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End of the first week in June. So what have our elected official’s been up to and how will that affect you?
Let’s see, the President has been traveling a lot trying to live up to campaign promises and to try to mend some fences in Europe and in the Middle East. I’ve not left the country in over a year, but friends who have traveled recently indicate that the world blames the USA for the financial melt down. I’m not sure what Hilary has been doing, unusually quiet. Joe Biden has been kept away from microphones. They are trying to teach him to think before speaking but that isn’t going to work. Old dog, New tricks problem. He delivered a critical state in the election and he is a valuable source of knowledge for the young administration. Just need to keep him in the attic with the crazy relative.
Ms. Pelosi is the target of some sort of CIA conspiracy and was told lies. Was the CIA forth coming? No, not in their job description. Did they lie, no they keep incredible documentation and transcripts. Ms. Pelosi would be looking for their heads on a platter if she were telling the truth. So draw your own conclusion. Oh, if a State goes bankrupt, and the Federal Government has to take over does that mean California could terminate her contract? Best thing the Dem’s could do. Biden is occasionally embarrassing but Pelosi is a *itch. She is mainly responsible for the writing of the stimulus bill which is apparently not working while China’s stimulus has their stock market back, people are working and their economy is growing. We have a porkulus bill (of which only a small portion has actually been distributed) rather than a stimulus bill. It is the same governing mentality that is about to bankrupt California. Bring back Pay-Go!
Barney Frank, now there is a probably the worst thing to happen to the gay community in a long time. I’m not bashing him because he’s gay, I’m bashing him because his is either inept or a crooked Politian. Either he was clueless or he was taking so much money from Fannie Mae and Freddie Mac that he lied about their condition when the inept Mr. Bush was concerned enough to ask about them. For those who liked to bash Mr. Bush, let’s remember that even he was sharper than Mr. Frank.
Government bonds are going to have to start yielding higher interest to attract buyers. The last round of bonds was bought by the Fed. That means there was no free market pricing. That is, in the current lexicon, not sustainable. Thus rates will begin to rise. Check with your mortgage broker. See if prices are rising, and be suspicious if he denies it. Prices aren’t rising for the very best borrowers, but the requirements to get a certain rate are rising. Same effect as admitting that rates are rising, just more politically palatable. I think the government will try to set up a program that will provide 5-6% mortgage rates for the foreseeable future. Once that legislation is in place the Fed will begin to tighten monetary policy, raising the discount rates and generally make borrowing cost even more. Good news for net savers, bad news for borrowers.
Gold continues to climb and the dollar will continue to inflate especially if the Fed doesn’t begin to tighten monetary policy by the beginning of 2010. My gasoline price prediction has been pretty accurate and I think we will continue to see rising prices until mid July. Probably $3.00 for regular. Venezuela, Brazil, Nigeria, Iran and other third world countries really need $85 oil to continue to fund their social programs and keep their governments in power. $85 oil equates to $3.50 gasoline for you and me. Get used to it because it is coming unless we can cut consumption more than China and India increase theirs. Fat chance of that. Even with the 2016 fuel efficiencies that Mr. Obama outlined, the consumption decline will be small. There are 46.5 million cars including pick ups, SUV’s and so forth, and at current level s we are adding only 5 million new cars to the fleet each year. So we will not have effectively completely purged the fleet of gas guzzlers until 2025 at the earliest. That is 17 years from now. If the dollar’s value continues to decline in purchasing power at the current rate (June 6, 2009 Gold= $962 / Jan 3, 2006 Gold = $530) how much will a gallon of gasoline cost? At the current rate you will be looking at $4.75 by 2012. We’ve seen $4.00 before, only last year in fact. Does $4.75 seem so hard to believe? Higher mileage cars are smaller and more expensive so begin to think ahead for your next choice in a car.
What are Ms. Pelosi and Mr. Frank going to do about that? Perhaps the CIA will have lied to them about that too? Mr. Obama has started to do something. Do I think it is enough, No. Do I think he is the first to try to do something since President Ford (1974-1977)? Yes, not one other President, including my personal favorite Ronald Regan, really seemed to understand what our dependence on foreign oil really meant.
Do I think the recession is ending? In a word… No. I think we are in for a bottoming out of the economy in 2009 but signs of recovery like declining unemployment will take quite a bit longer. In fact we will continue to see unemployment grow over the next couple of months. That means more mortgage and credit card defaults. I don’t think we will see any sustainable economic growth for at least another year. 2011 may be when we feel the effects of recovery but those effects are likely to be mild. The shifting of economic and military power from west to east has begun. Their recovery will be faster and more robust than ours. We are a debtor nation. They are our bankers. Who is likely to come out on top? The bankers or the borrowers? We have lived well beyond our means because “we deserved it”. Life will be different in the future than it has been in the past 30 years for all Americans. How different remains to be seen. Tempted as I am to predict what will be different I’ll limit myself to the following. Borrowing will be more difficult. No more using the house as an ATM machine and much greater limitations on “buy now / pay later”. Buying a house will be considerably more difficult as well. You might actually have to bring money to the deal, money that you have saved, not borrowed. Real money that you earned and didn’t spend buying all those things “you deserve”. Cars, pedicures, the things your great grand-ma used to call luxuries.
