MARKET NEWS DIGEST
Sep 3, 2004
-> Intel warning weighs on Wall Street -CBSMW
-> High death toll in Russia siege -BBC
-> Gold ends lower on dollar rise -CBSMW
-> Oil Rises as Pipeline Blast Raises Concern
-> National Preparedness Month - September 2004 -GSA
-> TREASURE SHIP MEETS PERFECT STORM -NG
-> Bush's Plan for a Safer World... -RNC
-> DOLLAR SELL-OFF, GOLD BUY-ON - Craig R. Smith
-> A TERRORIST ARMY IN THE US? -Alan Caruba
-> Why Zell Miller loathes Democrats -Slate
-> The Great American Savings Grab -Stephen Roach, Morgan Stanley
-> Iraq's Freedom Over Tyranny - By Ayad Allawai, WSJ
-> The GOP and the GDP - Wash. Times
FOUNDER'S QUOTE OF THE DAY
"If Congress can do whatever in their discretion can be done by money, and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one, subject to particular exceptions."
THE ORIGIN OF LABOR DAY
Dept. of Labor
The First Labor Day
The first Labor Day holiday was celebrated on Tuesday, September 5, 1882, in New York City, in accordance with the plans of the Central Labor Union. The Central Labor Union held its second Labor Day holiday just a year later, on September 5, 1883.
In 1884 the first Monday in September was selected as the holiday, as originally proposed, and the Central Labor Union urged similar organizations in other cities to follow the example of New York and celebrate a "workingmen's holiday" on that date. The idea spread with the growth of labor organizations, and in 1885 Labor Day was celebrated in many industrial centers of the country.
Labor Day Legislation
Through the years the nation gave increasing emphasis to Labor Day. The first governmental recognition came through municipal ordinances passed during 1885 and 1886. From them developed the movement to secure state legislation. The first state bill was introduced into the New York legislature, but the first to become law was passed by Oregon on February 21, 1887. During the year four more states — Colorado, Massachusetts, New Jersey, and New York — created the Labor Day holiday by legislative enactment. By the end of the decade Connecticut, Nebraska, and Pennsylvania had followed suit. By 1894, 23 other states had adopted the holiday in honor of workers, and on June 28 of that year, Congress passed an act making the first Monday in September of each year a legal holiday in the District of Columbia and the territories.
A Nationwide Holiday
The form that the observance and celebration of Labor Day should take were outlined in the first proposal of the holiday — a street parade to exhibit to the public "the strength and esprit de corps of the trade and labor organizations" of the community, followed by a festival for the recreation and amusement of the workers and their families. This became the pattern for the celebrations of Labor Day. Speeches by prominent men and women were introduced later, as more emphasis was placed upon the economic and civic significance of the holiday. Still later, by a resolution of the American Federation of Labor convention of 1909, the Sunday preceding Labor Day was adopted as Labor Sunday and dedicated to the spiritual and educational aspects of the labor movement.
The character of the Labor Day celebration has undergone a change in recent years, especially in large industrial centers where mass displays and huge parades have proved a problem. This change, however, is more a shift in emphasis and medium of expression. Labor Day addresses by leading union officials, industrialists, educators, clerics and government officials are given wide coverage in newspapers, radio, and television.
The vital force of labor added materially to the highest standard of living and the greatest production the world has ever known and has brought us closer to the realization of our traditional ideals of economic and political democracy. It is appropriate, therefore, that the nation pay tribute on Labor Day to the creator of so much of the nation's strength, freedom, and leadership — the American worker.
[Ed. NOTE: "The Socialist Party held a similar celebration of the working class on May 1 of each year. This date eventually became known as May Day, and was celebrated by Socialists and Communists in commemoration of the working man. In the U.S., the first Monday in September was selected to reject any identification with Communism." Wilstar.com
HAVE A RELAXING LABOR DAY!
MARKET NEWS DIGEST
Intel warning weighs on Wall Street -CBSMW
Techs tumble; 144,000 jobs added in August
By Susan Lerner, CBS.MarketWatch.com
Sept. 3, 2004
NEW YORK (CBS.MW) - An Intel-led a parade of warnings from the chip sector pressured stocks Friday but encouraging news on jobs helped limit broader market losses.
The tech-heavy Nasdaq Composite Index was feeling the brunt of the burden, tumbling 28 points, or 1.5 percent, to 1,845 in midday trade.
Intel plunged 7.4 percent after slashing its revenue estimate for the third quarter to between $8.3 billion and $8.6 billion from a range of $8.6 billion to $9.2 billion and cut its gross margin target to 58 percent from 60 percent.
In its midquarter update, the chipmaker also said its inventory would increase again instead of remaining flat. See full story.
