A Recycling, An Axiom, and a Rigging

Over the weekend in a General Election, Japanese voters - or, rather, the 59% of eligible voters who showed up - overwhelmingly brought back Shinzo Abe, leader of the Liberal Democratic Party (LDP), as their 7th Prime Minister in 6 years. This reflected much less a new-found love of Mr. Abe (who last ruled for 12 months as Prime Minister in 2006-07), and much more a thorough disgust of Prime Minister Yoshihiko Noda and his DPJ party's chaotic rule of the past 4 years. The Japanese economy is back in recession, despite years of virtually zero interest rates and aggressively stimulative fiscal policy; Japanese exporters have struggled as the yen, until very recently, has strengthened relentlessly; and Japan has continued to provoke China and South Korea regarding the sovereignty of the tiny, uninhabited Senkaku/Diaoyu islands (claimed by both Japan and China), and the even smaller Takeshima/Dokdo islands (claimed by Japan, and both North and South Korea). Today, at his first press conference as incoming Prime Minister, Mr. Abe decided the best way to begin a Tokyo-Beijing reconciliation was to announce that "there is no room for negotiation on this (Senkaku islands) point".

Moving to America, this writer is reminded of the communication axiom that redundancy creates retention. Thus, since the Presidential election, Republicans and Democrats have engaged in seemingly endless repetition of their respective positions regarding fiscal policy - tax rates must not rise, and spending is the problem, according to Republicans; the rich must pay relatively higher taxes, and we will talk about expenditure restraint later, according to Democrats. The Republicans appeared to blink - slightly - this weekend, with Speaker Boehner saying Republicans could agree to rate increases, but only on incomes above $1 million (0.2% of US tax filers), assuming significant expenditure cuts. President Obama remains mum on this latest offer. But equity markets in America seem to think that a cliff deal is imminent, today continuing their post-November-election rise. Watch for a "fiscal-deal-lite" this week, that will simply punt the tough debt and deficit issues to next year.

Finally, in another weekend election, Egyptians began voting on their new, post-Mubarak Constitution (logistically, the referendum had to be restructured into two parts, that continues next weekend, because most judges refused to monitor the voting procedures). Secular Egyptians are outraged that the draft Constitution presented to the electorate by President Morsi and his Muslim Brotherhood party would, if adopted, shift Egypt to Islam-dominated rule. Without judicial oversight, and with many Egyptians boycotting the election (32% of those eligible voted in this first round), the referendum outcome will fall just a little short of legitimacy.