Monday, June 29, 2015

THE PRAIRIE EDITOR: Confluence?

A dictionary definition of “confluence” is “the flowing
together of two or more streams.”

There are, of course, many kinds of stream, including
the literal kind, rivers. Over the earth many rivers, large
and small, converge and flow into each other. These are
obvious confluences.

But there are also less literal streams in our experience,
including political, economic and cultural streams which
also, from time to time, converge or flow into each other,
often with extraordinary consequences.

I would like to call the reader’s attention to one set of
streams, economic streams to be precise, which might, or
might not, now be converging. If they are not converging,
there is not much to say about them other than to note their
particular effects. Yet if they are forming a confluence,
I suggest it might be useful to pay special attention to
them and to any possible unusual consequences their
coinciding might bring.

One of these streams is a very large “river,” that is, the
Chinese economy. With more than a billion persons
composing it, and employing a curious combination of
so-called capitalist free market strategies with ultimately
non-democratic totalitarian controls, the Chinese economy
is perhaps the hottest financial story of the past decade.
Chinese millionaires and billionaires have taken their
places not only domestically in China, but as players on the
international market stage, purchasing foreign stocks, debt,
real estate, art works and other properties. The Chinese
government has taken a serious economic interest in
underdeveloped nations in Africa, South America and Asia.
Accompanying these activities, there has been an economic
“boom” in China. Some say this is an economic “bubble” and
not sustainable, primarily because so much of it, free market
strategies notwithstanding, is controlled by the Chinese
government and its bureaucrats. In any event, the Chinese
stock market has just endured a notable downward slide, at
least in the short term.

A second economic stream of note is the economy of the
European Union (EU) and the state of its common currency,
the euro. As with the economies of the United States and
China, the EU is one of the world’s largest economic forces.
In recent years and months, the EU has made its way through
a chronic series of crises, most of which have been provoked
by the increasing debt and mismanagement of some of its
member states. The latest example is Greece which, as like so
many smaller European economies, has seen unbridled growth
of its debt after decades of creating unsupportable public
expenditures and entitlements (and shortage of revenues to
pay for them). While larger and more stable European Union
members have resisted underwriting this growing debt, and
insisted on government-imposed measures of austerity, the
Greek people have resisted the cut-backs, making the austerity
programs politically impossible. After on-again-off-again
bailouts, the Greek government has closed the Greek banks
and called for a plebiscite. This might not only result in the exit
of Greece from the EU, but precipitate unstoppable larger
crises as the Spanish, Portuguese, Italian and French
economies, also heavily laden with debt, flounder.

A third, and smaller stream, is the bonded debt of the U.S.
territory of Puerto Rico. It amounts to about $73 billion, not
a small amount in itself, but tiny compared to the whole U.S.
economy. The news is that Puerto Rico might not be able to
pay for its public bonds which are not only free from federal
taxes, but state and local taxes as well.  As such, they have not
only been attractive to large investors and many high-earning
middle class investors, but other municipal bond funds as well.
In fact, 70% of all such funds have some investment in Puerto
Rican bonds. The reason for this level of investment is that
Puerto Rican bonds are rated “below” junk level, and since
they have so high a risk, their yield (now above 9%) is so high.
With national interest rates otherwise so low, the high (and
tax-free) rates are especially attractive to investors and funds
which want to improve their yields. No state or territory has
recently defaulted on its bonds. (After the panic of 1837, some
states were unable to pay for their bonds when called in, but
eventually they were paid off after several years.) Recently,
a few U.S. cities have declared bankruptcy, and several others
have admitted they are having difficulty in meeting their
obligations. The governor of Puerto Rico has just warned that
the territory is at the edge of default. If this Puerto Rican bond
crises is not resolved, what effect would this have on the whole
bond market and the U.S. economy?

These three streams are located in the three largest economies
on earth. Is there a chance they could converge into each other?
And what of other financial streams (such as those in Brazil and
other large economies)?

