FWD: The Bush Effect

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*The Bush Effect*
By Sam Parry, July 3, 2002
  Europe's crumbling faith in U.S. political and financial institutions
  starting with the installation of George W. Bush as president after
  Election 2000 through the latest corporate-accounting scandals - is
  sending shivers through a U.S. economy that has grown dependent on $1.2
  billion a day in capital from overseas. This withdrawal of foreign
  investment now is threatening to choke off a U.S. economic recovery.
Less than 18 months into Bush's presidency, a nasty mixture of economic  
and international problems is facing the American people: a sinking dollar  
and a sagging stock market on one side and soaring budget and trade defi- 
cits on the other, with a backdrop of Bush's intent to press ahead with an  
ill-defined "crusade" to rid the world of "evil" over the advice of tradi- 
tional allies in Europe and elsewhere.
  One might call this predicament - the combination of a depressed econo- 
my, an inability to address pressing domestic needs, the alienation of key  
allies and an endless war - the Bush Effect.
  A key feature in the new economic and political reality has been a stun- 
ning reversal in attitudes about the U.S. in Europe and other regions. In  
the mid-to-late 1990s, a consensus emerged that the world was integrating  
itself into a common market with the U.S. in the lead, an assessment that  
propelled the boom in U.S. stocks. In the last half of the decade, the  
United States was THE place to invest.
  From 1995 to early 2001, foreign net purchases of U.S. stock and corpo- 
rate bonds soared ten-fold, while foreign direct investment jumped six- 
fold, Business Week reported in its July 8, 2002, edition. The money from  
Europe and elsewhere financed technology startups as well as high-tech  
equipment that improved productivity at traditional businesses.
  The benchmark Dow Industrial average more than tripled from the end of  
George H.W. Bush's presidency on Jan. 20, 1993, to the end of Bill Clin- 
ton's administration on Jan. 20, 2001 - rising from 3241.95 to 10587.59.  
Other major indexes, such as the broader S&P 500 and the tech-heavy  
Nasdaq, registered similar or bigger increases.
  Domestic and foreign Investors bid up U.S. stocks with the hope of pro- 
fiting from the edge U.S. companies had in business enterprises around the  
world. This Clinton-era prosperity swung the long-running federal budget  
deficits into surpluses. The U.S.-led technology boom also offered hope  
that nations could be brought closer together through the growth of the  
Internet and that the world might have a chance to solve emerging threats,  
such as global warming.

continues at: www.consortiumnews.com, consortium for independent journalism


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