‘He shall from time to time give to Congress information of the State of the Union and recommend to their Consideration such measures as he shall judge necessary and expedient.’ (Article II, Section 3 of the U.S. Constitution)
So today I did not start off with a song but with that all important sentence in the U.S. Constitution that led to what we call today: ‘The State of the Union’
Yesterday, Tuesday January 25, President Obama delivered his State of the Union for 2011. As expected the state of the economy took center stage, but there was also emphasis on clean energy and more important education.
Some key statements from the speech (full transcript & video):
“Over the next 10 years, nearly half of all new jobs will require education that goes beyond a high school degree. And yet, as many as a quarter of our students aren’t even finishing high school.”
“The future is ours to win. But to get there, we can’t just stand still. As Robert Kennedy told us, ‘The future is not a gift. It is an achievement.’”
“But if we want to win the future – if we want innovation to produce jobs in America and not overseas – then we also have to win the race to educate our kids.”
"We are living with a legacy of deficit-spending that began almost a decade ago. And in the wake of the financial crisis, some of that was necessary to keep credit flowing, save jobs, and put money in people's pockets."
"But now that the worst of the recession is over, we have to confront the fact that our government spends more than it takes in. That is not sustainable.
"We need to get behind this innovation. And to help pay for it, I'm asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don't know if you've noticed, but they're doing just fine on their own. So instead of subsidizing yesterday's energy, let's invest in tomorrows."
"Now it's our turn. We know what it takes to compete for the jobs and industries of our time. We need to out-innovate, out-educate, and out-build the rest of the world. We have to make America the best place on Earth to do business. We need to take responsibility for our deficit, and reform our government. That's how our people will prosper. That's how we'll win the future."
"To help businesses sell more products abroad, we set a goal of doubling our exports by 2014 - because the more we export, the more jobs we create at home. Already, our exports are up. Recently, we signed agreements with India and China that will support more than 250,000 jobs in the United States."
"We will put more Americans to work repairing crumbling roads and bridges. We will make sure this is fully paid for, attract private investment, and pick projects based on what's best for the economy, not politicians."
To be honest, it felt like more of the same. Not many new economic policies announced, no new stance with regards to India or China and certainly no ground breaking fiscal reforms to bring the budget deficit under control. As to how he is going to try and change the state of the American educational system, no concrete plans there either. Unfortunately ‘it’s the economy, stupid’ has been replaced by ‘it’s education, stupid’. In a report out last month the U.S. now ranks 25th in math, 17th in science and 14th in reading out of 34 countries as compiled by the OECD. Without a skilled workforce there will be no sustainable economic growth, perhaps it’s time for a new approach, re-build the economy from the ground up and start with the education system.
So much for the ‘We can’t win the future if we stand still’ – quote. I guess it’s hard to start running when you have become complacent and have been standing still for so long already.
So that was yesterday, today across the street Mr. Ben Bernanke and his open market committee members voted on monetary policy. Guess what, they don’t like change either and decided to leave interest rates on hold (for an extended period of time) and QE2 in place.
Some key points from the statement (full text):
“The economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions. Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.”
“Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate.”
“In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its securities holdings and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011.”
In other words: anemic economic growth, no job growth and no inflation whatsoever. No inflation, it must be good to be Ben Bernanke and to live in a bubble. At least he let go of his fear of deflation.
The one thing that was different about this statement was the fact that it was a unanimous decision. Where Mr. Hoenig dissented on each and every occasion last year, his successor (Philly Fed president and arch-hawk) Mr. Plosser decided to sit this one out and vote for instead of against Mr. Bernanke. It will be interesting to see if and when he starts voicing his opposing views.
With Obama saying nothing new and Bernanke being stuck in last year’s groove, is there nothing for to the markets to take their cue from you might ask.
Actually there’s an event coming that holds some predictive value and therefore might cause some upheaval in the next week and a half. It’s Super Bowl time. I won’t get into the Super Bowl indicator right now, because I want to devote next week’s blog exclusively to the Super Bowl and the predictive value of the Super Bowl indicator.
The markets today did next to nothing. The Dow Jones hovered around the 12.000 mark all day long, the S&P 500 could not break 1.300 and the Nasdaq flat lined just before lunchtime and could not be revived over the remainder of the session.
Dow 11.985 (+ 0.07%) S&P 500 1.296 (+ 0.42%) Nasdaq 2.739 (+ 0.74%) WTI $87.30 EURUSD 1.3680 Gold $ 1.346
I would like to end my blog with an interesting ‘statistic’ (I say statistic, but these are in fact the lives of real people) tweeted yesterday by Nicole Lapin (CNBC):
‘99ers hit a new milestone- 1.4 million people have been of work for 99 weeks (the limit for unemployment benefits)’
Oh, and the other milestones we're looking at -- 12k on Dow, 1300 on S&P...Thanks, Helicopter Ben - but your job was also, um, JOBS!
Enough said !
Happy Hunting & Let’s Be Careful out there!!!
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