatization rush has also left a legacy of longer term scars on the face of the real economy and fading U.S. hegemony. Cheap money can be a temporary solution to assuage sharp economic downturns but as a practical long term policy one must ponder its eventual outcome with at least a small degree of skepticism.

During this period the Canadian dollar has risen from 62 cents U.S. to over 90, a percentage gain of some 45%. Similar gains have taken place in the Euro-US dollar arena allowing many US based corporations to add serious numbers to their balance sheets from foreign sales.

A good thing or a bad thing you might ask? The answer to that conundrum is also a question. How long can America expand its deficit, devalue its currency and diminish its middle class without triggering higher inflation and tighter money. One clue as to how the government’s domestic policy has mirrored its Iraq adventure is in the “truthiness” of it reporting. Aggregate money supply aka M3 is no longer officially reported but “Shadow Government Statistics” states that it has annualized near 12% since mid-2005. No economy can grow its currency at three times GDP without a reckoning. Buy gold, which incidentally, is already up over 100% during the same post-Clinton period. This commodity’s price would have to close in on 2000 USF per ounce just to reach the inflation adjusted high that occurred in 1980.

Commentary

Everyone, in or out of office, who supported the Iraq war and the subsequent occupation has been dead wrong. Many of those running for the 2008 Presidential nominations have been furiously backtracking on their positions, yet few have adopted strong opinions out of fear of appearing unpatriotic.

The face saving White House continues to expound a fantasy world overview of its policy waffling between the unrealistic and the accusatory even while the facts on the ground belie the rhetoric. Newly appointed “surge director” General Patraeus has promised to be truthful to Congress when he reports on progress or the lack thereof by late summer or early autumn 2007. It is indeed strange that the Bush administration so adamant in its criticism of Democratic guidelines, can be so accepting of their own…or is this just another lie?

In Canada the debate over our commitment to the Afghanistan occupation had almost reached rational grounds when the Liberals proposed their timelines. The NDP, in its infinite quest to appear silly, supported the government. No matter what position we may hold on the Martin/Harper Afghan policy we must surely agree that Canada has already done more than its share of the fighting.

Even if the policy and the battle were justified, a stance with which this writer has disagreed from the outset, then let the rest of NATO and other interested nations make their contribution. If the NDP had not been disingenuous on this issue they could have proposed an amendment to the motion…2009 or BEFORE.

The proponents of the war in Iraq may have been dead wrong, a malleable position, many of the troops however, have just been dead….and for what!?

Remarkably

Corn based ethanol is not the answer and it should not even be among the questions. This is the phoniest boondoggle perpetrated on the public since bottled water. Its cost is both prohibitive and subsidized, its environmental impact versus gasoline is at best neutral and may even be net negative, its effect on food prices both in ours and third world countries may border on the disastrous, while its proponents will get rich at the public’s expense and upon its naiveté.

Getting excited about the environment is a good thing and makes us all feel useful in a community sort of way. Getting screwed by special interests is not conducive to feeling good, it isn’t even sexy.

One final note on the Afghanistan debate. Why tanks? Why not an air conditioned fortress? In fact why not bring them home and spend money on Arctic bases and ice breakers? Maybe new coast guard helicopters. Something that will help, not hinder the coming generations.

Geoff Ryan

May 1, 2007