Finally, the Bank of International Settlements (BIS), the central
bank of the world’s individual central banks, has just issued a
report that the world’s banking system has kept interest rates
so low for so long that it has no further ability to deal with the
world’s next economic crisis when it comes. The report was
critical of the banking strategy of prolonged low interest rates,
some of them less than zero, which has fueled short-term
bubble booms followed by busts. In response to these financial
bubble bursts, central banks have lowered interest rates even
further, but as the BIS report suggests, banks now cannot go
any lower to try to revive economic downturns.

All free markets depend on public confidence. If the major
global markets are shaken not only by the crisis in each of the
economic streams I have mentioned, but the loss of confidence
is magnified from a confluence of debt crises in world markets,
what are the consequences?

I am making no predictions, dire or otherwise, but  I do think
current economic events now warrant especially careful and
prudent vigilance.

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Copyright (c) 2015 by Barry Casselman. All rights reserved.

Friday, June 26, 2015

THE PRAIRIE EDITOR: Not What It Seems

One of the important insights which the West receives
from Eastern religion and philosophy is that everything
is not always what it seems.

The U.S. supreme court has now handed down, by a 6-3
vote, a ruling that the exchanges feature of the
Affordable Care Act (also known as Obamacare) is
constitutional. This is the second ruling on this
legislation which gives it constitutional legitimacy in the
opinion of the majority of the highest court . There will
not likely be any more Obamacare rulings by this court.

As any regular reader of this column knows, I have been
from the beginning opposed to the Obamacare legislation.
This was entirely an opposition to the structure of it,
which I knew to be unsustainable, and to the manner it was
passed by the U.S. congress, a manner which did not allow
virtually any debate, and which was not even read in full
by its supporters. I might add that my opposition on the
former point has been clearly demonstrated since it took
effect. Obamacare is not only failing badly economically,
it has failed to provide the “universal” health care insurance
that it promised. On the second objection, i.e., the manner
in which it was adopted, the voters of America have now
twice handed Republicans landslide victories in national
midterm elections, much of the energy for those landslides
provoked by widespread public opposition to Obamacare.

It might surprise my readers to learn that I am not upset by
the consequences of this supreme court ruling.

In terms of the legal reasoning for the majority opinion,
however, legal scholars would be right to point out that
Chief Justice John Roberts and his five colleagues literally
had to rewrite the language of the legislation to justify their
decision. It is not the first time in history that this court has
done this, nor will it be the last. History might not be kind to
Mr. Roberts for this aspect of the decision. Conservatives
will argue that this is an improper imposition of the court on
its role in the separation of powers.

However, the political consequences of the decision are perhaps
not what they seem. If the court had ruled the exchanges part
of Obamacare unconstitutional, the legislation would have
been, in effect, no longer operative. the result would have been
traumatic not only for those who would suddenly be without the
coverage they thought they had, but also for many Americans
who are sympathetic to the legislation. It almost certainly will
be a major issue in the 2016 elections, but unlike 2010 and 2014,
the momentum would have emotionally shifted dramatically to
the pro-Obamacare side and to those Democrats who support it.

The latest supreme court ruling, on the other hand, maintains
the momentum to the opposition to Obamacare, primarily for
the reason that the legislation and its implementation will now
continue to reveal its inherent flaws, economic unsustainability
and failure to fulfill its stated promise of universal coverage.

The celebrations now taking place in the White House, and by
those who created Obamacare, will therefore be short-lived.
The decision creates a huge opportunity for opponents to
come up with the one element they have lacked, i.e., the public
perception of an alternative to Obamacare, one based on a free
market sustainability that is both workable and fair. Such ideas
and proposals already exist, but now the Republican aspirants
for the presidency in 2016 will have the opportunity through
their campaigns and the presidential debates to acquaint the
electorate with a conservative alternative.

Although I have consistently opposed Obamacare, I have also
consistently agreed that the present healthcare insurance
system has failed. The question is not whether or not there
should be healthcare insurance reform, but what should be the
structure of that reform.

