Idol Chatter

I have to wonder what is in the water that many of our country’s leaders are drinking.  Here is just one more example of some very comfortable beaurocrat who is totally detached from the economic reality that most Americans are living with lately:

Perhaps a new high in bureaucratic separation from reality came a week or so ago when Bill Dudley, the president of the New York Federal Reserve, was grilled by a group of working class citizens about surging inflation in the food sector.

Dudley, who before his current post was head economist at Goldman Sachs (you will remember them as the too-big-to-fail outfit that got something like $12.9 billion in taxpayer bailout funds at the same time they were preparing to hand out bonuses of $12 billion to 443 partners), was slogging through prepared remarks about how inflation continues at negligible levels, when one of the audience members asked, “When, sir, was the last time you went grocery shopping?”

To which he gave a circuitous reply, finally noting that while “food prices may be rising … other prices are falling — today you can buy an Apple iPad 2 that costs the same as an iPad 1 and is twice as powerful.”

There followed, according to news reports, “incredulous, boisterous laughter.”

If Dudley, who is reported to get a $400,000-plus yearly salary in his Fed post, gave any response as to whether he ever sets foot in a grocery store, it wasn’t noted in media accounts.

Source: http://deltafarmpress.com/government/solution-escalating-costs-food-let-em-eat-ipads

I mean seriously?  With millions out of jobs, millions having (or already had) their homes foreclosed on and now far more people struggling just to get the basics (food and gas) paid for, when will we hear our leaders start to acknowledge the true state of affairs in this country?

This morning I read that Walmart CEO Duke is indicating that Walmart’s core customers are showing that they are finding it harder to make ends meet and as Duke says “running out of money at a faster clip”.    While politicians want to paint a rosy picture as we edge closer to election year, the truth is that a huge number of people in this country are struggling.

The recession of 2008 started with a surge of gasoline prices.  Sure the real estate market was poised for a collapse but what got us there faster was the rising gas prices which squeezed budgets to the breaking point and defaults started to roll out like a tsunami rolling all the way across this country.  What will break this time?  With both gas and food pricing climbing and the QE2 ending in a month or so, a new storm is on the horizon.

This is seriously scary.  Take cover now America.

When you listen to politicians you ought to knowt that if they told you what they really thought and held to priciples, you’d never elect them. And that is our fault. We just want to hear what we want to hear. The better the spin or at least the closer it is to what we want to believe can be, the more likely we are to go along with what, I’d argue, we really know to be at best reality spun to idealistic levels and at worst just a pack of lies.

However, of all the politiicans in today’s political arena, I’ve got to hand my hat to our current president. He’s got the ability to spin any side of an argument and the ability to make up total lies down so pat, you believe him. He understand the craft of lying better than any I’ve ever seen.

Guess what America, we can’t tax the rich, give to the poor and have happy days. It’s a nice concept but even Jesus told us there will always be poor. If you over tax the engine that drives our country, you will either ruin it and, consequently see even more unemployment than we have today or you will see the rich leave this country for more understanding nations which will also leave us with fewer jobs. 

Wake up and take stock. We need to get real with ourselves first and then we need to not expect but demand truth from those who will shape (or in Obama’s case, should he have his way, completely control) our future.  We need to fight for an America where anyone can still control their future if they work hard and seize opportunity rather than buy into some socialist state where it makes no sense to work hard because all you achieve is just given to those who don’t work at all.

The thing that made our country truly unique was the rise of the middle class.  Getting ‘in’ wasn’t that hard and once in, you were almost guaranteed of a solid future.  But now the middle class may be doomed.  In fact, it may have a terminal illness that cannot be reversed.  Consider the following:

After the economy collapsed in 2008, the middle class took it hard.  Unemployment of over 10% in many states was the norm and has been slow to come down.  While we are told now that it’s under 9%, understand that as people’s unemployment benefits run out, they are taken out of the count.

