New York Times OP-ED columnist David Brooks notes that “President Obama has a strong incentive to reach a deal so he can campaign in 2012 as a moderate. The Senate majority leader, Harry Reid, has talked about supporting a debt reduction measure of $3 trillion or even $4 trillion if the Republicans meet him part way.” However, Mr. Brooks goes into further detail on that which he sees as “the mother of all no-brainers” i.e., the opportunity for the GOP to “put the country on a sound fiscal footing.”
As Mr. Brooks sees it, the U.S. Republican Party “may no longer be a normal party.” How is that? Well, writes Mr. Brooks, “the members of this movement do not accept the logic of compromise, no matter how sweet the terms. If you ask them to raise taxes by an inch in order to cut government by a foot, they will say no. If you ask them to raise taxes by an inch to cut government by a yard, they will still say no.
The members of this movement do not accept the legitimacy of scholars and intellectual authorities. A thousand impartial experts may tell them that a default on the debt would have calamitous effects, far worse than raising tax revenues a bit. But the members of this movement refuse to believe it. The members of this movement have no sense of moral decency. A nation makes a sacred pledge to pay the money back when it borrows money. But the members of this movement talk blandly of default and are willing to stain their nation’s honor.”
A final item of potential interest in today’s abbreviated post concerns the fact that, apparently, the lending spigots in America’s banks may finally be turning to the “open” position after having been stuck shut for quite some time now. If the recent gains being tracked in the average credit score in the USA are indeed here to stay, well, perhaps the entire credit and lending landscape might be finally improving in the country.
Analysts say that the average credit score for individuals is a good metric for the probability that a lender will be paid back. That average score has recently risen to 696 and it is at its highest level in nearly five years. As well, the US’ ratio of consumer debt to incomes is at its lowest level in more than fifteen years. Perhaps most importantly, loan delinquencies in the US have decline by 30% over the past 24 months. This situation is a radical departure from the scenarios being depicted in various hard money publications; a gloomy picture of an American consumer indebted to the hilt, unable to do anything but roll over and experience credit death.
James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis strongly disagrees and offers a bit of myth-busting: “The financial situation of the [American] household sector has improved far faster and far more than everyone thought it would two years ago. People are still locked into the view that consumers are facing record burdens, and they are not. There has been a change that is sustainable and durable.” Thus, the fairytale of the “zombie consumer” is not at all applicable to the American version of same – not at this juncture, anyway.
Senior Metals Analyst - Kitco Metals