WARNING: Depression ahead

FT.com / Markets / Currencies - Dollar expected to fall amid China's rumoured selling :
"Many currency traders were taken aback on Friday when the greenback fell in spite of bullish data showing the US economy created 337,000 jobs in October.
"'If this can't cause the dollar to strengthen you have to tell me what will. This is a big green light to sell the dollar,' said David Bloom, currency analyst at HSBC, as the greenback fell to a nine-year low in trade-weighted terms."

The dollar fell against the euro on the assumption by traders that Bush's re-election meant four more years of budget and current account deficits. It does, in a way. But, John Kerry could hardly have been counted on to reverse either of those tendencies.

Gold has reached a 16-year high. China is selling off some of its massive dollar reserves. Retailers and auto makers are struggling. The housing boom appears to have peaked. Where is the good news?

Add to all this woe the need to do something about Social Security. Some combination of tax rate increases, raising the income level to which taxes apply, benefit cuts (or at least computing COLAs more conservatively), delayed retirement age,
increased taxation of benefits, or means testing (this is the most highly charged option, even though it makes the most sense - what is the point of sending social security checks to Warren Buffett or Mrs. Heinz Kerry?). And Bush will try to slide in some partial shift to forced private pension savings (which, although it has worked relatively well in Britain and Chile is still a hot-button issue politically).

Bush is to be commended for pledging to actually tackle social security, but I fear the coming depression will be charged to his account and blot out the memory of whatever good he accomplishes. The economic outlook is so bad, in my view, that Bush had better put a maximum effort into putting some good judges on the courts, that may be his entire legacy.