If you are among the 90% or so that didn’t lose their job – congratulations!  But don’t thing the worst is over.  Instead, think about your retirement.  Social security is anything but secure.  The only way out is to 1) extend out the official retirement age farther and farther, 2) cut benefits and 3) increase taxes.  Even with that there may not be anyway to save it unless the federal government decides that it has the right to go after your 401K and IRA accounts and force them into a government program.  So much for all your diligent saving!  Finally consider whether or not you think you are covered by a pension program.  Many pension programs are grossly underfunded.  And as the baby boomers start to hit retirement age, the strain of new claims may end up to be far too much for some pensions to cover.

Pretty bad – right?  Now let’s talk about inflation.  Did you know that the reported statistics have been revised to take out the impact of rising prices on core necessities like food and gas?  So reported inflation sounds acceptable but we are all finding it harder and harder to keep our grocery bills in line.  And gas?  We are all making trade offs to keep our cars running.  The net of this is that our ability to save for our future is getting squeezed.

Then there is the housing market.  Recent sales data says that now more than 2 years post market collapse, prices are still falling.  Many people lost much if not all of their equity and what was once one of the safest investments the middle class made, is now nothing more than paying rent to stay in a mortgage.

All of this is bad but the worst is yet to come.  This morning I listened to “Dr. Doom” Marc Faber go on about his concerns about the economy (http://video.cnbc.com/gallery/?video=3000015563) and he got off the main point for a moment and mentioned that 50% of all babies are born to unwed mothers.  Now that caught my eye so I did some research and based on government data (find it at http://www.cdc.gov/nchs/fastats/unmarry.htm) it’s 41%.  Now while this may be 9 points lower than Faber’s number, it’s still scary high.  And the reason why this is scary is that these babies are born into households that, on average, are much lower on the social economic scale.  That means fewer opportunities and more drain on our over taxed social benefit programs.

Somewhere along the way our quest for the American dream became a demand for entitlements.  We’ve dug ourselves a very deep hole and the next decade may well be one of significant upheaval.

In what seems to almost be his trademark style, President Barack Obama is taking Europe by storm in what is his first visit as our President.  His wife, Michelle, our first lady is making an almost equally impressive impression as she meets with England’s Queen as well as normal school girls.

What is not clear is whether there is any real progress being made in a cohesive effort among the world’s leading countries to end the current recession.  Certainly the President brought enough staff to get that job done but the likelihood of accomplishing anything meaningful in such a short time frame is not probable.

Meanwhile the economy continues to show us a mixed bag.  Home sales are increasing but prices are lowering.  Unemployment continues to increase and has been recently reported as high as 8.5% but in March the stock market posted a 20% increase.  It is likely that we will continue to see a lot of volitility until all facests of our market start to move in a more unified upward trend.

Let’s face it, the small business owner is under a lot of pressure with the weak economy.  Even in the best of times they have a harder time getting credit and now, that has nearly completely evaporated.  Small business owners struggle to get by.

Now with over 1,100 pages, it seems like nearly no one (and that includes your congressmen and senators) has actually read the bill.  But with President Obama addressing Congress last week there were no specific provisions mentioned there designed to really help the small business owner.  For example, while Obama seems to have little regard for tax cuts, actually implementing tax cuts for small businesses would enable many to hang on during these difficult times.  And by hanging on, more jobs are retained in the economy.

In a recent poll conducted by Merchant Circle over 10,000 respondents when asked about whether they approve of the stimulus bill overwhelmingly voted NO.  Not a surprise really to those of us in the trenches with them.  Too bad we are, once again, ingnored by our elected officials.

With the incentive plan now passed, President Obama now turns his views towards the housing market.  Certainly if the economy is to recover, the housing market, which started the quick downslide, must be addressed.  The problem is that there seems now to be significant factions within the country that just hate the idea of bailing out people who failed to pay on their mortages.

This isn’t an easy situation but it does seem that if one of the major issues was the ARM rates underlying much of this junk lending suddenly rose significantly causing people who would have paid their mortgage to now be unable to, the solution should address the rates, not try to bail out folks who chose to stop paying.

Moreover, it’s unclear how you help a family who has been foreclosed on.  Once foreclosure happens the family has to get out and it makes no sense to try to put them back into the home that has now been cleared of any possessions left behind.