The burden now shifts to conservative congressional/senate
candidates, and to Republican presidential contestants to
finish the job that Americans have clearly and consistently
wanted to happen since Obamacare was so improperly
passed and implemented --- namely, the repeal of the
Affordable Care Act, and its replacement with a better way to
provide Americans with healthcare coverage. Clearly, some
of the reforms of Obamacare should be preserved, e.g.,
insurance portability, but the continued disintegration and
unsustainabilty of Obamacare remains an open legislative
open sore which requires prompt and competent treatment by
the next administration.

Even “final” supreme court decisions are not always what
they seem.

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Copyright (c) 2015 by Barry Casselman. All rights reserved.



Tuesday, June 23, 2015

THE PRAIRIE EDITOR: Demo-Intensity

There is currently an overflow of statistical analysis being
unloosed about the upcoming presidential election. Claims
and presumptions are being made about which side (and
thus which nominee) has the advantage in 2016. I suggest
most of it is not yet very useful or predictive.

There can be little doubt that, based on the 2012 election,
and earlier ones, that more minority group voters favor a
Democrat for president, as do more women, while more men
favor Republicans. But only a few years ago, these trends
were quite different. By recent demographic standards,
several states --- including Florida, Ohio, Pennsylvania,
Wisconsin, Iowa, Colorado, Virginia, New Mexico and
Nevada ---are already in the Democratic column.

Furthermore, there are assumptions being made that there
are dramatic differences in these and several other states
in party turnout in presidential election years -- in contrast
to midterm election years.

There is no disputing the statistical facts of previous
elections, but I think it is a potentially a large and certainly
premature error to superimpose these statistics on an
election which has not yet taken place, especially an election
with no incumbent. This is not an abstract contention.
Current polls in the states mentioned above (which have a
total of more than 100 electoral votes) signal that the
current Democratic frontrunner, while slightly ahead of
most GOP opponents in these states, is far from a sure
winner in them --- all of which voted for Barack Obama
in 2012.

What happens if an Hispanic Republican is on the 2016 ticket?
Or a woman? What happens if an Hispanic Democrat is on
the 2016 ticket? What will be the consequences for turnout if,
as is almost certain, there is no black on either party’s ticket in
2016? President Obama will have served two terms by the
next election. What is the impact of the general (but not
exclusive) rule that American voters like to change parties
after two terms of one party in the White House. What about
the impact of innovations in voter ID and GOTV technology?
And what about the often very important impact of candidate
personality on the turnout in any presidential election?

I suggest that there is no reliable measure yet available for
the circumstances mentioned above. Smug presumptions using
numbers from the past, and stereotypes from the past, are not
facts.

The real environment of the 2016 election, I suggest further, is
not even visible now in the summer of 2015. What happens if
there is a recession? Or alternatively, what if the stock market
is at all-time highs and unemployment at new lows in November,
2016? What happens if there is an international crisis?

An election is made of actual votes. We have not yet held a single
primary or caucus. There have not even been any real presidential
debates. The demo-intensity of 2016 has not yet been determined.

Anything can yet happen in the next presidential election. Any
other presumption is neither science nor useful.

Be patient, the next election picture will become clearer in its
own good time.

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Copyright (c) 2015 by Barry Casselman. All rights reseerved.

Saturday, June 20, 2015

THE PRAIRIE EDITOR: Is Europe Breaking?

It should be no surprise to non-European observers that
the current economic and political crisis of the European
Union (EU) is so repetitive and prolonged. 

The EU, like the United Nations, came as an aftermath to
two brutal world wars, much of them fought on European
soil, and so costly in human suffering. There was an
understandable and praiseworthy impulse in the EU’s
creation, but its device was, alas, bureaucratic and abstract,
and it failed to take vitally into account at least a millennium
of very complicated peoples, languages, traditions, religions
and identities. It was, in short, to be imposed on the European
population by its political elites. Further, its initial and positive
design as an economic union was pushed by these political
elites to become much more, a political union, and to unite
politically much more rapidly than its subjects and their various
groups could tolerate and absorb.

