Quote of the Day
Imagination is more important than knowledge.
Albert Einstein
Polls, Polls, and More Polls
Obama's post-2 month payroll tax holiday "triumph" bounce seems to have peaked at about 47%. He clearly has the momentum, but consider the following projections from National Polls:
Obama 262 vs Generic Republican 174
Obama 371 vs Gingrich 119
Obama 284 vs Romney 222
Obama 289 vs Paul 152
Recall that there are 538 electoral votes (the number of federal legislators + 3 for the District of Columbia). To win the Presidency outright, one needs (538/2)+1=270. One thing is very clear from these results: Romney is running closer to Obama than any other GOP challenger, and Gingrich is running worse than McCain against Obama. This tells you a lot of about the race for next year: I think the winning challenger is going to have to argue that unlike Obama and the Congress, he is from outside Washington and is able to work productively in a bipartisan manner. This exactly fits Romney. Gingrich was in Congress for a generation; he took retainer fees from Freddie Mac, one of the arch-villains of the economic tsunami. A recent discovery that one of Gingrich's think tank websites on health care had positive things to say about RomneyCare, one of the issues that activist Republican conservatives are not happy about, makes it harder for Gingrich to distance himself on that issue.
The all-important Iowa caucuses are now within a week. There is some evidence that Rick Santorum is getting a modest "hot conservative" bump from Gingrich's dropping poll numbers, but let's get serious: Santorum got blown out of his reelection by "Mr. Excitement" himself, Bob Casey. Casey lacks Obama's charisma and political skills; Santorum comes across as too strident, and he lacks administrative experience. National Polls features two recent GOP polls, the Gallup tracking poll which has shown Gingrich drop a substantial lead over Romney to the bare minimum. The Economist poll still has Gingrich up by 6, but we've also seen Romney and Gingrich in a dead heat in two earlier polls. The latest polling shows Paul with a small but impressive lead in Iowa before next week's crucial caucuses given the most motivated supporter base of any of the candidates. (See my earlier preliminary endorsement earlier this month.)
Some Thoughts on the Asset Bubbles
There are 3 basic schools of economics I have generally considered in drafting my commentaries: the Keynesian school, the monetarist school (e.g., Friedman), and the Austrian school (Mises, Hayek). This is not an economics blog, but in layman's terms, the Keynesians are particularly interested in consumer confidence and related measures and the ability to government policy to influence the economy. The monetarists argue that in the long run it's maintaining the money supply commensurate with sustainable economic growth. The Austrian school is particularly characterized by a focus on business cycle theory One of the key concepts of the latter school is malinvestments that occur as an artifact of central bankers whom keep their feet pumping easy money into the economy. Think, for example, the enormous amount of money that went into housing and, say, credit extended to home owners using their home equity as collateral. What's the return on all that money in these areas? Homes don't generate widgets for sale; a homeowner's investment in a large-screen TV doesn't yield dividends like investing that money in blue chip utilities. It's not necessarily that a consumer is tapped out, but when home prices doubled within just a few years while people's incomes didn't, the prudent investor said, "The price has gotten ahead of itself; sooner or later, you're going to run out of buyers at these prices."
I came across a debt migration chart published by a financial newsletter company. (Any investor must do his own due diligence in researching investments.) What's particularly notable was how stable the US government debt-to-GDP ratio was from the Clinton to Bush Administrations at roughly two-thirds the size of the economy. At the same time, S&P 500 companies increased debt to just over revenues by the peak of the Bush expansion in 2007 to less than half of revenues during the Age of Obama. (There's some evidence that households have also sought to pay down debt.)
I'll simply conclude that I believe that businesses and households are worried about the long-term sustainability of fiscal and monetary policies and hence are unwilling to take on new debt given current economic instability.
Musical Interlude: Nostalgic/Instrumental Christmas
"Winter Wonderland"
Boston Pops
Mormon Tabernacle Choir
The Eurythmics
Instrumental Jazz
Bing Crosby