In any event, there was a lot of chatter on talk radio today about the plan, much of it revealing a grow sentiment against the bail out ideas.  We’ll stay tuned to see what happens next.

Earlier this week I listened to President elect Obama address congress to move swiftly to put together and a approve a new economic recovery package.  Now that was to be expected but as I’m listening to the President elect I’m wonder who is this guy?

The ‘new’ Obama seems to have lost his optimistic outlook entirely.  This new guy likes to talk about how we are at the edge of an economic abyss from which there may be no recovery.  No recovery that is, unless congress approves his package.

The thing is that a package of incentives cannot do anything for the next 3 months and very little for the first half of the new year.  More people will get laid off which will be painful.  The housing market will not come back to life  anytime soon.  The big three auto dealers will be back in Washington DC shortly asking for a lot more money to survive.

However, what Obama won’t acknowledge is that there will be recovery without his package.  And whether the economic recession we are in gets any worse or last any longer without it is debatable.  What I do know (and I think the President elect does too) is that his job creation plans that have to do with infrastructure projects (yes folks we are talking about laying concrete for roads and bridges) won’t do anything for a single mother of 4 who gets laid off of her adminstrative job.  I won’t do anything for the 48 year old father of 2 in college who can no longer make any money being a real estate agent.  It just can’t help the hundreds of thousands of folks who are not physically capable of doing that labor.

So the bad news is that much of what gets included in this stimulus/recovery bill just won’t help us out and will just raise the deficit further.  We are in for a grim year this year.

But we will recover because we are a huge economic force.  Once the contraction stops – and it will – spending will slowly come back.  And that will lead to job growth.  We need to focus on just how vast this country is and how rich it is with not only natural resources but with a people who will raise to the occasion.  Americans do not need a hand out.  This country has survived worse and come back the stronger for it.

In a recent news article I read today on Reuters.com, the focus was on how we may go into a depression from the current recession.  Now the premise of this argument was that the recent and significant fall of oil prices is a bad thing.

Are you kidding me?

A much needed easing of one of the principle expenditures in any individual’s budget is now a bad thing.  Forget how the sky high prices were making us all cut back our driving and cut back on other discretionary expenditures, that supposedly is not as bad as getting this price break on gas.

The arguement is that “the swift fall in oil prices is now lowering the absolute level of consumer prices and bringing with it likely declines in nominal GDP over the next three quarters.”

Well isn’t that only a potential rollback of the steep incline we just saw during the first 3 quarters of this year?  Moreover I say ‘potential’ because many companies absorbed the price increases for a period of time before they started to raise their prices.  To say that they now will decrease prices is a bit of a stretch.

Of course if you bought the first arguement you could then buy the second which is that “Falling prices would cut demand and discourage employers from hiring.”  But really if prices came down significantly that would incent consumers to, well, consume again.  And there is a core demand in the economy that won’t be easily shut down.

With government bail outs for the financial industry and probable for the auto industry, two hard hit sectors are getting some relief.  And with Obama’s likely proposals to spend on infrastructure and maybe a tax cut, the economy won’t pull out of the recession anytime soon but sure won’t sink into a depression.

Black Friday 2008 has now come and gone.  With much trepidation many retail stores and, frankly, economists will be counting the numbers.  Is Black Friday a good barameter of the Holiday spending totals?  Or could it be that with all the hype about how dramatic the deals were going to be and how much price slashing would be evidient, customers were left feeling a bit disappointed?

If that’s the case, if Black Friday becomes Bleak Friday, there is still a modicum of hope.  The fact is that Christmas will come and some level of buying always happens.  Christmas 2008 is already fated to go down on the records as one of no growth and probable retraction of sales volumes that have been achieved in prior years.

And the real story about Christmas 2008 will be told after Christmas as some retailers just won’t be able to make it.  There’s no jolly in that thought.  But the US economy is one driven by the consumer.  Consumers are fearful.  There have been many job layoffs already announced and as folks reduce spending in fear that their jobs may be next, they actually promote the very outcome they seek to avoid.  Ironic isn’t it?

In a day or two we’ll all be told how it went.  In the meantime, perhaps I’ll make a trip to the mall or better yet wait until Cyber Monday and buy something online.