Year End 2014

Stock Market
     December is always (with very few exceptions) a good month for the stock market.  Next month might not be as good (but you never know).  The Federal Reserve intends to keep interest rates low.  That means investors will continue to have an incentive to keep their money in stocks rather than in interest bearing accounts, for the simple reason that the dividend yield on stocks is much higher than the (practically non-existent) interest yields.
The Economy
     Rising stocks usually go together with a growing economy.  There are exceptions to that, too, but that is the usual rule of thumb.
     Low interest rates tend to boost the economy.  Business and consumer loans are cheaper, saving money for everyone.  The down side is that retired people who hoped to live on interest income are getting practically nothing.
     The fall in oil prices also saves money for consumers and businesses.  The result should be more disposable income, which should lead to more growth.
     Europe is once again a drag on the international economy.  Growth rates there are hovering around zero.  China's growth has slowed from its former double-digit pace.  Russia's economy is on the brink of a free-fall, because it depends so much on selling oil at high prices.
     The fact that the Federal Reserve is still keeping rates so low indicates that they are still concerned that our economy could relapse into recession.  One wonders what their approach will be if the fall in oil prices leads to falling prices in the economy in general.  They believe that falling prices indicate economic weakness.  However, it is possible for the supply of commodities to rise, and manufacturing efficiency to increase, even in a growing economy, leading to declining prices. Still it is true that there is plenty of economic weakness in the world.
     The continuing large Federal budget deficits and the spiraling national debt are causes for concern.  Most of us have been putting off thinking about them till later on down the line.  However, at some point the US economy will have to stand on its own and stop relying on deficit spending and interest rate subsidies.  The fact that those things are still going on indicates that the economic disruptions of the previous decade are not actually over yet, despite the growing economy.  The crisis will not really be over till the Fed's interest rate policies are back to normal and budget deficits are at least back to pre-crisis levels.
     Two things need to happen for that to occur:  (1) economic growth, and (2) the will to cut the deficit.
     Economic growth is occurring, but it is not strong, and it suffers from various drags and hinderences, many of which arise from policies of the current administration in Washington.  Of primary concern is the torrent of new red tape spewing out of various bureaucracies.  Included in the regulatory orgy are attempts to regulate carbon emissions and assaults on traditional sources of energy, especially coal and oil, which are basically regarded as evil.  We certainly want to find cleaner ways to fuel our economy, but probably cold-turkey is not the best way to do it.
     Tax policies, also, could be better, to say the least.
     There is a definite anti-business bias in the policies of the current administration.  Sometimes the administration seems to show signs of recognizing some economic realities, but its political base goes crazy every time that happens.
     In regard to cutting the deficit, that is a deep-seated problem.  It currently seems to be divided along party lines, but we have only to look back to the Bush administration, during which there were times when Republicans controlled both Congress and the White House, to see that the pressures to overspend are very pervasive.  However, we can hope that if the party that currently talks loudly about cutting the budget gets the power to do so, things will at least get a little better in that area.
     All-in-all, there is hope but continued need of caution.
   

Bull Session

[The following are hypothetical opinions of imaginary characters, for your amusement.]

               “With all your prating about democracy, you know full well that it is a bundle of lies.  Real democracy, full democracy, can never work,” said Fal Ban Oh, the Chinese sophomore.

                “Certainly it can work.  If the people are really empowered, they will make the right choices,” said Charles Orson, law student from Vermont.

                “Bullsh**,” said Sal Gregory, the business student from Ohio.  “’The people.’  What a crock.”

                “Oh, so you think we’d be better off if we were run by a communist politburo?”

                “It’s working well for us,” said Oh.

                “You can’t call them communists,” said Charles.  “They’re exploiting their own people, like the capitalists did here 100 years ago.”

                “So what are you then,” Sal said, jabbing an index finger towards Charles, “the true communist?”

                “No, I’m not a communist.  I believe people should be free, and if they are they will rise to their true potential.”

                “Ha!” Sal retorted.  “What a bunch of la-de-da pie in the sky.”

“Well, it’s never really been tried.”

“What?  What have we been doing here for the past 200 years?”

“You think they’ve been free?  They’ve been slaves to low-paying jobs.  They haven’t had health care, and the education they get is crap.”

“Who’s this ‘they’?  The people?  The masses.”

“No, not the masses.  Just regular people.  Like us.”

“Hey, I’m just a regular person as much as anybody else, but I know that if I want anything decent in life, I’ll have to work for it.”

“F*** everybody else?”

“No.  They can work, too.  They’re welcome to work as much as I am.”

“Flipping burgers? Picking grapes?”

“They don’t have to settle for sh** like that.”

“Oh don’t they?  You think the economy is so great, they can just put on a tie and walk into corporate headquarters and get a $100,000 a year job?”

Sal pressed his lips together and blew a raspberry at him.