Analysts lowered their forecasts in reaction to the update but some kept their bullish recommendations on Intel shares, saying valuation levels were getting attractive. Read more on analyst reaction.
Tempering the impact of Intel's update, however, was news that the unemployment rate fell to its lowest level in three years.
The Labor Department estimated that August nonfarm payrolls rose an as expected 144,000, snapping back after two disappointing months. The unemployment rate fell by a tenth percentage point to 5.4 percent, the lowest since October 2001. Numbers for June and July were also revised upwards. See Economic Report.
"I think there are unmistakable trends in the economy that employment is rising and that the unemployment rate is falling... All those things are moving in the right direction," said Joseph Keating, chief investment officer at AmSouth Asset Management Group.
The Dow Jones Industrial Average was bucking the broader market's weakness with four of its components -- Boeing, ExxonMobil, Procter & Gamble and Verizon -- touching new 52-week highs intraday. The blue-chip barometer was last down 6 points, or 0.1 percent, to 10,283, after rising as high as 10,321 in earlier trade.
The S&P 500 was off 2 points, or 0.2 percent, to 1,115.
Volume remained light heading into the long holiday weekend at about 450 million shares on the New York Stock Exchange and 675 million on the Nasdaq. Decliners outnumbered advancers 19 to 11 on the Big Board and 19 to 9 on the Nasdaq.
"You throw everything in the mix and it's kind of a push today as far as how the market's reading things," said Jay Suskind, director of trading at Ryan, Beck & Co.
"There's not a lot of direction -- no real bad news no real great news and without the players around and the volume light you're not going to see much movement," he said.
High death toll in Russia siege -BBC
Sept 3, 2004
At least 150 people are reported to have died at a school in southern Russia where Chechen separatists had been holding hundreds of hostages.
Dozens of corpses were seen outside a local morgue, and the number of dead is expected to rise further.
Heavy gunfire and loud explosions were heard throughout the morning as Russian troops stormed the school, in the town of Beslan in North Ossetia.
Russian troops are fighting to free children still held hostage.
The BBC's Jonathan Charles in Beslan reports hearing more loud blasts in the area of the school after a period of relative calm.
There is confusion over what sparked the operation, which was unplanned.
Correspondents say the day's events have taken Moscow by surprise.
Click here to see the layout of the school
The BBC's Humphrey Hawksley in Moscow says there has been a wall of silence from President Vladimir Putin and his government.
Meanwhile, the US White House condemned the hostage-taking as "barbaric" and blamed the hostage-takers for the lives lost during the storming of the school.
Battle continues ... MORE...
Throughout September 2004, the U.S. Department of Homeland Security, American Red Cross, American Prepared Campaign, the National Association of Broadcasters, the US Department of Education, and other partners will host a series of events to highlight the importance of citizen emergency preparedness.
During National Preparedness Month, coalition partners will promote the basic steps all Americans can take to prepare for emergencies. A variety of activities will encourage citizens to heighten their awareness and preparedness. For a good resource on personal and family readiness, visit www.Ready.gov, or www.OPM.gov. Great information is available and should be accessed to Get a Kit, then Make a Plan and Be Informed.
For questions about personal preparedness and also what GSA is doing to help this agency be prepared, contact a regional Emergency Coordinator or the Office of Emergency Management at (202) 501-0012.
Editor's Note: [Let us keep in mind that on Aug. 2 a report from captured al-Qaeda terrorist stated that the threat of a terrorist strike 60 days before the Nov. 2nd presidential election was made public. Keep our country and president in your prayers.]
Gold ends lower on dollar rise -CBSMW
By Myra P. Saefong, CBS.MarketWatch.com
Sep 3, 2004 10:30 AM ET
SAN FRANCISCO (CBS.MW) -- Gold futures lost almost $6 an ounce Friday to end the week with a loss as upbeat data on U.S. job growth in August provided some support for the dollar and lured investors away from the metal.
Gold for December delivery closed at $402.50 an ounce on the New York Mercantile Exchange, down $5.50 for the session, and down $2.90 from the week-ago close. It traded earlier as low as $401, a level not see since August 16.
The regular session closed early for the Labor Day holiday, and will reopen Tuesday.
U.S job growth snapped back in August after two disappointing months, as non-farm payrolls climbed by 144,000, the Labor Department estimated Friday. The unemployment rate fell 0.1 percentage point to 5.4 percent, the lowest rate since October 2001. See full story.
The dollar rallied in the wake of a U.S. jobs report that most analysts say all but cements a U.S. interest-rate hike this month. See Currencies.
Overall, "the latest employment numbers should be a net neutral for gold," said Peter Grandich, editor of The Grandich Letter, an investment advisory publication.
