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OK Gang, here we go again. This past week started off to be a downer. The stock market crumbled, its rally collapsed. Slowly but surely the world is beginning to recognize the American consumer as the most narcissistic bores in the world. We over indulge at every turn. We have more stuff than anyone in the world, we eat more, we are fatter, we conspicuously consume.
Our economy was 70% consumer products. When the consumer gets hurt, the economy tanks. Simple. Yet the government is doing everything it canto make it worse. Don’t think so? Consumers need more money to keep up their conspicuous consumption. I’m placing no moral value on this mind you but our economy is built on it. Every time government at some level raises taxes, you take money out of the consumer’s pocket and you depress the economy. As Mr. Clinton said in his first campaign, “It’s the Economy, stupid”. Raleigh, Washington and elsewhere these guys still don’t get it. Clinton was right. Ooh, it is hard to believe that I said that. I didn’t often agree with Mr. Clinton, but he was right then and he’d be right today.
Not only should we not add new taxes, we should continue to cut taxes. Not forever, I’m a prudent person. We need schools, better ones than we have. We need to pursue a reasonable and responsible health care system that is accessible to all LEGAL residents of the USA. We need a path by which currently illegal residents who have a clean police record here AND at home can become legalized residents. Yeah, I know. They are illegals and we should just kick them out. But that just isn’t going to happen so let’s resolve this issue and move on. We need to spend wisely and as we can afford too. If we do that, we end up with more for everyone and sooner rather than later.
That said, Mr. Obama has said that the economy is showing signs of turning around, yet in the same speech he said that the unemployment rate will continue to climb exceeding 10%. There are 8 million more people unemployed this May 2009 than there were in May of 2007 and 6 Million more unemployed in May 2009 than in May of 2008. It doesn’t seem like whatever we are doing is working, now does it? I know, shut up and drink my cool aid.
Gasoline, here in Leland NC, has eclipsed $2.60 per gallon working its way up as we move closer to the traditional price peak in July. I still think we might see $3.00.
The number of mortgage applications are still at record lows nationally, running 28% below last year for the Month of May. Housing Starts and Permits are evenly matched, suggesting that no one in the building industry is optimistic, pulling permits ahead of time for spec homes.
Consumer credit remains tight and rates are rising. Both of these constrain consumer spending which in turn slows recovery.
Mr. Obama see’s the economy as turning the corner. With rising taxes, continued unemployment growth and tight credit I fail to see how the economy will recover. The “porkulus bill” has yet to be actually spent in any meaningful way. According to the New York Times, only 6% has been spent to date. That is $46 billion of $800 billion. A very small amount considering it was to stimulate an $11 Trillion economy… NOW! Tax cuts would have been more effective in getting money into the hands of consumers right now, perhaps saving people from foreclosure. Instead we are preparing to build or refurbish bridges in the hinterlands and other projects that were not critical to recovery, just to someone’s re-election.
England see’s its unemployment picture starting to brighten. China’s economy has continued to grow (albeit from a smaller base and at a reduced rate from prior years). Where, Oh Where has our stimulus gone? I may be showing my age here, but perhaps it is "Blowing in the Wind".
Remember to keep our little corner of the world from being decimated we need to keep the fine people in Raleigh from killing the movie industry in Wilmington. It is a great little industry, one of our few. And it is clean and ecologically pretty friendly. Hard to find these days so lets keep the ones we have.
The future isn’t all bleak but it isn’t bright and beautiful either. We will be dealing with this economic problem well after Mr. Obama’s first term is over. Whether he will make things better or worse, history will judge. It will judge without any color bias. It may have a Latina woman’s experience bias or certainly a socio-cultural bias. Remember that history of battle is always written by the victor. It will just be interesting to read that judgment when it comes.
Tuesday, June 30, 2009
Tuesday, June 9, 2009
June 9 Political/Economic update
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.
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.
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