Economy
It's been a while. Almost two months since I penned my comments on the Recession. We still have no Recession. Some may argue that a .06 increase to a .08 increase isn't very much. However, it's not a decrease. The classical definition is two quarters of reduced (negative) growth. We haven't had any. We may not
I can see some glimmers of the end of the economic downturn. If our politicians don't screw it up by pouring more money (and tax increases) on special interests that reward the quick and easy while purporting to save the slow and diligent. The credit freeze is starting to un-lax (Unwind and relax, My kids said that. It fits.) Loans are being made and people are buying big ticket items. The 47% Bonus depreciation that was included in the Free Money stimulus package will start to kick in in the Third and Fourth Quarters of the year.
Overall, I think we have a bit of "Stagflation" happening. Gasoline costs are driving up the prices of everything but we haven't had an increase in payroll. We are promised huge tax increases by the Democrats next year. So, people are moving their investments into assets. Inflation will make the assets worth more (really the same in constant dollars) Congress will get more money from bracket creep and the bonus depreciation will make the new items cheaper... The low dollar should be making our exports a great bargain. We should have lots of tourists from abroad spending their bigger money on our bargain destinations... But we cannot depend on these sources of income to help pull us around. I look for higher interest rates in the near and long term. We need to make investments in the US competitive and profitable again. I'd like to see us sell some gold and soak up some of the dollars floating around the world. That won't happen for fear of causing a panic.
Oil is a bubble. Anything above $30/bbl is a function of 1) war premium and 2) speculation by lots of big funds and soveriegn nations. Iran is hoarding their oil offshore in tankers. This removes several million bbls from the market and drives up the prices of transportation. In the meantime, Brazil has discovered an estimated 33 billion bbls in deep water offshore. They have tied up many/most of the deep water rigs for their exploration. China will develop the Cuban oil fields and the US will sit with pristine beaches and pay-pay-pay. Sometimes it seems we have adopted the Malcolm Forbes strategy from the 1970's. He urged America to use up everyone else's oil first and then develop our own resources. What we need is to get busy developing our alternatives...
Global Warming
At $6/gal we will change the way we live. At $4/gal we're starting to cut back. The whole Global Warming scam is designed to force us to live poor. The proposed Cap-and-Trade program for businesses is but the opening for personal carbon rationing. I can easily see a time when each of us will be given a ration card. As we use carbon we will be dinged. When we run out, we will be forced to buy more from our less active or industrious fellow citizens...or from the govt. Every gallon of gas, every kilowatt hour, every airplane flight will be subject to rationing.
This is Free Money for the govt. They will create an artificial shortage. They will sell us access to the carbon gases. They will control the supply and not have to actually produce anything in return. They limit the number of nuclear power plants. They limit refinery development. They limit exploration. They define what types of oil we can develop (No Oil Shale, No Canadian Tar Sands)... Of Course, as our Masters and Superior Beings traveling on Important Govt business, they will be exempt from the same rationing scheme.
Can't happen here-? Why not-?
What do we do when the earth turns cold-? Over the past 100,000 years cold has been the dominant weather pattern. We look at our industrial history and become frightened. We see how we have changed and advanced. Things that killed us by the millions 100 years ago are seldom seen by the modern doctors... We are afraid of our success. We have created a new religion that demands great leaps of faith because the scientific evidence is shallow at best. We now need to force everyone to sacrifice for the noble cause. Of course, being humans we all know that those who advocate the most sacrifices will be among the few suffering the least.
What do you think-?
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Saturday, May 31, 2008
Monday, April 7, 2008
Recession -NOW -Update
Are we in a Recession-?
It's been a long time since we had one. The one in 1992 was a "hair-shirt" recession. We talked ourselves into it and we popped out again without the majority of the country feeling anything except worry. We haven't had one in a long time. We're losing the population that lived through the Big Depression.
The slight depression early in the Bush years scared the Republicans enough to push for tax breaks. This one is being fueled by:
1 Fears of a Democrat controlled Congress and White House. Together they have promised to not only let the Bush Tax Breaks expire (prompting a huge tax increase) but to add new taxes and regulations to businesses and The Rich. (Whoever they are-we're never told if we are one or not I don't know who to hate, feel pity or be depressed over.) The Democrat controlled govt is already talking about protectionism and abrogating the NAFTA trade agreements simply "because". They over look the historical affects of the Smoot-Hawley Act which is credited with destroying over 60% or the worlds trade and driving the worldwide Great Depression even deeper. They claim they want the US to use "soft force" to deal with drugs, narco-terrorism and terrorism. Yet they refuse to approve the Columbia Free Trade Agreement. This agreement will improve exports from the US. It will allow Columbian farmers to have a viable economic alternative to the cocaine and marijuana crops. What do the Democrats REALLY want-? The world and America waits for some clarity.
2) the Credit Freeze. Nobody knows what their collateralized securities are worth. They're forced to mark them to market, but the market keeps moving and when it drops the asset value drops. Which spins the cycle yet again. There was some fraud and some theft but not to the degree that companies are writing off their holdings. The knock-on effect is that all funding institutions are looking for belt-and-suspender guarantee on any loans. If the Freeze continues then only the credit card companies with usurous rates will be providing liquidity to the economy.
3) Sinking Dollar is harming our exports. We need an active Fed to start pulling dollars off the market. They can do this by buying in dollars with either foreign currency or swapping some of the gold we hold. At around $1,000/per ounce the US needs to sell some gold, platinum and palladium. (no wonder the meth addicts are stealing catalytic converters from the driveways at night). Gold, Silver,oil are commodity prices all reflect the surplus of US Dollars floating about the world. We cannot raise interest rates in the middle of this credit freeze. Too many contracts are tied to the Fed Rate.
