I try not to make many predictions. I've found in my life that people who make predictions more often than not end up with egg on their faces but today I feel I need to make a statement.
Despite the best efforts of our President and Congress to shorten this current recession I fear those efforts are doomed for failure. I say this because of the simple fact they, I mean politicians and economists in the collective, don't have a clue what caused this current calamity. With all of their MBA's, JD's and PHD's they don't have the foggiest idea what causes a recession. They think they know because it is all based in numbers, the GNP, the Deficit, the Budget, Trade Imbalance, Unemployment Rate, these are all indicators, statistics used to quantify a situation but in reality they tell you nothing. The 623,000 new unemployment claims this month doesn't come close to the big picture. It's a snapshot because it doesn't factor in those that have exhausted their benefits, those that didn't qualify for benefits and those that are being fought to obtain benefits. So whether or not the new claims rise or fall it means nothing.
The popular thought in Washington, in the Media, and on Wall Street is that this recession is the result of a "housing crisis" going on in our country. Bad mortgages and sub-prime lending are to blame according to the experts which only goes to prove my point. The reason they don't know what caused this recession is because they are insulated from it. They are millionaires and they have no concept of struggling to pay bills or put food on the family table or wondering if your job will be gone tomorrow and as millionaires they only relate to numbers, and statistics.
Now if you actually walked down main street and talked to a dozen different people about their story they could tell you what caused this recession. They could not only tell you the answer in a heartbeat, most will tell you that reason would be oil, or actually the price of oil. You remember oil, don't you? I know it hasn't been in the news much lately because it's not fun to talk about right now because the price is down. But have you noticed it's starting to creep up again? Just 8 weeks ago it was $31 dollars a barrel but yesterday it closed at $51 dollars a barrel. If you don't believe me take a look. We are heading for $3+ a gallon for gas again because Washington isn't paying attention.
The simple facts are that recessions occur when people either have no extra money to spend or their confidence is so low that they are afraid to spend, and that's what has happened here. As gas prices rose the last 5 years people cut back, when it hit it's zenith in 2008 it crippled people. People all over this country took huge pay cuts imposed by the oil companies and commodities speculators when it started to cost them more than $100 a week to go to work. Higher oil prices also impacted the cost of all goods and staple products either by an increase in manufacturing costs or shipping costs. Not to be outdone the utility companies decided to jump on the energy bandwagon and raise the cost of electric and natural gas. The natural gas one cracks me up! This country is sitting on enough natural gas to heat the entire earth for about 50 years, so since it wasn't scarce they raised the price in case we had a hurricane. You notice it never came down when the hurricane never happened? The amazing thing is that evidence, after the fact, indicates that most of the reasons for high energy prices were fabricated, they didn't exist, yet here is our government letting them get away with it again.
People needed to cut back because of the higher cost of basics. Now human nature is a funny thing because people will go out for dinner but put off buying new curtains. They'll go on vacation but won't buy a new stove, so in some ways we've hurt ourselves. The end result from the cut backs was less purchases, means less employment, means layoffs, means can't pay my mortgages regardless if it's prime or sub-prime, which means companies get into financial trouble and either fold or hold their hands out. That is what caused this recession. It's really that simple! It has nothing to do with the auto companies business plan, which by the way, I'd love to ask that old fart Senator from Alabama about his business plan cause right now our country ain't doing so well. The auto companies were selling SUV's as fast as they could build them, trucks too, and that plan worked just fine until the government allowed gas to go above $3.00 a gallon. So put that in your pipe and smoke it Senator!
Now here is my prediction and I hope I am wrong: As I said Washington doesn't have a clue and they will continue to ignore the oil prices, either by ignorance or design, until they reach the critical stage again where they negate all of this stimulus spending. People will continue to stay in their shells, cars won't sell, manufacturing will not resume, housing prices will not start to grow again because people will still lack the confidence it takes to make our economy grow. We need to reinstate rules that take oil and natural gas off the commodities exchange, we need a comprehensive plan to ensure affordable gas and base utilities in this county. I know everyone is going green but green isn't going to change a damn thing for at least a decade. We don't have another decade to squander. In fact many of us don't have another 6 months to squander.
It's the oil prices dummies! It's the oil prices Democrats! It's the oil prices Republicans! It's the oil prices President Obama! It's the damn oil prices! Control those and your economy heals, ignore them and we're all in for a very long, rough ride.
Despite the best efforts of our President and Congress to shorten this current recession I fear those efforts are doomed for failure. I say this because of the simple fact they, I mean politicians and economists in the collective, don't have a clue what caused this current calamity. With all of their MBA's, JD's and PHD's they don't have the foggiest idea what causes a recession. They think they know because it is all based in numbers, the GNP, the Deficit, the Budget, Trade Imbalance, Unemployment Rate, these are all indicators, statistics used to quantify a situation but in reality they tell you nothing. The 623,000 new unemployment claims this month doesn't come close to the big picture. It's a snapshot because it doesn't factor in those that have exhausted their benefits, those that didn't qualify for benefits and those that are being fought to obtain benefits. So whether or not the new claims rise or fall it means nothing.
The popular thought in Washington, in the Media, and on Wall Street is that this recession is the result of a "housing crisis" going on in our country. Bad mortgages and sub-prime lending are to blame according to the experts which only goes to prove my point. The reason they don't know what caused this recession is because they are insulated from it. They are millionaires and they have no concept of struggling to pay bills or put food on the family table or wondering if your job will be gone tomorrow and as millionaires they only relate to numbers, and statistics.
