Yesterday’s big news barely sent a ripple of disquiet through the world’s great pool of liquidity. The report came that the U.S. trade deficit hit a new record last year, and the markets shrugged. Who cares?
Funny the way things work. As time goes by people stop caring about things.
There was a time when people worried desperately about the U.S. money supply figures. A little blip up would send the bond market into fits of hysteria. Investors (the so-called ‘bond vigilantes’) would rush to dump their bonds, thereby sending yields upwards. Higher yields cooled economic activity, which had the effect of reducing inflation.
But who pays any attention to money supply numbers any more? No one. They’re forgotten; considered irrelevant.
People used to worry about paying too much for stocks, too. But the Dow has been above 10,000 for so long – with the average stock trading at around 20 times earnings – people have come to expect it. They think it is normal.
And the federal budget! We remember when Republican politicians would get worked up into a hot sweat over a budget deficit. They felt it was irresponsible to spend more than was taken in. It was a stain on your record…a blemish on your honor. It was dangerous to the nation’s credit…it was a burden upon the taxpayers…and it was a threat to the dollar.
Now, a Republican president proposes the biggest deficits…the biggest budgets…and the biggest national debts in history…and every pet political hack in Washington – Republican and Democrat – purrs with cool contentment. ‘Deficits don’t matter,’ they’ve learned.
Decent, sober American citizens used to fear war, too. No public issue was more important – it was not only a matter of life and death, but of national honor. For the first 150 years of its existence, the United States avoided foreign wars. Even as recently as the 1960s Lyndon Johnson had to bamboozle the American people to get the country into Vietnam. LBJ said that he wouldn’t send American boys to do the fighting that Vietnamese boys should do. And then, when he did send American boys, the public put up such a howl that they had to be pulled out.
Now, American boys are garrisoned all over the world. And now they fight enemies that can never be defeated…so the wars can go on forever. But who worries? Perpetual war is considered normal.
There was a time, too, when the trade deficit numbers came around like meter maids. People kept an eye on them…and rushed to get out of their way. Now, they show up and nobody even bothers to look up. It is as if all the parking tickets had already been fixed, even before they were written.
What is the penalty for running a $763.6 billion trade deficit? Has anyone asked? Does anyone care? People have come to take trade deficits for granted – like an old shoe or an old spouse. Yes, they get a little bigger every year, but that just makes them more comfortable, doesn’t it?
Stock market buyers paid no notice to the higher trade deficit numbers. They sent the Dow up 102 points. Bonds held their ground. Even more remarkably, the dollar stayed about where it was.
When nothing bad happens for a very long time, people come to assume that nothing bad ever will. It is as if they closed the windows and turned the gas on. The slow hiss of the gas worries them at first. But as long as nothing blows up, they get used to it. Finally, ‘It’s no problem,’ they say to themselves… and light up a cigarette.
Markets and Money