Here are a couple of tidbits from the daily news feed that you may have missed;
The leader of the NBER personally thinks we are sliding into a recession. The NBER, (National Bureau of Economic Research,) a non-profit research organization, typically declares start and end dates for U.S. recessions. The group has not officially declared the U.S. is in a recession.
Transportation is a leading indicator of the economy.
BNSF Idles Freight Cars Due to Downturn
Freight railroad BNSF Railway Co. is parking miles of rail cars in some parts of the country because there is not enough freight to keep them moving, the Associated Press reported Monday.
ISM Contraction May Indicate Trucking Upturn, Analyst Says
Last week’s Institute of Supply Management report that showed continued contraction may actually be good for the trucking industry’s outlook, according to an industry analyst, the Associated Press reported.
I read the two as saying long term freight is gonna slow down. Short and intermediate freight demands will draw down inventories until demand returns. Manufacturing will slow and if demand does not rise, stop. Then we are in deep trouble. Loans must be paid, insurance must be paid, rents, leases and mortgages must be paid, even if there is no manufacturing or sales of goods and services.
Things are not that bad. They probably will never get that bad. Our fears will make them worse. Our politicians may create a problem where one could have been avoided. we don't have to have a recession or depression. The market is correcting itself. The fire will be over before the fire brigades can react-but they may pass laws that make it harder to avoid or correct in the future.
In seven months we will know much more than we do today. Unfortunately, the country cannot hold its reath for that long. Plans will be made, approvals granted or denied, commitments made based upon the best estimates of what the economy will be doing in 2009 and 2010.
What does it all mean-?
How do you read the headlines-?
It's been a long time since we had one. The one in 1992 was a "hair-shirt" recession. We talked ourselves into it and we popped out again without the majority of the country feeling anything except worry. We haven't had one in a long time. We're losing the population that lived through the Big Depression.
The slight depression early in the Bush years scared the Republicans enough to push for tax breaks. This one is being fueled by:
1 Fears of a Democrat controlled Congress and White House. Together they have promised to not only let the Bush Tax Breaks expire (prompting a huge tax increase) but to add new taxes and regulations to businesses and The Rich. (Whoever they are-we're never told if we are one or not I don't know who to hate, feel pity or be depressed over.) The Democrat controlled govt is already talking about protectionism and abrogating the NAFTA trade agreements simply "because". They over look the historical affects of the Smoot-Hawley Act which is credited with destroying over 60% or the worlds trade and driving the worldwide Great Depression even deeper. They claim they want the US to use "soft force" to deal with drugs, narco-terrorism and terrorism. Yet they refuse to approve the Columbia Free Trade Agreement. This agreement will improve exports from the US. It will allow Columbian farmers to have a viable economic alternative to the cocaine and marijuana crops. What do the Democrats REALLY want-? The world and America waits for some clarity.
2) the Credit Freeze. Nobody knows what their collateralized securities are worth. They're forced to mark them to market, but the market keeps moving and when it drops the asset value drops. Which spins the cycle yet again. There was some fraud and some theft but not to the degree that companies are writing off their holdings. The knock-on effect is that all funding institutions are looking for belt-and-suspender guarantee on any loans. If the Freeze continues then only the credit card companies with usurous rates will be providing liquidity to the economy.
3) Sinking Dollar is harming our exports. We need an active Fed to start pulling dollars off the market. They can do this by buying in dollars with either foreign currency or swapping some of the gold we hold. At around $1,000/per ounce the US needs to sell some gold, platinum and palladium. (no wonder the meth addicts are stealing catalytic converters from the driveways at night). Gold, Silver,oil are commodity prices all reflect the surplus of US Dollars floating about the world. We cannot raise interest rates in the middle of this credit freeze. Too many contracts are tied to the Fed Rate.
Here are a couple of tidbits from the daily news feed that you may have missed;
The leader of the NBER personally thinks we are sliding into a recession. The NBER, (National Bureau of Economic Research,) a non-profit research organization, typically declares start and end dates for U.S. recessions. The group has not officially declared the U.S. is in a recession.
Transportation is a leading indicator of the economy.
BNSF Idles Freight Cars Due to Downturn
Freight railroad BNSF Railway Co. is parking miles of rail cars in some parts of the country because there is not enough freight to keep them moving, the Associated Press reported Monday.
ISM Contraction May Indicate Trucking Upturn, Analyst Says
Last week’s Institute of Supply Management report that showed continued contraction may actually be good for the trucking industry’s outlook, according to an industry analyst, the Associated Press reported.
I read the two as saying long term freight is gonna slow down. Short and intermediate freight demands will draw down inventories until demand returns. Manufacturing will slow and if demand does not rise, stop. Then we are in deep trouble. Loans must be paid, insurance must be paid, rents, leases and mortgages must be paid, even if there is no manufacturing or sales of goods and services.
Things are not that bad. They probably will never get that bad. Our fears will make them worse. Our politicians may create a problem where one could have been avoided. we don't have to have a recession or depression. The market is correcting itself. The fire will be over before the fire brigades can react-but they may pass laws that make it harder to avoid or correct in the future.
In seven months we will know much more than we do today. Unfortunately, the country cannot hold its reath for that long. Plans will be made, approvals granted or denied, commitments made based upon the best estimates of what the economy will be doing in 2009 and 2010.
What does it all mean-?
How do you read the headlines-?
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