Now if you actually walked down main street and talked to a dozen different people about their story they could tell you what caused this recession. They could not only tell you the answer in a heartbeat, most will tell you that reason would be oil, or actually the price of oil. You remember oil, don't you? I know it hasn't been in the news much lately because it's not fun to talk about right now because the price is down. But have you noticed it's starting to creep up again? Just 8 weeks ago it was $31 dollars a barrel but yesterday it closed at $51 dollars a barrel. If you don't believe me take a look. We are heading for $3+ a gallon for gas again because Washington isn't paying attention.
The simple facts are that recessions occur when people either have no extra money to spend or their confidence is so low that they are afraid to spend, and that's what has happened here. As gas prices rose the last 5 years people cut back, when it hit it's zenith in 2008 it crippled people. People all over this country took huge pay cuts imposed by the oil companies and commodities speculators when it started to cost them more than $100 a week to go to work. Higher oil prices also impacted the cost of all goods and staple products either by an increase in manufacturing costs or shipping costs. Not to be outdone the utility companies decided to jump on the energy bandwagon and raise the cost of electric and natural gas. The natural gas one cracks me up! This country is sitting on enough natural gas to heat the entire earth for about 50 years, so since it wasn't scarce they raised the price in case we had a hurricane. You notice it never came down when the hurricane never happened? The amazing thing is that evidence, after the fact, indicates that most of the reasons for high energy prices were fabricated, they didn't exist, yet here is our government letting them get away with it again.
People needed to cut back because of the higher cost of basics. Now human nature is a funny thing because people will go out for dinner but put off buying new curtains. They'll go on vacation but won't buy a new stove, so in some ways we've hurt ourselves. The end result from the cut backs was less purchases, means less employment, means layoffs, means can't pay my mortgages regardless if it's prime or sub-prime, which means companies get into financial trouble and either fold or hold their hands out. That is what caused this recession. It's really that simple! It has nothing to do with the auto companies business plan, which by the way, I'd love to ask that old fart Senator from Alabama about his business plan cause right now our country ain't doing so well. The auto companies were selling SUV's as fast as they could build them, trucks too, and that plan worked just fine until the government allowed gas to go above $3.00 a gallon. So put that in your pipe and smoke it Senator!
Now here is my prediction and I hope I am wrong: As I said Washington doesn't have a clue and they will continue to ignore the oil prices, either by ignorance or design, until they reach the critical stage again where they negate all of this stimulus spending. People will continue to stay in their shells, cars won't sell, manufacturing will not resume, housing prices will not start to grow again because people will still lack the confidence it takes to make our economy grow. We need to reinstate rules that take oil and natural gas off the commodities exchange, we need a comprehensive plan to ensure affordable gas and base utilities in this county. I know everyone is going green but green isn't going to change a damn thing for at least a decade. We don't have another decade to squander. In fact many of us don't have another 6 months to squander.
It's the oil prices dummies! It's the oil prices Democrats! It's the oil prices Republicans! It's the oil prices President Obama! It's the damn oil prices! Control those and your economy heals, ignore them and we're all in for a very long, rough ride.
So as a thought, take five minutes this weekend and shoot off an email to your Congressman or Senator or President. Remind them of what really caused all these problems then ask them what they intend to do about it.
Just my humble opinion.
Just my humble opinion.
I'ma do this...right now....you've inspired me to speak up!!!!!
ReplyDeleteYou are clearly right about their insulation being key to their lack of understanding. Either that, or they are just dirty.
ReplyDeleteTo use an example I'm sure you are directly familiar with, they seem to think lowering interest rates will cause a reinflation of housing. If they weren't so thoroughly insulated from society, they would realize that it doesn't matter how low interest rates are; no one will care if they can't get a loan. It is obvious that they consider themselves above the peasants. Every time they pass a bill that bans smoking in all public building (except Congress), or shoot down boosts in minimum wage and then vote themselves a raise, it shows how little they really care.
Oil will go up again, but I don't think it is the cause of crisis. If anything, it should have helped us. Increasing the cost to transport goods has its greatest effect on cheap goods imported from China. As much as the high gas prices are heavily fabricated, they are also based on supply and demand. A 1% increase in the demand can cause a 20% increase in the price because people aren't willing to do without. It isn't even about the supply of oil, it is the supply of refineries.
I think the Mainstream Media concept that we are failing because we aren't consuming enough is not only false, it is damaging. We don't have a lack of demand, we have a glut of supply. If few want to buy your goods and you make more anyway, the price of everything you have made goes down. We can't improve our economy by making crap we don't need and buying it from ourselves. That is like bailing water out of the back of the boat and dumping it into the front. If you make a product and buy it from youself, have you made money? If your employer pays you to make products and you go buy them, have you kept yourself in a job? If your government taxes you to bail out your employer so they can pay you to make stuff you don't want, have they saved the economy?
We need to boost external demand, not internal. It is easy. Devalue the currency. It stops the foreclosures, decreases imports and outsourcing, and increases manufacturing and exports. It cuts the debt and the deficit, and with any luck gets the Chinese to unpeg the Yuan from the Dollar.
LLJ....Atta girl! I'm proud of you
ReplyDeleteSP...
ReplyDeleteYou make many valid points. The housing crisis will not be solved any time soon unless this Administration takes the forclosed properties off the market to bring balance back to supply vs demand. Once the market has stabilized then they can dole the properties back into the market in a controlled, systematic plan that will not have a negative effect on home values.
Thanks for stopping by.