"Taipan Daily" reports that stock market volatility - violent short-term price swings - is higher in 2008 than at any time in the past 70 years. Volatility reflects uncertainty, so it seems the investing public views the world's economic future as murkier now than at any time since 1938. That's saying a lot, because 1939 was the year Hitler kicked off World War Two.
The big unknown is probably the U.S. political campaign. Both Democrat presidential candidates, Clinton and Obama, are big government, tax-and-spend "liberals," and the record of their opponent, so-called Republican John McCain, hardly inspires confidence. None of them can be trusted not to wreak the economy. McCain has said he will not raise taxes, but he doesn't have to. Just letting President Bush's 2002 tax cuts expire would drain the average American family's pocket by $2,000 per year. A reduction of private spending on that scale has every prospect of flushing America's consumer sector down the toilet. Consumers power our economy, and our economy powers the world.
Latest poll results show McCain beating Clinton or Obama by 5 to 7 percentage points, outside the margin of error. If McCain was as smart as he thinks he is, he would spark a market recovery by laying out a serious economic stimulus program and then take credit when it works.
Suggestions: reduce high-end tax brackets. Cut income taxes on dividends and capital gains. Give tax credits, not just deductions, for research and development expenses, capacity expansion, and new hires. Cut federal spending other than defense by 2-1/5% per year for the next four years - 10% in his first term. Encourage entry-level jobs by making minimum wages 150% deductible. Address health care costs by passing tort reform to get the trial lawyers off our backs, and establishing new medical schools to increase the supply of doctors. And then THE BIG ONE: Abolish public employee and teachers unions.
Can anyone doubt that even these off-the-cuff actions would change the outlook over night? Knowing that they won't happen is exactly why the stock market will continue to be volatile.
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Carl Jung's daughter once brought a 15-year old friend to meet her eminent parent. "Herr Professor," said the friend, "Since you understand so much, please tell me the shortest path to life's true goal."
Jung's daughter remembered that the old man smiled and answered without hesitation: "Take the detour."
For the record, abolishing public-employee unions would not require repealing any Act of Congress, or overturning any judicial precedent.
These absurdly counter-productive entities originated as JFK's political payoff to George Meany's AFL-CIO in January 1961, in an Executive Order issued just days after Kennedy's inauguration. In ridding himself of the Air Traffic Controllers a generation later, Reagan should have conjointly rescinded JFK's diktat, but apparently was unaware he had the option.
No doubt the ineffable Sweeney's squeaks would rise to very heaven, but hey: Big Unionism defaults to zero in any (even nominal) Republican context. By pen-stroke, McCain could score a major coup, reversing decades of one of the most conspicuously debilitating initiatives in all U.S. history.
Big John of course would never consider "alienating Labor." For this among other reasons, we will never endorse him with our vote.
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