Way back in October, Time Magazine write Joe Klein wrote about the average American's ability or willingness to "hunker down" in response to trying times.
The 2005 US budget introduced some intense cuts to public expenditures - so intense, one wonders if the folks at the IMF have advised the US to enact the very fiscal austerity measures many developing countries have been forced to endure in the past. It's little wonder that John Fogerty sang "Bad Moon A Risin'" at the Superbowl, which roughly coincided with the US Budget release.
Lyrics for: Bad Moon Rising
I see the bad moon arising.
I see trouble on the way.
I see earthquakes and lightnin'.
I see bad times today.
Don't go around tonight,
Well, it's bound to take your life,
There's a bad moon on the rise.
I hear hurricanes ablowing.
I know the end is coming soon.
I fear rivers over flowing.
I hear the voice of rage and ruin.
Don't go around tonight,
Well, it's bound to take your life,
There's a bad moon on the rise.
All right!
Hope you got your things together.
Hope you are quite prepared to die.
Looks like we're in for nasty weather.
One eye is taken for an eye.
Don't go around tonight,
Well, it's bound to take your life,
There's a bad moon on the rise.
Don't go around tonight,
Well, it's bound to take your life,
There's a bad moon on the rise.
From the World Socialist Website, we see that many of the cuts to discretionary spending were almost exactly offset by increased military expenditures:
In raw numbers, the $19 billion increase in Pentagon spending—up from $400 billion to $419 billion—almost exactly equals the nearly $20 billion in cuts on various social programs. The equation is not accidental. In the choice between guns and butter, the Bush White House has come down unequivocally on the side of guns.
The 4.8 percent increase for the Pentagon, brings the cumulative increase in military spending since Bush took office to 41 percent.
Well, we have seen Mr. Greenspan concerned over the increasing US deficits and their accumulation, the debt, but how about this discrepancy between short-term rates and mortgage rates?
MSNBC:
The Fed is increasing short-term interest rates, so rates on bonds and home mortgages should also rise. Right? Well, they haven't.
March 7 issue - Something strange happened on the way to higher interest rates: they declined. We're talking about rates on long-term mortgages and bonds. These rates truly affect the economy, because they influence housing and business investment. Most economists expected them to rise. But no. Last June rates on 30-year fixed mortgages averaged 6.29 percent; now they're about 5.7 percent. Federal Reserve chairman Alan Greenspan recently called the declines a "conundrum."
. . .
But why worry about low rates? After all, they help borrowers; and if the economy is unexpectedly weak, they might prevent a recession. However, artificially low rates can also prompt overborrowing, creating inflation or speculative price increases in whatever's being bought on credit—land, stocks, homes. Sooner or later prices stop rising or crash.
Well, as an economist, the sky hasn't fallen yet. But if the South Korean equivalent of Alan Greenspan can expose tremendous cracks in US dollar policy, we might be in for a ride.
DETNews:
The suggestion that South Korea might diversify its currency holdings away from the greenback -- later retracted -- also rattled the bond market, sending interest rates higher and the price of dollar-denominated assets such as gold and oil soaring.
The incident underscored the vulnerability of the dollar and exposed cracks in the U.S. currency policy, an issue analysts say is getting harder to ignore. It also suggests that if current conditions persist, more rough trading days lie ahead.