On the positive side, most of Europe, including nations which
are formally part of the EU and those which are not, has become
more thoroughly democratic, especially after the end of the Cold
War and the Soviet domination of eastern Europe. Although
several European countries have adopted variations, in part, of
socialistic theories in some of their economic institutions,
free market capitalism prevails in important other parts of their
economies.

Fifty years of social welfarism, however, have taken a singular
toll throughout much of the EU and its continental neighbors,
and it is this toll, unequally distributed in the European countries
and among its populations which now drives the chronic instability
and crisis on the continent.

Interestingly, the leading nations and economies of the current
post-war period are very similar in their relationships that existed
before World Wars I and II. At the beginning of the 20th century,
Great Britain, Germany and France were the dominant powers of
Europe along with imperial Austro-Hungary and tsarist Russia.
The latter two no longer exist in their original configurations,
but today Great Britain, Germany and France are again the leading
members of the EU. Germany, the loser in the two world wars, is now
uncontestedly the strongest economy in Europe. The smaller nations
of Greece, Portugal, and Italy have problematic economies, and
remain as chronic sources of the EU crisis. Although Spain was not
a serious power in Europe after it lost most of its colonies, it did
emerge in the post-war period after the death of dictator Franco as
a major player in economic Europe. Today, however, Spain is beset
again by its own crises as it has lurched to the left.

The latest headlines are about Greece. This is not the first time this
Mediterranean nation has precipitated an EU crisis. It might, or
might not, be the last time. There appears to be a certain fatigue
about Greece among the larger EU nations. It is not clear that, if
Greece defaults and exits the EU, it will begin to unravel the
post-war group of European nations.

The problems brought on by enlarging entitlement economics and
thus creating huge public debts are not limited to Europe. In  the
United States and Canada, notably, the growth of entitlements has
brought new strains to these more homogeneous economies and
populations. but these problems are less complicated than in their
European counterparts (although probably equally problematic in
the long term).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
One of the most troublesome components of the European crisis
is the resurgence of the kind of divisive nationalism which has
characterized this continent for at least a thousand years.
Existing nation states, some of their borders created as a result
of the 20th century’s two world wars, are breaking apart.
Czechoslovakia is now two nations, the Czech Republic and
Slovakia. The former Balkan Yugoslavia is now several independent
states, including Serbia, Croatia, Slovenia, Bosnia, and Macedonia.
Ukraine has separated from Russia, as have other former Soviet
regions. Areas of Italy, such as the region around Venice, now want
their independence. Spain has serious nationalistic movements in its
Basque, Catalan and Galician regions. Belgium is divided, as are
parts of The Netherlands. Scottish nationalism continues to threaten the
entity of the United Kingdom. These nationalisms are founded in
language, religion, ethnicity and culture.

Those who have created the EU and the new Europe are
understandably holding on for their very existence. Powerful new
economic and political interests have a huge stake in the status
quo
and its ambition for ultimate political union. They are resisting
the populist and popular uprisings now growing with obfuscation and
delay.

They will not go away quietly.

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Copyright (c) 2015 by Barry Casselman. All rights reserved.





Thursday, June 18, 2015

THE PRAIRIE EDITOR: Is There A Democrat Who Wants To Be President?

Although there are clear signs in the polls that Hillary
Clinton’s hitherto massive lead for the Democratic
nomination is fading, she is still on a direct path for her
party’s nod. But she is one serious Democratic opponent
away from seeing that lead truly challenged and overtaken
in the primaries and caucuses ahead.

In spite of her name recognition, fundraising and gender
(all distinct advantages in 2016), most Republican strategists
I know hope that she, and not some talented fresh face, will
be the Democratic nominee next year against the eventual
Republican nominee.

Why is that?

It is because of the fact that she is a very poor campaigner,
inherently secretive and journalist-avoiding, and tied to an
unendingly controversial story about her own record and
and that of her husband.

