Corn+Soybean Digest

It’s the Economy, Stupid!

Remember this comment from about a decade ago? Another Bush – George W. – is now fighting for his economic life now that the major conflict of the Iraqi War is complete. He will have to turn a suffering economy around in 12 to 14 months to have a major influence on next year’s elections.

His first strategy was to reappoint Mr. Greenspan for another two-year term starting June 2004. Greenspan is one of the most trusted individuals in the world concerning economics.

His second strategy will be to pass the new Tax Bill. Like his first tax stimulus package, this may have very little impact in the short run.

The economy’s problems are larger than a tax cut and stimulus of interest rate cuts. The economic sluggishness is the result of over-capacity in the agricultural manufacturing and service sectors globally, and the fear of long-term capital investment by business. This is compounded by large amounts of debt in government, households, and individuals, which makes them vulnerable to interest rate increases.

The bottom line is American economics is in the first stages of globalization. This is creating deflationary pressures on all business and household incomes. For example, unemployment jumped to 6 percent. However, this does not reflect the fact that we are trading one high paying job for two Wal-Mart, or lower-paying, jobs.

If Greenspan and Bush jump-start the economy this time, I will tip my hat. The economist in me says it may be a while before we turn the U.S. and global economies around because of the uncertainty and economic hangover of the 1990s.

Only in America

This past rainy weekend I watched the Kentucky Derby. My in-laws, who are from Sacketts Harbor, New York, indicated some guys I used to play basketball against had a horse in the derby. Each put $5,000 into the horse. You might guess what happened. They won the whole thing! Maybe I should invest in horses rather than cows! My e-mail address is:[email protected]

Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He recently completed a sabbatical working with the Royal Bank of Canada. He is now back at Virginia Tech with his academic appointment, which is teaching, extension, and applied research.

To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.

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