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Today's Market WrapUp 04.23.2007 Mon Tue Wed Thu Fri Kirby Archive Blind,
Blinder or Blind-Sided? We should have seen this coming – I’m speaking of the continuing assault on the North American middle class – except it’s got a slightly different ring to it this time around. At risk now are 40 MILLION service jobs. Don’t believe it? See for yourself – here. In an April 17 editorial by Froma Harrop – which I caught flying under the radar in the Seattle Times – Harrop cites the recent work and assessment of Alan S. Blinder, noted Princeton Economist and former Vice Chairman of the Board of Governors of the Federal Reserve:
“The master plan, it seems, is to move perhaps 40 million high-skill American jobs to other countries. U.S. workers have not been consulted. Princeton economist Alan Blinder predicts that these choice jobs could be lost in a mere decade or two. We speak of computer programming, bookkeeping, graphic design and other careers once thought firmly planted in American soil. For perspective, 40 million is more than twice the total number of people now employed in manufacturing.” The loss of an ‘additional’ 40 million high skill American jobs over the next decade or two equates to leakage [or rape, perhaps?] of somewhere between 2 and 4 million jobs per year! Where does it all end? According to Harrop, even Blinder was reportedly taken aback, “when, sitting in at the business summit in Davos, Switzerland, he heard U.S. executives talk enthusiastically about all the professional jobs they could outsource to lower-wage countries. And he's a free trader.” The article goes on in attempting to lay the blame for these unwelcome developments at the feet of the government’s H-1B visa program. What we can surmise – regardless of the true cause – outsourcing / off-shoring of American jobs has CATEGORICALLY served to dampen wage demands / wage inflation. The Blinder Leading the Blindest? Call me silly, but I have trouble resolving Mr. Blinder’s apparent surprise when you consider that he has written 16 books on Economics and served as Vice Chairman of the Federal Reserve from June 1994 until January 1996. The man is CLEARLY an adept researcher. As such, wouldn’t it make sense that Mr. Blinder would at least have knowledge of macro-economic research being conducted like, The Evolution of Macro Models at the Federal Reserve Board Admittedly, this paper was prepared for the Carnegie-Rochester Conference on Public Policy, November 22-23, 1996 – meaning it WAS published just after he finished his stint with the Fed. But the contents of this historical account of the evolution of Macro Modeling at the Fed – one might think - would “logically” have been known to him. On page 10 of this excellent short read, the importance "expectations of inflation” play in the macro models the Fed uses to forecast the economy. Now I ask, would it really be a stretch to consider the notion that the Fed – working hand in hand with government – would consciously advocate and promote policies designed to “blunt” future wage demands? Before any of you leap to conclusions and claims that I’m “hooked” on conspiracy theories – PLEASE consider this: At a recent speech of Fed Chairman, Ben Bernanke – titled, Financial Regulation and the Invisible Hand--April 11, 2007, the Chairman said, "Although the market system is the principal source of America’s economic dynamism, economic theory and practice both suggest that targeted government regulation and intervention can sometimes benefit the economy." And, "Instead, the regulatory approach taken in the United States has followed recommendations set forth in 1998 by the President’s Working Group on Financial Markets and recently reaffirmed in a set of principles by the same group.” So, perhaps-and-just-maybe, the timing of Mr. Bernanke’s remarks - citied above - ‘absolves’ Mr. Blinder of fore-knowledge of Fed meddling [tacit or otherwise] in the markets. What cannot be disputed, however, is that Mr. Bernanke ‘admits’ that the Federal Reserve in conjunction with government interferes with what are alleged to be FREE MARKETS. Oh, but he did state that it’s only done to benefit the economy.
My question to you all is – whose economy? * Special thanks to ‘eagle-eyed’ Bix Wier at Lemetropolecafe.com for noticing and drawing my attention to Mr. Bernanke’s latest comments. Today’s Market Overseas equity markets began the week on a subdued note with Japan’s Nikkei Index gaining 2 points to 17,455. North American markets fared worse with the DOW off 42.60 to 12,919.40, the NASDAQ giving up 2.72 to 2,523.67 and the S & P falling 3.4 to 1,480.95. NYMEX crude oil futures added 1.62 to close at 65.73. On foreign exchange markets the U.S. Dollar Index managed to gain .10 to 81.55. Interest rates were 3-4 basis points lower across the curve with the benchmark 5-year bond ending the day at 4.54% while the 10-year bond ended the day at 4.65%. The precious metals complex ended the day mixed with COMEX gold futures falling 1.90 to 690.50 while COMEX silver futures gained .13 to 14.07. The XAU Index fell .94 to 142.72 while the HUI dropped 1.42 to 354.74. On tap for tomorrow, at 10:00 a.m. April Consumer Confidence data is due – expected 105.0 vs. prior 107.2. Also at 10:00 a.m. March Existing Home Sales data is due – expected 6.40M vs. prior 6.69M. Wishing you all a pleasant evening and happy as well as prosperous rest of the week! Rob Kirby Copyright © 2007 All rights reserved. Contact
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