While the Republicans have a natural advantage in 2016 after
eight years of President Obama and his left-turning policies,
there is no guarantee that their nominee will win.

In 2014, conservatives swept to a landslide mid-term election
by recruiting mostly talented fresh faces, especially for close
senate races. The GOP gained 9 seats and control of the U.S.
senate. While on paper the Democrats have a mathematical
advantage for senate races in 2016, their failure to recruit new
talent so far, but to depend on past losing candidates, has
made their effort to take back control problematic.

Mrs. Clinton is obviously not wearing well on the campaign
trail. Repeated political facelifts are providing only temporary
boosts to her campaign.

There are at least three significant Democrats who could
provide a fresh face, and a serious candidacy for the presidency
in 2016. They are Massachusetts Senator Elizabeth Warren,
Minnesota Senator Amy Klobuchar, and New York Governor
Andrew Cuomo. There are also some less well-known liberals
who might emerge as formidable in 2016. All indications so far
are that none of them is yet willing to enter the Democratic
nomination contest.

The Republicans will have a very visible and open contest for
their nomination. Just as the left has its Bernie Sanders, the
right has its Donald Trump.

But only the Republicans, so far, have a true “team of rivals.”

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Copyright (c) 2015 by Barry Casselman. All rights reserved.



Friday, June 12, 2015

THE PRAIRIE EDITOR: Who Should Debate?

A dilemma facing the Republican National Committee (RNC)
as it plans and organizes for the presidential nominating
contest in 2016 is that there are at least 16 “serious” candidates
now or imminently in the field.

As I have written earlier, this in itself is mostly a positive
circumstance, reflecting as it does the good prospects as of now
for the election of a Republican president next year.

But one apparent drawback is trying to present a TV debate
with the very large number of well-known contenders with
serious credentials. The solution by the leadership of the RNC
is to limit the first debate to the top 10 candidates as shown by
aggregating a number of polls.

Objections have arisen, as might be expected, by those who have
something to lose by not being included in the all-important
debates.

The solution of the RNC, while not perfect, is the only reasonable
one under the circumstances. Even 10 candidates on the stage are
too many perhaps, but the number is reasonable for the first debate.
The RNC, in order to placate the objections, has scheduled a second
debate the same day which will include those who don’t make the
top 10 list.

Presumably if a candidate improves in the polls after the August 20
first debate in Cleveland, Ohio, they could be included in a
subsequent debate, replacing a candidate with lower poll numbers.

It might be uncomfortable for the RNC if Governor John Kasich of
Ohio, a serious candidate by most standards, doesn’t qualify for the
first debate (which will be held in Ohio); as it might also be
embarrassing if Donald Trump, a perennial attention-seeking
candidate is included at the expense of others, but, as I suggest,
there is no “perfect” solution.

It is, after all, up to the candidates and the campaigns to earn
name recognition and raise funds by their own efforts. The burden
is on them, not on the RNC. Nor are the debates the only venue
for a presidential campaign. Some candidates begin the contest
with lots of name recognition or, as in the case of Mr. Trump, with
enough of their own money to bypass fundraising. Politics, like
everything else, is not ideally fair.

The next president will need to demonstrate to the nation his or
her ability to overcome obstacles, and to create wide support.

Let the debates begin.

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Copyright (c) 2015 by Barry Casselman. All rights reserved.

Monday, June 8, 2015

THE PRAIRIE EDITOR: Political Potpourri - June 2015

IOWA STRAW POLL 2015

The recent tradition of the Iowa Straw Poll (a notable factor
since 1976), usually held in Ames in August, has been
scheduled for this cycle on August 6 in Boone, a few miles
west of the Iowa State University campus. A number of major
candidates have decided to take a pass on this event which
has had declining prestige and influence over the past few
cycles, culminating with then-Congresswoman Michele
Bachmann’s win in 2011, and the surprise disappointing finish
for former Minnesota Governor Tim Pawlenty. Bachmann
subsequently failed to capitalize on her victory, while Pawlenty,
a potentially major contender, prematurely withdrew from the
presidential race. Long-time Iowa Governor Terry Branstad
wanted to cancel the Straw Poll altogether for 2015, but the
state Republican Party, which uses the event as a lucrative
fundraiser, scheduled it anyway.  Whether this year’s Poll will
be even remotely interesting depends on the decision of
Wisconsin Governor Scott Walker to attend or not to attend.
Walker is currently the favorite to win the Iowa Caucus in
February, 2016 --- traditionally the opening electoral event of
the GOP presidential nominating process --- but the large
number of Republican candidates this cycle has created much
suspense about the outcome of the race for the GOP nomination.

HILLARY CONTINUES TO DECLINE

Democratic presidential frontrunner Hillary Clinton continues
to lead all announced rivals for her party’s presidential nomination,
but her numbers in virtually all polls, at the same time, continue
to decline. Former Connecticut Governor Governor Lincoln
Chaffee is the latest formal entry into the race against her, joining
Vermont Senator Bernie Sanders and former Maryland Governor
Martin O’Malley. Vice President Joe Biden has not announced, but
his poll numbers remain in the double digits.  Former New York
City Mayor Michael Bloomberg has also not announced, but would
likely be considered a formidable opponent for Mrs. Clinton if he
did enter the race. Other potential major candidates in 2016 include
Massachusetts Senator Elizabeth Warren, Minnesota Senator Amy
Klobuchar and New York Governor Andrew Cuomo. The problem
for the former First Lady is that should one of these  major as yet
unannounced rivals declare himself or herself into the race, the
contest would likely become a much more wide open competition.
Mrs. Clinton needs to significantly rebuild her image over the
summer and early autumn; if she does not, it is likely that some
big name in the liberal party will run for president against her.

CONSERVATIVES ON THE RISE IN EUROPE

Only a short time ago, it appeared that  politicians on the left were
winning in Europe, but that brief trend has been clearly reversed
in recent months. Most recently, conservatives have won
parliamentary elections in Turkey (denying radical Turkish
President Erdogan a majority), and are looking strong in Poland.
Conservative British Prime Minister David Cameron recently won
a surprise landslide election, and conservatives look positive for
the upcoming election in France where Socialist President Hollande
remains unpopular. Conservative parties are also strong in Spain,
Netherlands, Italy, Germany, Spain and in Scandinavia. Only in
Greece have leftists recently triumphed, but that nation is on the
brink of economic disaster. In fact, the Greek economic crisis is
posing a major problem for the nations of the European Union and
a showdown for troubled European body. Although not in Europe,
Israel recently gave its conservative party and prime minister an
upset victory. The most recent U.S. election, the 2014 midterms,
gave the Republican Party a landslide victory in which it regained
control of the U.S. senate.

U.S. TOP COURT SOON TO MAKE MAJOR DECISIONS

As the U.S. Supreme Court approaches its summer recess,
expectations are rising that it will soon hand down a number of
major and historic decisions on Obamacare, marriage, labor
unions and other important issues. The current court is often
narrowly divided in recent years, with many notable decisions
being decided with a 5-4 vote.

2016 SENATE RACES FAVOR DEMOCRATIC GAINS

In reverse of 2012 and 2014, Republican incumbent U.S. senators
heavily outnumber incumbent Democrats in the races up in 2016.
In fact, there are 24 GOP seats up for re-election compared to only
10 Democratic seats. A majority of these races, however, are not
yet rated as competitive. About 8-10 conservative party seats are
considered “in play,” while only two liberal party senate seats are
considered vulnerable. Democrats only need 4 or 5 “pick-ups”
to regain control (the number depends on which party wins the
presidential race; the new vice president will serve as president of
the senate, and casts any tie-breaking vote). Republicans gained 9
seats in 2014, but were able to recruit several strong new figures to
run. So far, the Democrats have only been able to do so in no more
than a few competitive contests.

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Copyright (c) 2015 by Barry Casselman. All rights reserved.