“Politics and prejudice keep pushing their way into things.”
I’m often inspired by doers in this world. Instead of pandering to the political wind, they simply lead by example. Their respect is earned each and every day, not centrally allocated.
The aforementioned quote comes from a Palestinian doctor who was educated in Cairo and at Harvard. He practiced in both Saudi Arabia and Israel, and now lives in Canada. His story is called “I Shall Not Hate”, and I highly recommend reading it if you’re looking for cultural context in analyzing the Middle East.
“The last decade has been a particularly disappointing period in this grinding conflict that keeps us apart. Our leaders bicker like children, breaking promises, behaving like bullies, keeping the kettle of trouble boiling. The people I talk to – patients, doctors, neighbors in Gaza, friends in Israel – are not like our leaders.” (I Shall Not Hate, page 121)
Until he mentions Gaza, you’d think he was writing about the 112th US Congress. But what is it about Iran or Illinois that keeps us from having a discussion about economic facts? Why are we wedded to Western Academic Dogmas gone bad? Why are we so partisan?
Unlike debating science and math (where there are actual answers to the questions), American economic opinions, strategies, and forecasts are heavily weighted to Politics and Prejudice – and massively underweight transparency, accountability, and trust.
Back to the Global Macro Grind…
I was looking for a way to bridge the gap between what Inflation Expectations are doing (last price) and what partisan politicians are saying about oil prices this morning. In a globally interconnected marketplace of colliding factors, to call this rip to $124/barrel in oil prices simply a function of “Iran” is as simple does – un-American and uninspiring.
- Oil is up +11.7% in the last month
- Oil is up +193.4% in the last 3 years
- Oil is up +503.3% in the last 10 years
This, of course, is what The Bernank calls The Deflation.
Iran is definitely a factor. But it’s certainly not the only factor. Having a dual mandate (monetary and fiscal policy) to debauch the Dollar puts the world’s reserve currency in a position where we are all subject to more volatility associated with “external shocks.”
If that’s not the case, why didn’t Oil go to $130 or $150 during the Reagan and/or Clinton years? There were plenty of Middle Eastern, Russian, and US supply scares over the course of the 1980s and 1990s, weren’t there?
Ah, but there was also a global expectation for Strong Dollar Policies from both the Reagan and Clinton Administrations:
- Monetarily: Reagan was Strong Dollar (Volcker raising interest rates and the rate of return on American Savings, again, and again)
- Fiscally: Clinton was Strong Dollar (Balanced Budget Act 1997 and the only President since Truman to run 3 consecutive surpluses)
Got Politics and Prejudice?
Oh there is plenty folks. But the beauty of being Canadian this morning is not only that we have Steven Harper instead of Santorum, but we can sit back and not be Republican or Democrat about this. Economic policy context here is critical, because when it comes to the last decade of Bush/Obama, both of these Presidents are much more like Nixon/Carter than anything else – Keynesians.
Abuelaish says one thing they haven’t tried in the Middle East is empowering women to make decisions. I like that, because the American men running economic policy couldn’t be worse. And by the way, the only major head of State to be Strong Currency (both fiscally and monetarily) in the last 40 years was Margaret Thatcher. If I was Mitt Romney, I’d be doing the required Hayekian reading on that, fast.
In other news:
- Japan – Former BOJ deputy chief Muto says the Japanese fiscal and monetary situation has reached a “trigger point”
- China – Premier Wen is whispering about cutting China’s GDP run rate below 8% at the National People’s Congress (March 5th)
- Europe – Economic Stagflation (rising inflation, slowing growth) is back in the headlines instead of Greece
Maybe we should blame Iran (or Canada?) for Big Government Policies to inflate slowing global growth again too?
Macro Math on what those big 3 represent as a % of total Global GDP:
- Japan = 9.3%
- China = 11.1%
- European Union = 28.1%
So, that’s only 48.4% of the world’s economic output. I guess it’s a really good thing that Bernanke sees no inflation slowing real (inflation adjusted) economic growth in America. Sadly, Politics and Prejudice have made us willfully blind.
My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar Index, and the SP500 are now $1, $119.45-123.86, $79.01-79.47, and 1, respectively.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer