Tower Private Advisors
- Inflation protection, II
The last time the folks from Williams Inference Service (click here for more information) were in they featured a folder titled, “Purple: Magical Thinking.” That file reminded us that they had considered the Kubler-Ross model of the five stages of grief a fitting analog for what our culture had been and was going through, with respect to the financial crisis. They suggested the move was on to acceptance, the last stage (model cycle: Denial, Anger, Bargaining, Depression and Acceptance).
At that time they had also noted the rise of the color purple, and they said, “purple is associated with magical thinking. It’s similar to a teenager’s world where the hard realities of adult life have not set in.” Here is how they see purple:
Where are we today?
Despite grim economic news throughout the year [this was Q4 2010 material], the stock market is up, corporations are sitting on huge hoards of cash, mortgage foreclosures stalled in the courts, and the consumer is beginning to loosen the purse strings.
It is our belief that all this is magical thinking. Our local governments are mired in debt, wages are stalled, unemployment remains high, and public officials have yet to come to grips with reality. The consumer as well as government have not reached acceptance.
So, when I received the latest of issue of Fort Wayne Living; A Lifestyle Magazine from the publisher of Business People Magazine (click here for more information) I couldn’t help but be struck by the cover.
Now, the Wall Street Journal’s Weekend Edition last week said orange is the latest color, leaving Fort Wayne, again behind the curve–or the coasts–as usual, but that’s another subject.
I like magazine covers for their use as contrary indicators. You can find some dandies by perusing the Cover Stories category on the blog. This one, though, is great for its creativity. It’s intended to highlight the problems facing the U.S., what with its divided government. Check out those names:
Below the image you can see a couple of paragraphs from the actual article. Click on the picture to see a huge version of it, and click on the link with the paragraphs to jump to the full story.
To the Republicans who now control the House of Representatives, the main problem is the deficit and the cumulative burden of debt it brings with it. The deficit will of course narrow as the economy recovers, but because of the insatiable demands for health care of America’s now-creaky and retiring baby-boomers, unless taxes are hiked it will not dip below 4% of GDP, and it will start to rise again after 2015. That is not sustainable. Not only will borrowing on this scale tend to crowd out more productive investment: the interest on it is already eating up 10% of government revenue, a figure that will rise as interest rates go up. Hence the Republican demand for swift and deep cuts. Get spending down, shift government off the backs of the people, and jobs will return, as the invisible hand works its magic.
Mr Obama sees things the opposite way round. His state-of-the-union speech was an attempt to place jobs—which, according to pollsters, most Americans say are their priority—at the forefront of the debate, and he put the deficit at the end of a long list of concerns. After two years in which he concentrated more than was wise on getting health reform passed, refocusing on jobs makes some sense. It is obviously true that America’s infrastructure, both human and physical, is sub-par (its children’s maths skills were recently placed 25th out of 34 in a ranking of OECD countries). And it is hard to reduce the deficit while the country has a large group of persistently un- or underemployed people. Full article here.