But "after two decades of basically getting their heads handed to them, gold bulls could use the long weekend as an excuse to once again think gold can never have a sustained move upwards," he said.
Ned Schmidt, editor of Value View Gold Report, an investment publication of Schmidt Management, said Friday's session is "illiquid" due to the Labor Day weekend, so "any dips below $400 should be bought."
"Deluded Wall Street economists did not forecast lull in economy and now think they can forecast resurgence," he said, concluding that "whenever data confirms nothing and markets react, investors should be moving in to buy."
The "technical and fundamental picture for gold hasn't been this good in 20 years, and a $500 gold price in the next 12 months is a legitimate target," said Grandich.
Aug. 30 (Bloomberg) -- Crude oil futures rose for a second session in New York after a blast damaged an oil pipeline in Iraq, renewing concern that violence may reduce supply from the Middle East's fifth-largest oil producer.
Saboteurs caused the blast yesterday on the pipeline that links the Rumaila and Zubayr oil fields, Al-Hayat newspaper reported, citing an official from the South Oil Co. Iraqi exports in the Persian Gulf are unaffected, said three agents who provide services for tanker owners. Oil has fallen about $6 a barrel since reaching a record $49.40 a barrel on Aug. 20.
``The pipelines are having a little bit of an effect on oil prices,'' said Michael Fitzpatrick, vice president of energy risk management with Fimat USA in New York. ``When you come down $6 in a week there is going to be a little bargain hunting.''
Crude oil for October delivery traded up 29 cents at $43.47 a barrel at 10:01 a.m. on the New York Mercantile Exchange. Prices are 38 percent higher than they were a year ago.
The International Petroleum Exchange in London was closed for a holiday.
Vessels at the Basra terminal, the larger of Iraq's two export facilities in the Gulf, are loading at a combined rate of 60,000 to 65,000 barrels an hour, or about 1.5 million barrels a day, said the three agents, who asked not to be identified. The terminal's capacity is about 1.6 million barrels a day, they said.
South Oil shut one of two pipelines supplying oil to the export terminals earlier this month because of threats of attack from Shiite militants. The closure cut exports by as much as half. The pipeline reopened on Aug. 22.
``OPEC hasn't got a report on whether the attack in Iraq has disrupted supply,'' Purnomo Yusgiantoro, the president of the Organization of Petroleum Exporting Countries, said in Jakarta.
Saboteurs also struck eight pipelines in southern Iraq on Thursday, Jabbar al-Leaby, director general of South Oil, said by telephone from Basra, the regional capital.
Concern over supply may be tempered as factories that have the ability to select fuels switch to natural gas, which tumbled 7.4 percent last week. Five to 10 percent of U.S. factories can change fuels to take advantage of favorable prices.
Crude oil's plunge since failing to reach $50 a barrel Aug. 20 has convinced more traders and analysts that prices will continue to fall, according to a Bloomberg News survey Thursday.
Nineteen of 39 traders and analysts surveyed, or 49 percent, predicted a drop in crude-oil futures this week, while 17 forecast a rise and three were neutral. A week ago, 24 percent of respondents said oil would fall.
``You won't see the kind of moves in crude prices that you saw last week,'' said Fitzpatrick.
In 1865 a paddle wheeler packing gold, silver, and post–Civil War hope went down off the coast of Georgia. Now the treasure is coming home.
It was a time to move on, to douse the fires and lick the wounds. The Civil War had ended in May, and the holy quiet that followed had evolved into a vibrant summer hum of opportunity. The defeated South lay poor and bitter, but the rest of the nation had turned, gratefully, back to making money.
In October William T. Nichols, a former colonel of a Vermont regiment, and his younger brother, Henry, put down 60 dollars each and stepped off a Manhattan pier onto the S.S. Republic, a steamship bound for New Orleans. They found stateroom number 13, stowed their baggage, and awaited the 3:30 cast off. The weather was heavy outside the harbor, so the steamship lay over until the next morning at Staten Island and embarked again at 9 a.m. on October 19.
Newly refitted from a warship back into a civilian steamer, her twin side paddle wheels turned by coal-fired boilers, the Republic carried 59 passengers, 500 barrels of freight, and a reported 400,000 dollars in coins. Hard money was scarce in the former Confederate states, and New Orleans was broke, so bankers and businessmen were shipping keg-loads of coins to take advantage of their inflated purchasing power. In New Orleans the same 20-dollar gold coin would buy twice as much as it would in New York. Aboard the Republic were families with children, Army officers headed for new assignments, and businessmen like Nichols. Dressed in top hats and silk, the passengers breathed the warm salt air, played cards, and drank wine, happy to have survived the war.
