Yesterday, while we were “celebrating” Labor Day, European stocks crashed, with most major European averages losing more than 4% and Germany losing over 5%. This follows a 2.2% drop in the U.S. on Friday following the disastrous August jobs report showing zero net new jobs created in that month. And U.S. stock index futures on Tuesday morning point to another brutal day in U.S. markets.
Meanwhile, as people fear both the Euro and the U.S. Dollar, on Monday (in international markets) gold traded over $1900 per ounce for the first time ever and the U.S. government’s 10-year note looks set to create its lowest closing yield in recent history, aiming for a rate under 2%. (If the Federal Reserve really thinks that some sort of program to push those yields even lower will somehow stimulate economic activity, one has to wonder what they’re smoking. But that’s a topic for another day.)
Politics is feeding into the international sense of economic despair: In Germany, Chancellor Angela Merkel, who has staked her political future on committing Germany to saving the Euro, is paying a heavy political price with her CDU party losing badly in elections in her own home state of Mecklenburg-Western Pomerania on Sunday; the CDU has now lost seats in state parliaments in six elections in a row. Unfortunately, her center-right party’s loss means gains for a more left-leaning party, the Social Democrats, along with gains for the far-left Greens, which in the long run can’t be good for Germany or the world. It’s no wonder that even on a day of widespread European stock market destruction, Germany got the worst of it.
On Wednesday night, probably while American financial markets are still open, Germany’s highest court will announce its decision in a case challenging the legality of Germany’s participation in the bailout of Greece and the Europe-wide “rescue fund.” The German magazine Der Spiegel suggests that “It is unlikely that the judges will thwart the bailout of Greece and the attempts to save the euro. But it is equally unlikely that they will just accept the status quo. Comments made by the judges so far suggest they will opt for a qualified approval of the government’s actions — a ‘Yes, but.'” Whatever comes after that “but” may have a major impact on the value of the euro and on European stocks and bonds, with inevitable ripple effects in the United States.
In particular, the degree of input into or control over future bailouts that the court gives to the Bundestag, the German equivalent of Congress, will give the markets more or less fear of even greater politicization of the process. Despite the legitimate concerns of European taxpayers over the risks being taken with their money, the markets will probably react badly if politicians are given too much influence in this situation; after all, how often have squabbling politicians actually made a situation better even when they had a good point? Europeans, like many Americans, are rightly becoming suspicious of the activities of their central banks, with the trend in Germany showing a likely increase in both transparency and politicization of the Bundesbank’s future activities. The consequences may present good object lessons for the “audit the Fed” movement in the U.S.
ON THIS SIDE of the pond, President Obama thumped his chest in front of a union crowd in Detroit, making official his election strategy of campaigning against Congress, hoping that Americans will forget that the real impetus behind the “stimulus” and Obamacare, two of the most economically damaging pieces of legislation in modern American history, came from the face staring at him in the mirror.
Meanwhile Joe “big f-ing deal” Biden used similar rhetoric at an AFL-CIO picnic in Cincinnati (see a theme here?), though he appears to be campaigning against a sitting governor, John Kasich, rather than against Congress. In a threat that can best be described by Republicans as “please don’t throw us in that briar patch, Br’er Biden,” our loquacious vice president told of his coming campaign involvement: “I am about to be let loose.” Is the Obama team really going to let Biden off his leash for more than a couple of hours a month? Republicans and the writers at Saturday Night Live can only hope so.
Hints of the content of Barack Obama’s upcoming “jobs speech” — more infrastructure spending and extension of certain small tax breaks — are leaking out. While they should surprise no one, the markets are already screaming “double dip recession” with oil down 15% in the past month, the S&P 500 down 10%, and copper, often considered a good leading indicator of economic activity, also down about 10%.
Speaking to the union crowd in the once-great city of Detroit, Obama apparently did not notice the irony of campaigning — and make no mistake, that’s what he was doing — in a city that has been utterly destroyed by the very unions cheering him on. The crowd was yelling “four more years” in much the same way that a masochist might plead with his dominatrix “hurt me, hurt me!” Obama’s aggressive language toward Republicans, saying “You say you’re the party of tax cuts? Show us what you got,” might have been noteworthy but for two things: House Republicans have shown they are not cowed by his bluster, and Obama followed Teamsters Union President Jimmy Hoffa Jr., who tenderly warmed up the crowd by pledging his allegiance and muscle to our own Dear Leader:
“We got to keep an eye on the battle that we face: The war on workers. And you see it everywhere, it is the Tea Party. And you know, there is only one way to beat and win that war. The one thing about working people is we like a good fight. And you know what? They’ve got a war, they got a war with us and there’s only going to be one winner. It’s going to be the workers of Michigan, and America. We’re going to win that war…President Obama, this is your army. We are ready to march. Let’s take these sons of bitches out and give America back to an America where we belong.”
I’m a big fan of Jimmy Hoffa Jr. because his words require so little elaboration by me. I’ll just add this: Remember Hoffa’s words the next time a leftist pundit describes the Tea Party as violent or aggressive.
It’s also worth noting that the Washington Post‘s first take on Hoffa’s remarks conveniently left out the parts emphasized above. Clearly the leftist “mainstream” media would like to avoid tying Barack Obama to people who use direct threats of violence, and they were able to whitewash Obama’s relationship with Bill Ayers and Bernadine Dohrn. But a couple of hours later after Hoffa’s words swept the Internet, even the Post had to grudgingly quote Hoffa‘s incendiary remarks.
Not surprisingly, Hoffa’s goons aren’t backing down. After Tea Party activists called for an apology and “urged Obama to rebuke him,” a Teamsters spokesman said “Workers didn’t start this war — the right-wing tea party zealots did. Jim Hoffa’s comments today reflect the anger of workers under attack in this country.” Again, remember this the next time you see bloody faces and broken bones at a political event, and hear some MSNBC talking head talking about violent tendencies of the Tea Party.
When you have a president and vice president whose jobs strategy is to boost the very unions that have sapped the life out of much of our manufacturing sector for decades, and to extend temporary and poorly designed tax policy such as the employee-only break in payroll taxes, it’s no wonder that the markets are vomiting all over their collective shoes.
Barack Obama’s prescription for jobs is nothing more than an economic emetic and the employment and market picture won’t improve until the nation is no longer force-fed that bitter medicine.
The best pre-answer to Barack Obama’s photo-op/speech to this weary-of-another-speech Congress has come from Congressman Joe Walsh (R-IL, not of Eagles fame), who is leaving Washington on Thursday afternoon and will be hosting a Small Business Jobs Forum in his suburban Chicago district while Obama is speaking. In other words, Walsh will be finding out from job creators what they want to do while Obama is telling the rest of Congress what the unions want done. Rep. Walsh said he’ll read the speech later. I’m not sure I’d even bother with that, but every job has its particularly unpleasant aspects and I applaud Walsh for subjecting himself even to the text version of Obama’s lecture.
Congressman Walsh emphasized in a radio interview with me on Monday that President Obama is “abusing the very notion of a joint session of Congress, doing it purely for political reasons, and I just don’t want to be a prop in his political theater.” Knowing Joe Walsh, it’s not surprising that he’s the first member of Congress to refuse to participate in Obama’s jobs kabuki. What is surprising is that, at least so far, he’s the only one.