WASHINGTON, December 10, 2012 – There’s stuff to get to with regard to today’s market, that’s for sure. But aside from the ongoing fiscal cliff soap opera, the big news over the weekend was the astonishing action in Michigan’s legislative branch, which voted decisively to follow the lead of Wisconsin and Indiana and pass a new right-to-work law. Right-to-work over right-to-pork? What happened?
Short answer: Michigan’s governor asked the unions not to push things by putting a constitutional amendment on the ballot this past November that would have permanently mandated union membership in the state constitution. To the unions’ astonishment, the voters voted it down. At which point, Governor Snyder and the Republican legislature put away the carrot and pulled out the Big Stick. UPDATE: The new legislation is scheduled for final approval and the Governor’s signature on Monday. Predictably, union protests are planned.
Nonetheless, barring last-minute-developments, like Hoosiers and Cheeseheads, Michiganders won’t be forced to sign up for membership in unions that do them no good, sending most members’ dues directly to the DNC rather than doing what they were set up to do. It’s an astonishing U-Turn in this, the most damaged state in the Rust Belt and the one still least likely to recover anytime soon, as evidenced by the rapidly vanishing population of Detroit, once one of the nation’s mightiest cities.
On other fronts, Ohio—the Maven’s old home—almost made a home run out of what’s now only a trifecta. But Ohio’s voters short-sightedly turned back their own newly minted right-to-work law in a referendum, due by and large to Republican sloppiness in targeting the legislation rather than outright hatred of the new law, however. Governor Kasich and the Republicans are likely to try again, but not just now.
This effectively leaves Illinois as the only complete and total outlier in the continuing Rust Belt struggle to right their Taker-oriented economies and re-establish contact with the meaning of the term “growth.” Illinois, like California, is run by a permanent leftist Democrat politburo that’s taxing and borrowing its populace into oblivion. No doubt like the cynical Californians, they fully expect that the Feds will bail them out when their imminent bankruptcies begin to swirl around the toilet bowl on their third and final journey to Hades. But why would the rest of U.S. taxpayers, beleaguered themselves, put up with this? Time will tell.
But for the moment, there is now hope and possible change in Michigan. It’s a beautiful state loaded with friendly, hard-working people and probably possessing more beach frontage than even California if you look at it. It would be heart warming to see Michigan come back.
Heading back to Wall Street, we find traders again obsessed with another weekend’s worth of failure in Washington. President Obama and Speaker Boehner met again without apparent result, each no doubt ready to sing Washington’s favorite December song, “I got plenty o’ nothing,’ and nothin’s plenty for me.” Time to climb into and seal up those barrels. We’re goin’ down the falls.
Also bugging traders: now we’re hearing ugly noises from Italy again. Markets were roiled there by the imminent collapse of yet another government and the not-so-veiled promise by Silvio Berlusconi that he might be open to taking the reins again.
Berlusconi is a perplexing fellow. He’s a businessman and knows how things work. He’s relatively conservative to boot, all of which earns him the undying hatred of the world press, naturally. All that said, however, he’s also the very model of a crony capitalist of which there’s entirely too much in Italy anyway, so who knows?
Italy’s main problem is that its government(s) is/are permanently dysfunctional and permanently changing. The South remains mired in poverty and addicted to government handouts. The North remains reasonably wealthy and cares very little for the South. Successive governments conduct enough redistribution to keep the South quiet and the North from getting too PO’d about it, mostly via crony capitalist arrangements favoring this or that supporter. It’s a recipe for chaos which largely explains why that country remains…in chaos.
The U.S. and Europe, along with their interlocked economies, find themselves trapped in entropic stasis. Makers and Takers are about evenly divided. Each side wishes the other one would fade away like Lenin’s state. But neither side will accommodate the other by doing so. Both sides borrowed trillions of dollars and Euros to sustain the myth of real growth and political comity for at least three decades and maybe four.
But like most myths, this one’s real story is rooted in grim reality; namely that Western politicos have consistently built their economies largely on a quicksand of lies, while their lazy constituents have looked the other way and voted the same scoundrels and failures back in to complete the disaster.
Disaster is once again what the markets are contemplating this morning. December is a month that’s famous for its generally predictable year-end “Santa Claus Rally.” But, with massive tax increases likely coming, professionals have been collecting augmented dividends and cashing out of stocks before January’s threatened and increasingly likely tax deluge.
We are, too, save for the occasional opportunistic trade. Add to the current mess the SEC’s apparently headlong dash into wrecking investors’ money market funds—little reported in the media—and, as one old TV character once put it, “you got you a peck o’ trouble, son.”
Get your Christmas shopping done before the Feds take the rest of your money away. We’ll see you tomorrow.
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