The Economy - 2
2/16/2003

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The Secular Bear Market of 2000 to 2014 Is Looking More Plausible
    Last April, I began a series of "editorials" pointing out that, starting in 1998, the U. S. economy might be ripe for a 16-or-so-year secular bear market. At that time, there wasn't a lot of evidence pointing in that direction other than historical patterns and the fact that the U. S. stock market had become more overpriced in the "roaring 90's" than at any point in its past.
    By now, a long-term bear market roller-coaster looks more plausible.
    The return to federal deficit spending, and the combination of stimulative Federal Reserve (monetary) policy and stimulative federal spending and tax cuts (fiscal) policy seem to me to make all-but-inevitable a resumption of inflation, and of stock market declines.
    I'm still hoping for a rebound in the stock market as we head into 2004, although that's from a done deal. Furthermore, we'll be lucky to get back where we were last April with 10,200 on the Dow.
    Bear in mind that after correcting for inflation, a Dow index of 10,200 in late 2004 would be equivalent to a Dow crest of, perhaps, 9,200 in early 2000.
    At least, the Dow shows no signs of "falling out of bed" to levels of 4,000 or 6,000.

War with Iraq
    Last night, I imagined some reasons why President Bush might want to go to war with Iraq now:

Why (I Think) President Bush Wants to Go to War Now

    The last bullet suggests that perhaps Western oil companies stand to gain if we "liberate" Iraq's oil. But today, I thought about who owns Iraq's oil now... Saddam Hussein. He seems to be sharing wealth with his populace, which is certainly a good thing. But how bad would it be if someone else controlled that oil?
    Other arguments in favor of invading Iraq might center upon the danger that Saddam Hussein, empowered by his oil money, is dead-set on getting even with his arch-enemy, the United States. 
    The Bush administration may be quite right in seeking to invade Iraq now.
    The problem with invading Iraq is that the U. S. hasn't yet "made the sale" to the rest of the world. Granted, the United States may be able to invade and subdue Iraq in defiance of most other nations of the world. Hitler and Napoleon were able to subdue most of Europe... for a while. But the popular resistance to such a move has become a cause celebré.
    It seems to me that our administration's remarks and practices might be catching up with us, along with the perception that the United States thinks that it's entitled to run the world.
    The ideal solution would be, of course, a United Nations resolution to enforce U. N. decrees, but that may not happen. (I realize that trying to get 20 people to agree that the sun will come up in the east tomorrow morning isn't easy.)

 

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