Fate had not been kind to William Nichols, a 35-year-old veteran of the Battle of Gettysburg. He had just lost his daughter, May, to typhoid fever. He had also lost a small fortune in stock and wool investments. Now he was looking to the South to regain his footing, planning to continue from New Orleans to Texas, where he hoped to purchase real estate on the cheap. He took heart from the voyage. "The weather is beautiful, and the ship bounds on her way like a thing of life," he wrote to his wife, Thyrza, back in Rutland.
The Republic passed Cape Hatteras on Sunday, October 22, and by the next evening the wind had stiffened into a northeast gale. The ship was off the Georgia coast when the gale turned into what the captain, Edward Young, described as the "perfect hurricane." Steaming south at a furious rate, Young could not outrun it.
The end began with a table-clearing roll on Monday afternoon that sent dinner—pies, meats, vegetables, and condiments—tumbling to the floor. The ship labored as towering waves rushed across her decks. The soaked passengers huddled in their berths, sleepless, and in the nightmare clarity of Tuesday morning they saw the great paddle wheels stop, leaving the piston locked dead center and the ship adrift, at the mercy of the wind. Waves washed away the pilothouse and paddle-wheel boxes. Passengers and crew alike tossed cargo overboard to lighten the ship. Out went bolts of silk, ingots of tin, liquors, tobacco, varnish, and other heavy goods.
"I supposed I had seen something like confusion in battle," Nichols later wrote, "but the scene at this time was sublime. The ship had 300 tons of coal, and as she lurched from side to side, the roar of the coal and water sounded like Niagara, and the water on the outside dashing against the ship was another distinct sound and horrid enough of itself. The wind was howling through the rigging like the demons of the sea, and to make it a perfect hell, the men, excited and yelling to each other, begrimed with black smut and engine grease. It was desperation intensified."
Get the whole story in the pages of National Geographic magazine.
Bush's Plan for a Safer World & More Hopeful America -RNC
Republican National Convention
New York, New York
Sep 2, 2004
Mr. Chairman, delegates, fellow citizens: I am honored by your support, and I accept your nomination for President of the United States.
When I said those words four years ago, none of us could have envisioned what these years would bring. In the heart of this great city, we saw tragedy arrive on a quiet morning. We saw the bravery of rescuers grow with danger. We learned of passengers on a doomed plane who died with a courage that frightened their killers. We have seen a shaken economy rise to its feet. And we have seen Americans in uniform storming mountain strongholds, and charging through sandstorms, and liberating millions, with acts of valor that would make the men of Normandy proud.
Since 2001, Americans have been given hills to climb, and found the strength to climb them. Now, because we have made the hard journey, we can see the valley below. Now, because we have faced challenges with resolve, we have historic goals within our reach, and greatness in our future. We will build a safer world and a more hopeful America -- and nothing will hold us back.
Read more about The 2004 Great Economics Debate
DOLLAR SELL-OFF, GOLD BUY-ON - Craig R. Smith, CEO SATC
Aug. 30, 2004
Once again I walk into my office to discover gold is up $4.60 and the dollar is weaker, as the world is slowing selling off dollars. Oh, they are not doing it with the fanfare of the closing games of the Olympics, but they are selling.
Who are "they"? China, England, Japan, Germany and many others, but most frightening of them all SAUDI ARABIA. That is right. The folks that brought you $49 a barrel oil have been selling dollars and feverishly buying gold.
This same phenomenon happened but in 1979 just before gold ran up to $875 amid a world in chaos. Interest rates went to 22% and inflation was around 15%.
If I were Mr. Bush I would let Kerry win and have him deal with the mess. But he won't for many reasons. Pride, sense of duty, cleaning up the mess he partially created.
The world is getting crazier by the moment. I have been watching the news in San Diego and how the Border Patrol are stopping thousands of illegals (many of middle eastern origin) and giving the a "ticket" that requires them to appear before an immigration Judge in 18 days -- then they release them.
On this side of the border. Illegal immigration is killing the country and driving costs up for California and the rest of the country.
HIGH COST OF FREE SPEECH
Look at N.Y.C. To protect "free speech" of a couple thousand protesters, the whole city is at risk to another terrorist attack. Marbles thrown under Police horses (where is PETA), people promising to sprinkle gun powder on themselves to set off detectors, etc. etc.
For what? Because they want to protest peacefully? No. Because they hate Bush.
This nation has become divided, but not just by the President, by many forces who hate America. Forces that have no qualification to join the debate.
Is Al Franken and Jeane Garafolo really the elder statesmen of the democratic party? Has Michael Moore become the new voice of Democrats across America?
No more than voices like Jerry Falwell represent me as a Republican. But it is happening and we can thank the media for a lot of it because it makes good theater.
The bottom line is that the business world is starting to question our ability to be "One Nation under God, indivisible..." and thus is also smart enough to know that our money is vulnerable because it's value is tied to confidence.
The "confidence" that the world once had in the U.S. has either been transformed into jealousy or serious concern about our ability to lead the Free World, when all we have to offer is George Bush and John Kerry.
This may sound very partisan but I'm going to say it nonetheless. John Kerry has done more to hurt America in the last 3 months with his double standards of political ads as he did 30 years ago when he spit on all U.S. military personnel in the field fighting for the country.
The war, right or wrong, was still going on. We're still at war now! To say the things said about our president and Secretary of Defense during a time of war is nothing short of treasonous, but hey, this is America.
George Bush has his faults too, no doubt. But, ask yourself these
1) When was the last time you lost a loved one to the horror of terrorism since Bush made it clear that we are coming and we won't stop till we destroy all of the terrorist?
2) How many Americans have died to terror since he declared war on Al Qaeda?
If John Kerry were president, he would be far too busy trying to become a war hero again to have fought as good a fight as Bush. His voting record in the Senate proves that. He cut defense, he cut intelligence and he raised taxes.
Is that the right way to go now? He sold out 2.5 million of his men in the field. Is that the right guy for "Commander in Chief"? I now see why so many Vets are terrified to see Kerry become President.
At the end of the day, it all adds up to higher gold prices. The days of $280 gold are as far behind as the days of a new car at $10,000, or a gallon of gas at a buck. So I ask you, "Are you ready for the uncertainties in your financial future?"
Gold will do it's job of asset protection, no matter who is elected President in November.
IS A TERRORIST ARMY MASSING IN THE US? -Alan Caruba
August 30, 2004
Is there is an invisible army of terrorists gathering in America today? The mainstream media and the Bush administration do not want to talk about it.
In July, Defense Watch reported that, in Arizona, an area called the Naco Strip has become a primary route of illegal entry by "significant numbers of Arab-speaking males." It took a small town weekly newspaper, the Tombstone Tumbleweed, to reveal that, "males of possible Syrian and Iranian descent have been detained in the past few weeks." Since October 1, 2003, 5,510 illegal aliens designated "Other Than Mexican" (OTM) have been apprehended while crossing the Arizona terrain. These OTM’s are not here to pick vegetables, mow lawns, pluck chickens, or wash cars.
Just do the math. If only five Muslim terrorists crossed the border every day for a year that would add up to 1,825 people ready to do the bidding of Osama bin Laden. If this has been going on for just the years since 9-11, that’s an army of 5,475. Then, too, there are an estimated 2.9 million Muslims in America. Extremists, worldwide, are estimated to be about ten percent of the overall population. Applied to the US, that represents a potential 290,000 American Muslims sympathetic to the Islamist cause. No matter how you slice and dice the numbers, it suggests that a substantial threat exists and is exacerbated by the failure to stop terrorists at our borders.
They constitute a virtual army of terrorists who, if not apprehended, could create a day of havoc from coast to coast when al Qaeda gives the signal. When that day comes, remember that you read about it here first.
Or, as some argue, there’s no proof that any al Qaeda operatives have crossed the border. If, however, any were captured, normal counter-terrorism procedures would be to deny this and seek to extract information from those in custody. The 9-11 operatives were here thanks to sloppy immigration procedures and, in the case of illegal aliens, the estimates are that eight to twelve million live among us. That is a huge margin for error.
The topic the Bush administration wants to stay away from until after November 2, Election Day is immigration. Some have called the Bush administration immigration policies "schizophrenic", but they are not. They are globalist, i.e., the views of someone for whom national borders should be regarded as outmoded while we all join hands in one big, global neighborhood.
One can understand the "schizophrenic" label, given the hue and cry about Bush’s so-called unilateralism and willingness "to go it alone", but this is the same administration that supports a variety of policies that are globalist, most of which come straight out of the United Nations. The way civics is taught in our schools today is designed to create generations of globalists for whom our national sovereignty and the Bill of Rights are just a bunch of 18th century "ideas."
There are a number of problems with this see-no-evil immigration policy. On August 10, Jerry Seper of the Washington Times, reported that, under President Bush’s guest-worker program, "Millions of illegal aliens in the United States would be free from arrest and deportation, have access to tax-deferred savings accounts and Social Security credits, and get unrestricted travel to and from their home countries." This constitutes a massive dollar transfer to Mexico.
Homeland Security Undersecretary, Asa Hutchinson, responsible for the nation’s borders and transportation security, has apparently lost his senses. In a recently reported response to questions from the Senate Judiciary Committee, Hutchinson supported the Bush immigration policies while acknowledging that the "incentives" being offered illegal aliens are generous to a fault. The National Border Patrol Council that represents 10,000 of the non-supervisory agents called the guest-worker plan a "slap in the face to anyone who has ever tried to enforce the immigration laws of the United States."
