Friday, February 15, 2013
So those crazy North Koreans have exploded a nuclear device this past week in an underground test. Just a bunch of cut ups and jokers, right? Uh...that is a decided and resounding "no". It is highly suspected, but not conclusively proven, that Iran and North Korea are in cahoots in the pursuit of refining weaponized nuclear material (Iran) and obtaining an effective and reliable delivery system (North Korea). In the background is Russia, that has been supplying centrifuges and other equipment to the Iranians to advance their nuclear program. The reason that this is important to you and I is that as much as the liberal left would like to believe that we all live in a world of unicorns, rainbows, and blue skies, the reality is that the world is a very dangerous place. What has promoted stability and peace around the globe has been the projection of American military power. And the Left hates this. As we have pulled back our military presence under this administration, and as we have begun to gut our military, the rise of crazy dictators and their desire to have their country become a nuclear power has grown. This is no coincidence. The reality of this world is simply that peace and stability are fostered and preserved by those countries- led by the United States- that have been willing to do what it takes to promote freedom and insure stability. When we as the world's lone and true superpower abdicate that responsibility, the geopolitical environment becomes more unstable. And that is what is happening under this administration.
They say that wisdom comes with age. Wisdom must weigh about 40 pounds.
Even if you are not an economist, you intuitively know that for our economy to grow, the private sector has to start hiring again. Currently, the real unemployment rate (the U-6) is just north of 14%. The private sector, from a mom and pop business to giants like General Electric, have just not been hiring over the past 4 years as political and economic uncertainty have combined to stymie job growth. The private sector is where goods and services are produced and sold for for a profit for reinvestment into new jobs, buildings, equipment, and technology. Until that sector does begin to grow, the economy will wallow. Oh, there is one sector that is showing an increase in new hires. Want to guess? If you said "government" you are not only a winner, but astute. Now there is nothing wrong with government jobs, per se, but here is the reality: government jobs do not add to the needed productivity and capital investment that is sorely lacking in the economy. Instead of growing government and burdening the private sector with ever increasing costly regulations and higher taxes, our focus should be on growing the private sector and eliminating some of the drag of a bloated and unproductive bureaucracy. The simple economic reality is that as government spending grows to support this monstrous entity, private spending gets crowded out because more resources are needed to support government. Until we reverse that direction, we will continue to struggle to create jobs and bring down private sector unemployment.
This "you scratch my back, I will scratch yours" thing doesn't work well with a cat.
It may sound arcane and of no consequence to you and I, but keep an eye on what many of the major countries are doing with their currency. Japan has committed to weaken the yen to boost exports and hopefully get their economy out of the doldrums. A weaker yen means that their products cost less to buy, whether they are purchased in Euros, dollars, or any other currency. The problem with that action by Japan is that it make the exports of any other country more expensive, which in turn can- and usually does- slow down the economy in countries that sell to Japan. So what do those countries do? They follow suit and seek to weaken their currency as Japan is doing to maintain some degree of parity. Now what does that have to do with you and me? When our dollar is cheapened through currency manipulations, the cost of everything we buy goes up. In our sluggish economy, the last thing we need is rising prices because of central banks manipulating currency prices. Japan has made the first move, and it will be important to see if the U.S. and other countries follow suit.
I hate going shopping with my wife, especially when she asks me to hold her purse and it doesn't match anything I'm wearing.
And that, my friends, is my view.