Happy 2010 (?)

So it remains to be seen whether 2010 will be better than 2009. This will depend a lot on how you define "better". But let's start with our economic stats:

Item                Jan07  4Oct08 31Dec08 31Jul09  31Dec09
Unemployment        4.5%    6.1%   6.7%    9.5%     10.0%
CPI (with energy)   2.0%    5.5%   -1.7%   0.7%     1.8%
Gasoline cost/gal.  $2.25   $3.60  $1.66   $2.60    $2.61
Dow Jones           12,500  10,325 8,776   9,171    10,365
S&P500              1,450   1,099  903     987      1,110
Nasdaq              2,500   1,947  1,577   1,978    1,858

The only bright spot is that the equity markets are back to where they were in October 2008. If you had the stomach for it, and the cash on hand, you could have done quite will from the lows last March with many US markets having their best run since the 30s. You'd have done even better if you put your money in the Hong Kong Hang Seng index, which is up over 80% this year (and has no currency risk vs. the USD by the way). You'd have done even better if you held on to Credit Suisse stock (a former employer of mine), which is up over 100%!

But that doesn't help if you are unemployed. Jobless recovery anyone? Some 21.2M Americans were out of work at some point during 2009. There are also indications that a lot of job seekers simply gave up and are not in the statistics.

So what happened to all that stimulus, cash for clunkers, etc.? TARP arguably had a positive impact on liquidity that is essential for the banking system. Keynesian stimulus, however, did what it always does, which is hardly anything. First of all, it was badly executed: most of the money is not yet in the economy! Second, the initiatives that did proceed created nothing sustainable. Cash for clunkers was a blip. Bailouts of GM have done nothing except line union wallets and generate more requests for money (another $3.9B just this week).

What should have been done? How about immediate tax breaks or deferrals to get the money directly into the hands of consumers, who will first pay down debt, and then start shopping a bit. I'd even go so far as to suggest that activity would generate new tax revenue - at least more than is being generated now!

So what hope for 2010? The economy will no doubt pick up a bit, but I don't see anyone suggesting it will roar back. If anything there is a bit of a bubble in the stock market. Certainly trends towards higher taxes don't help, which brings me to the health care debacle.

How can anyone believe that the health care legislation in congress now will help anything? By all accounts (and it is hard to know exactly what is in these bills) ObamaCare will reduce quality, increase costs, and most certainly raise taxes. How does this help anyone? It drives the cynical view that it isn't about health care, but rather increasing government power over individual choice. For that reason it must be stopped.

At least ClimateGate, defined as the willful falsification of climate data and coordinated suppression of contradictory research by "scientists" with a political agenda in favor of anthropogenic climate change, has slowed down the rush to crush the global economy with bad economics. Even if we agree that climate is changing, the best way to deal with it is not massive wealth transfers controlled by bureaucrats at trans-national agencies. The only tried, true and tested method of adapting to change on a massive scale is the power of free markets, free trade supported by property rights and rule of law. If we had more of that in Zimbabwe, Venezuela, North Korea, most of the rest of the mid-east and Africa - there wouldn't be any problem. China and India get this, as evidenced by their actions at Copenhagen.

By the way, China's economy is growing at about 8%. The stimulus implemented there actually seems to work, but most of the activity is driven by trade and entrepreneurship. Ditto India!

And how about Obama's performance? Well certainly no better than my last post. Most would say worse (just look at the polls). And why not. Obama is the least qualified US president of my lifetime. Even Carter had been a state governor and had military experience. It's not even clear that Obama is that smart. After all, has anyone seen his college grades? Are his books any better than say Palin's (and any less ghostwritten)? B+ isn't even close. D- is more like it, even by the criteria set by the left wing of his own party (Gitmo anyone?) - as for the things that matter to most Americans like jobs, security, and how about choice in health care - well again the polls speak for themselves.

As for foreign policy - the US is now officially a laughing stock. Nobody takes the US seriously. Obama is not seen as credible nor consistent. This leads to perceptions of weakness. At best Obama can be ignored. Worse, the US can be sidelined from the discussion. Is there really anything more to say other than where is Hillary?

At least Iraq is a win! Bummer Afghanistan though. At least the dithering on that decision is over.

So what's this all mean for 2010? Probably not a Republican sweep in Congress. . .but it doesn't create cause for optimism. Best I can wish everyone is that personally things go well and that the undy-bombers are not on your flight. So happy 2010, such as you can!