In January 2004, the Mexican government acknowledged that the number of their people entering the US illegally had increased 66% from 1990 to 2002. Naturally, Mexico’s president, Vicente Fox, wants Bush to grant de facto amnesty to an estimated eight to eleven million illegal aliens already working in the United States, the majority of whom are Mexican. Amnesty and any other program of this nature is simply a reward for breaking the laws of the United States of America. There are even some voices suggesting they should be given the right to vote!
One little discussed cost of the open door policy being pursued by the Bush administration is the increase in the cost of law enforcement where illegal aliens gather in numbers. Right now, according to Seper, "About 80,000 illegal criminal aliens, including convicted murders, rapists, drug dealers, and child molesters who served prison time and were releases, are loose on the streets of America, hiding from federal immigration authorities."
They don’t have to hide that hard. According the figures for 2002 from the former Immigration and Naturalization Service and from US Immigration and Customs Enforcement, more than 375,000 known illegal aliens have been ordered deported, but have disappeared pending immigration hearings. Lee Boyd Malvo, the sniper who terrorized the Washington, DC area, was one of them.
Recently, Brazil agreed to step up the policing of the Triple Border Area with Paraguay and Argentina. According to a Washington Times editorial, "It has long been identified as a fund-raising, training and procurement haven for diverse terrorist groups, including al Qaeda and Hezbollah." The ease with which terrorists could be infiltrated into the US from these South American strongholds cannot be underestimated.
When the facts are examined, there are few good reasons to permit the massive daily influx of Mexicans and other illegal aliens, but there is one very good reason to shut it down completely.
Alan Caruba writes "Warning Signs", a weekly commentary posted on the website of The National Anxiety Center.
Why Zell Miller loathes Democrats -Michael Crowley, Slate
Friday, Aug. 27, 2004
A main theme of George Bush's re-election campaign is the notion that it's Democrats, and not Bush himself, who are responsible for the bitter partisanship in America today. Bush, after all, pledged in 2000 to be "a uniter, not a divider." So it's a little awkward for him that the United States is now about as united as an English soccer stadium. Republicans say their party occupies the mainstream, common-sense political center. The real problem, they argue, is that the Democratic Party has been driven left by monomaniacal special interest groups and the wild-eyed likes of Michael Moore, George Soros, and Whoopi Goldberg. Their favorite piece of evidence? Zell Miller.
Miller is a silver-haired Democratic senator from Georgia who has dedicated the twilight of his long career to excoriating his own party. The 72-year-old Miller has become such a heretic, in fact, that he will deliver the keynote address at next week's Republican convention in New York City. It's a strange twist of history, given that Miller delivered the keynote address on behalf of Bill Clinton in 1992 (also at Madison Square Garden, as it happens).
But the Miller of old is long gone. Nowadays Miller sounds like some kind of right-wing beat poet. Of Democratic values he says: "If this is a national party, sushi is our national dish. If this is a national party, surfboarding has become our national pastime." Of John Kerry: "You can't make a chicken swim, and you can't make John Kerry anything but an out-of-touch ultraliberal from Taxachussetts." National Democrats are "being cannibalized, eaten alive by the special-interest groups with their single-issue constituents who care about their own narrow agenda."
[ED. NOTE: I caught Zell on FOX News this weekend and he brings a powerful message to the GOP Convention this year (as he did in 1992 for Bill Clinton) ... the message is simple; Zell has not abandoned the Democratic party, they have abandoned him! My moving the country farther and farther to the left, as a conservative Democrat, Zell has no choice but to support Bush ... he said.]
Never before has the world's leading economy been saddled with such a severe shortfall of saving. Ironically, America has not had to pay a price for its extraordinary profligacy -- at least not yet. The US has borrowed freely from abroad and converted asset-based saving into newfound purchasing power. In my view, this cannot continue. There's nothing sustainable about the growth dynamic of an increasingly saving-short US economy.
The numbers speak for themselves. Driven by a veritable collapse in personal saving, in conjunction with a dramatic deterioration in the federal government's budget position, America's gross national saving rate -- the combined saving of households, businesses, and the government sector -- fell to an all-time low of 12.8% of GNP in early 2003. Nor has it recovered much since, rebounding to only 13.8% in early 2004. Stripping out the depreciation of worn-out capital in order to get a cleaner read on the domestic saving available to fund net growth in productive capacity, America's net national saving rate plunged to a record low of just 0.4% in early 2003. While there has since been a modest rebound to 2.0% in early 2004, there can be no mistaking the sharp break from historical trends; by comparison, the US net national saving rate averaged 5.3% in the 1980s and 1990s and 9.6% in the 1960s and 1970s.
