Taking interest in, er…interest

There is a point at which a “developing” story stalls, starts to ferment, and becomes a chronic journalistic chancre sore. And we’re at just such a point with the U.S. electoral scrap. There’s probably nothing left to be said about it, and the event’s only real theme now is that is keeps dragging on and on and on. Any momentum of spectating interest, at least for me, has ceased to build and has pretty much started rolling downhill.

Like ground scatter on a radar screen, this story is masking any other news that might otherwise be a compelling target for us. The slowing U.S. economy, for instance, should be a screaming red-zonker of a headline. Economic growth has plunged to a two percent rate. Initial claims for unemployment compensation have spiked. High oil prices continue to put the brakes on industrial profitability. High tech companies are starting to look vulnerable in some cases, and downright unviable in others. The stock market is suffering from more jittery, bipolar mood swings than a Hollywood coke whore.

In some venues, however, Katherine Harris (Florida Secretary of State) has remained on the stage when it’s really Alan Greenspan (Federal Reserve Bank boss) who should be in the limelight. They may, actually, be the same person; they do bear a vague facial resemblance and, come to think of it, I’ve never seen both of them at the same place at the same time.

Anyway, Greenspan, or Harrisspan, or whoever, is getting a lot of second guessing from the economic cognoscenti. The deal is that the regular doses of higher interest rates may have, indeed, kept the inflation flu at bay, but they may have also started killing the economic patient.

Every economic jabber jaw is, then, predicting that the Federal Reserve (known simply as the “Fed” if you’re on first name basis with it) will change course and actually lower rates before too long. That’s the way I’d bet.

Whenever interest rates take center stage–and they’re going to–the real action happens in the bond markets. Yeah, yeah, I know, it’s stocks that have all the sizzle and sex appeal. But at times like these, my ears are more attuned to bond analysts. Big money is going to be made by the folks who can read the interest rate tea leaves.

Which may, or may not, have much of an impact on our fair shores. If interest rates do take a turn downwards–which is the more likely direction–it may offer some financial relief to any of our wheezing businesses that have floating rates on their debt.

Also, in theory, all the “tremendous opportunities” for investors that some folks like to talk about would be even more valuable when interest rates are lower. We are, however, pretty much an economic leper, and a few downward ticks in interest rates can’t redeem our reputation. In other words, while a fall in interest rates holds the promise to boost productivity in the United States, it won’t do much for the Commonwealth.

So forget the electoral “crisis” in the United States. The real crisis–a financial tsunami–is right here at home, and it’s utterly amazing how our collective eyes are on our Budweiser cans instead of on the economy. It’s also amazing how Katherine Harris can wear all that makeup without scaffolding and steel reinforcements, but that’s a different story.

Stephens is an economist with Stephens Corporation, a professional organization in the NMI. His column appears three times a week: Wednesday, Thursday and Friday. Mr. Stephens can be contacted via the following e-mail address: ed4Saipan@yahoo.com.