“I mean, the point is…” Charles paused and regrouped.  “There’s millions of unemployed people who would love to not have to settle for flipping burgers.”

“Tell ‘em to go to North Dakota.”

“Yeah, sure.  Just pack up and move to some crazy boom-town and live in a dormitory?”

“Life ain’t always easy or fun.”

“So, f*** ‘em?”

“Ahh, bullsh**.  So what are we supposed to do?  Just give everybody everything, then nobody will have to work if they don’t want to?”

“They’ll work if they can get a decent job.”

“Why should they if they have everything given to them?”

“Well, obviously they wouldn’t get everything.  Just enough to have a minimum standard of living.”

“Oh, sure, and how much is that?  And who’s going to pay for it?  Me, I suppose, with sky-high taxes!”

“Well, if you’re making good money, you could afford it.”

“Oh, yeah, and I’m working and slaving away, and half my income goes to people who are sitting on their asses.”

“They wouldn’t just sit there if they could get a decent job.”

“Wanna bet?”

“You have no faith in people, do you?  Ya gotta believe they would want to do better than a minimum standard of living.”

“Lots of people would.  Not everybody.”

“Most people.”

“So that leaves only a few million, I suppose, sitting on their asses.  Just a few billion dollars drained into their fat, lazy mouths.”  Charles sat back and took a few gulps of his beer.

“You Americans are so closed-minded” said Oh, who had been sitting back watching the two.  “You can’t see past your little political arguments.  In China we are looking towards the future of our country.  We are part of something greater than ourselves.”

“That’s nice,” said Sal.

“You should try it, you Americans.”

“We believe in America, of course,” said Sal.  “At least I do.”  He smirked and raised his beer can towards Charles, who gave him a half-hearted sneer.

“You say you believe in America.  First of all, I don’t know how you can, except that you don’t know any better.  You were born here, you were raised here and have been fed American myths all your lives.  You don’t appreciate the fact that from our viewpoint and that of most of the rest of the world, you have done terrible things.”

“Oh, and I suppose Mao tse tung and Stalin were your favorite philanthopists,” said Sal.

Oh ignored that and went on.  “And you say you believe in America, but you are all just ‘me, me, me.  What can America do for me, and why should I do anything for it?’ Both of you.  You don’t know what it means to serve a greater cause than yourselves.”

“Hmm, the greater good, and all that,” said Sal.  “Well, you know, in America we believe that if individuals follow what’s good for them, in the end it turns out that it benefits America as a whole.  Anyway, we are all about the individual—rights, freedoms, etc.”

“Me, me, me,” Said Oh.

“Well, you guys have been doing much better since you started going our way a little bit.  More free markets, free trade and all that.”

“Of course.  But we never stopped believing in our country.  We will always believe in it and that everything we do is for its greater glory.”

“Everything?  So people who move from the country to the cities don’t think about finding work to feed their families?”

“Listen, let me tell you something about all that,” said Oh.  He was sitting on the edge of a plain old wooden straight-backed chair.  He took a gulp of his Amstel Light.  “Whatever we do, we do for China.  What we were doing before was not working.  So we are doing something different.  Our leaders were smart enough to see that some of your cut-throat ways gave you great power.  We need power.  We need it to defend ourselves against you.”  He poked his finger towards Sal.  “And you, too.”  He poked it at Charles, who looked offended.

They all sat there a minute considering Oh’s comment.  Oh sat back in his chair, looking a bit uncomfortable with his outburst.

“Well,” said Charles, “it’s true we have offended you...”

“You have no idea!” said Oh.

“Wait a minute,” said Sal.  “It wasn’t us.  We fought the first revolution against colonialists.”

“Then you became just like them!”

“Listen,” said Sal.  “The world would be a much more f***ed-up place without America.  We’re like George Bailey—you know, in ‘It’s a Wonderful Life?’  What would the world be like without America?  The world might be shocked if they could find that out.”

“You are right about one thing: the world is f***ed up, and as a Chinese citizen I know that China cannot continue to be weak.  It has to become strong to keep from being a pawn in the game.  It is a great country with a great heritage, and it deserves to be great.”

“Cool, I’ll drink to that,” said Charles.

"Here, here,” said Sal, and drained his can.

Some hope

                Although our current political scene is the cause of much despair for many, one can visualize it as (hopefully) a temporary phenomenon which may improve as we continue to recover from the financial and economic traumas of the last few years.  There is a passion on both sides of the political debate which may be fueled in part by a fear of what the future may hold.  If the traumatic events and the dangers continue to recede in our rear-view mirrors, the passion and fears may subside. 

                On the other hand, we cannot be so sure, and we have to be ready to defend common sense, the rule of law, basic rights, human decency and all the things that make us (somewhat) civilized.  And let’s do it in a civil and communicative way.  Let’s not believe rumors we may hear about how bad the other side is.  Listening to rumors is a sure road to mayhem.