In a world where saving must always equal investment, America's saving shortfall has profound implications. Lacking in domestic saving, the US had had to import surplus saving from abroad in order to keep its economy growing. And the only way it can attract such capital inflows from abroad is to run massive current account and trade deficits. Consequently, it is no coincidence that America's current account deficit hit 5.1% of GDP in early 2004 -- it's a direct outgrowth of a severe shortfall of domestic saving. Nor is this a trivial consideration for the rest of the world. By our reckoning, America's $531 billion current account deficit in 2003 absorbed a record 79% of the world's total surplus saving -- well in excess of the 68% global saving absorption over the 1985-87 period, when the US last had a current account funding problem. (Note: Surplus saving is defined, in this instance, as the sum of current-account surpluses around the world plus the aggregate discrepancy between global surpluses and deficits.) America's outsize claim on the rest of the world's pool of surplus saving has, in effect, become the sustenance of the global economy's US-centric growth dynamic.
The key issue for the economy and financial markets is sustainability -- namely, whether a saving-short growth dynamic can persist indefinitely.
Iraq's Freedom Over Tyranny -Ayad Allawai, WSJ
The Wall Street Journal
August 25, 2004
It has been just under two months since the handover of sovereignty to the Iraqi Interim Government, and despite significant challenges, much progress has in fact been made toward setting our country on the right course.
Iraq's success as a free and democratic nation will rest upon three important foundations -- first and foremost the rule of law; second, a prosperous market-based economy; and finally but vitally, an inclusive and collaborative political system. To this end, our role as the Interim Government is to establish the conditions for these foundations to take root in the new Iraq.
Establishing security and the rule of law. Terrorist and senseless "insurgent" attacks have dominated the headlines, but many Iraqis view the explosion of crime following the collapse of state institutions after the war as the larger concern.
The postwar wholesale disbanding of the security forces has seen a rise in murder, kidnapping, armed robbery and drug trafficking, often in a vicious cycle that funds violence. In addition to this, there are the foreign terrorist groups determined to cause havoc and thwart Iraq's chances of success.
To answer these threats to peace and security, we have begun in earnest the bolstering of the police force in numbers and training, established the National Guard, created a responsible intelligence service, and designated a rapid-deployment-force division with counterterrorism capability. However, the process is still in its infancy and therefore clearly fragile, and our forces are not adequately armed and are too small to face the challenges alone. The task and ability of recalling part of the Iraqi army remains a very important issue.
On the legal side, we have cemented the independence of the judicial system and the Supreme Court, while empowering the Public Integrity Commission and related anticorruption initiatives. In addition, a more limited form of capital punishment was reinstituted with widespread approval of Iraqis, as a necessary deterrent against violent crime and murder in the current climate.
The economic front.
The Government has made strides to centralize strategy and accelerate coordination through the formation of action councils with a specific focus, including the Supreme Economic Council, the Supreme Council for Oil Policy, and the Council for Reconstruction. The Iraqi National Oil Company (INOC) will also shortly be re-established to professionally manage and boost current oil production, in a manner that depoliticizes oil- sector operations.
Additionally, preparation and evaluation of the commission responsible for privatizations and the transition to the market economy has been undertaken. Simultaneously, we are conducting urgent initiatives for the reduction of unemployment and reconstruction of the Al-Thawra slum areas of Baghdad.
Success on the economic side will greatly aid security and stability, as joblessness and underemployment are major causes of frustration and crime in postwar Iraq. No one should doubt the inexorable linkage between security and general economic well-being. As such we call upon all our friends and allies with a long-term concern for Iraq's success to help us with two crucial initiatives: forgiveness of debt and accelerating disbursement of reconstruction donor funds.
Thanks to the horrendous war machine built up by the ousted regime, Iraq's current level of national debt is the highest in the world as a percentage of GDP or exports, and is simply unsustainable. The burden of debt is colossal and simply unfair for ordinary Iraqis to be expected to bear. The vast majority of this debt burden must be forgiven so that future generations of Iraqis are not made to suffer for the wrongs of the Saddam regime. In addition, despite reconstruction commitments of $18 billion from the United States and $13 billion from other countries, only a very small fraction of these funds have actually been received and disbursed. This needs to be rapidly accelerated so that Iraqi citizens and companies can see the tangible physical progress of reconstruction and the restoration of basic services as well as, very importantly, job creation.
The political arena and nation-building.
Our policy here is simple and straightforward: Any and all Iraqis are welcome to participate in the political process, providing they renounce violence and are innocent of any crimes.
To this end, we have passed the Amnesty Law and are actively engaged in reconciliation with those left alienated after the invasion, while establishing the National Council of representatives chosen at a local level. These will serve as key steps toward free and fair elections next year, to be supervised by an independent Electoral Commission. This will remain one of our top priorities as Interim Government, and throughout this process we are witnessing Iraqis at all levels engaging in constructive debate and compromise -- the building-blocks of any truly democratic system.
We will not, however, accept private militias or armed gangs using violence to set the political agenda by force -- there can be no free and democratic Iraq without a respect for the law and the rights of fellow citizens.
In order to strengthen Iraq's regional position and enlist the support of our Arab brethren, I recently led a high-level Iraqi government delegation on a tour of the region. This has already reaped tangible rewards, including the normalization of diplomatic ties, assistance with police and army training, donations of vital equipment such as armed personnel carriers, patrol boats and reconnaissance aircraft, and pledges of economic cooperation.
The journey ahead toward peace and prosperity for Iraq may be long and arduous, but as with all worthwhile journeys, it begins with a few determined steps, and is best undertaken collectively and in the company of others -- in this case the whole Iraqi nation and our friends in the world community. As Iraq is the birthplace of civilization -- and a nation at the heart of the vital region of the Middle East -- its success will be important to all countries of the world: The achievement of a free and prosperous Iraq will be a global victory for freedom over tyranny, and for moderation over extremism. With the hard work of all fellow Iraqis, and the continued support of the international community, we will make this a reality.
- Mr. Allawi is the interim prime minister of Iraq.
The GOP and the GDP - Wash. Times
August 28, 2004
On the eve of the Republican National Convention, the Commerce Department ratcheted down the already-disappointing economic growth rate for the second quarter. The annualized growth rate for the April-June period was lowered on Friday from the previously reported 3 percent to 2.8 percent. The change was largely due to huge adjustments in the foreign-trade statistics.
The trade report for June, which was issued after the government released its advanced estimate of the second-quarter growth rate for GDP, revealed that the trade deficit soared by nearly 20 percent in a single month to a record level of $55.8 billion. Previous monthly trade-deficit records had already been set in January, February, March and April. June's massive trade deficit represents about 5.75 percent of GDP, a level that is almost certainly not sustainable.
As a result of June's trade figures, the growth rate of second-quarter exports was revised significantly downward from 13.2 percent to 6.1 percent. Meanwhile, the growth rate of imports, in part reflecting rising oil prices, was revised upward from 8.7 percent to 14.1 percent. The net effect of the trade revisions was to shave nearly 1.4 percentage points from the quarter's overall growth rate. That compared to the initial estimate of a drag of less than one-tenth of a percentage point resulting from the deteriorating trade position.
Interestingly, the effects of the huge revisions in the foreign-trade sector overwhelmed a couple of welcome positive revisions. The growth rate of personal consumption expenditures, which account for 70 percent of GDP, was revised upward from 1 percent to 1.6 percent. The increase in business investment, which was initially reported to be nearly 9 percent, was bumped up to more than 12 percent. After declining for nine consecutive quarters following the collapse of the Clinton-era telecom bubble, business investment has now risen at double-digit annual rates during four of the last five quarters.
The U.S. slowdown arrives just as Japan's annual growth rate also sharply decelerated to 1.7 percent in the second quarter following 6 percent growth rates achieved during the previous two quarters. Meanwhile, the eurozone, where the German and Italian economies are performing badly, grew by only 2.3 percent during the first half of the year. And the soaring Chinese economy appears headed for a noticeable deceleration, which would complicate the expansions of its neighbors, whose exports to China have been the driving force. With oil prices likely to remain well above the prices that prevailed during the early stage of the U.S. economic recovery, when they averaged about $20 per barrel compared to about $45 today, the world economy could be entering a dicey period.
The economic slowdown confirmed in Friday's report will not be welcomed at the Republican convention. The president needs some good economic news. At 8:30 a.m. next Friday, less than 10 hours after President Bush will accept the nomination for a second term, the Labor Department will be issuing a crucial economic report, which will detail the August employment situation. After lousy reports for June and July, a turnaround in the employment situation would be most welcome at the White House.
ABOUT THE EDITOR
David M. Bradshaw is Editor of Real Money Perspectives, publisher of Rediscovering Gold in the 21st Century: The Complete Guide to the Next Gold Rush (7/01) and has been an economic commentator since 1987, when he produced the World Economic Perspectives radio show. In 1997, he produced a one-hour TV documentary, "Preparing Wisely for the Next Millennium," which was distributed free of charge at Blockbuster Video nationally. In 1999, he produced a one-hour radio special, "The Big Picture: The Shape of Things to Come" discussing geopolitical, economic and spiritual trends in the 21st Century. MORE ... NOTE: Youngest daughter Braida Zoe (6 months) is learning the importance of having a crash helmet -- a valuable habit for us all to remember... just in case!
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