Monday, January 21, 2008

The Big Economic Issues (1): Gas Prices

One of the two big issues that face our economy is gas prices. Nothing is happening to the prices; they just keep going up. It does seem that there is finally a little market resistance as prices go to the $3.50 range (using an average for regular unleaded), since prices seem to reach that area and then retreat some. Maybe this is consumer resistance or (more likely, I think) it's the oil market or its string-pullers.

I don't see that anything is going to change until either we see some real progress with alternative energy (which is still mostly unfeasible for general use) or until we have some external pressure to decrease demand.

As far as alternative energy: If "the magic bullet" were on the market today, it would still take several years for the effects to take hold, as new car and fleet buyers moved (reluctantly) to the new power, and then these vehicles trickled down through the used car market. We're talking probably ten years before seeing any meaningful effect and at least 20 years before we're off gasoline. That's after the clock starts, and we don't yet know when that will happen.

As far as decreasing demand: Flying in the face of the normal laws of economics, rising prices have not diminished demand.

We have seen gas prices go from the range of 30 cents to the range of $3.50 over the last 34 years. This occurred mostly in 3 short periods of huge jumps.

1. During the Arab Oil Boycott of 1973-74, the whole gasoline market was turned on its ear. Besides prices nearly tripling practically instantly, gasoline, always a buyers' market, became a sellers' market, as long lines formed at stations and such measures as odd-even limitations were imposed. Instead of gas stations fighting for customers by giving premiums, having price wars, and focusing on customer service (including freebies such as road maps), the station owners and operators (and the oil companies themselves) felt their new power. Instead of, "Please, please buy from me!", it became, "You don't like it my way, go find someplace else with gas." Even after the boycott ended (amidst rumors and conspiracy theories), the new pattern was set.

By the way, one interesting development was that prices trebled, then eventually fell back to double what they'd been, and everybody (responding to the press reports) was greatly relieved and saw the new prices as such a huge drop.

The fall of the Shah of Iran brought a repeat of the Boycott shortages and gas lines. However, the end result was only relatively moderate increases in prices, about 20 percent net. Again, though, prices rose a lot, then fell, and people were relieved that the prices were lower.

2. When Saddam invaded Kuwait, we had another shortage and another jump. Prices went from about a dollar to about $1.50, net. Same dynamics.

3. Prices were rising, enough to be in the news (with dire predictions of $2.00 gallons), until 9/11. As America froze for a few days, and as the airlines were stopped for several days, demand plummeted and so did prices. Of course this didn't last. For whatever reasons, the political pressure on Iraq, the uncertainty of the whole issue of terrorism, the world oil market started climbing, and remains so inclined as I write (although prices are down a little at the moment).

In none of these jumps has consumer demand dropped off. We've been willing to buy all the gas we could get, and pay any price for it. We've been tricked (by whom I'm not sure, but the news media have never failed to deliver the message to us) into being delighted when we end up paying up to double what we had been. We've been scared into being happy with the current price by forecasts of yet higher--all-time high--prices "certainly coming". And we've adopted a get-it-now-while-we-can attitude, which only runs up the price due to increased demand.

Ultimately, the only solution I see (on the way to weaning ourselves from gasoline) is gas rationing. I wrote about this on November 7, 2007, so I won't repeat it here.

The Big Economic Issues (2): Mortgages

The mortgage meltdown is a huge issue in today's economy. Investment money is tied up in homes with the expectation of a steady revenue stream over some 30 years. That revenue is funding other investment, including paying the mortgages or rent of retired individual small investors, as well as their groceries.

Stop that revenue stream and the result reaches the corner retailer in short order. Translation: Less spending, which leads right back to "the R-word".

My first thought about the mortgage crisis has to do with personal responsibility. This takes two forks: 1. People bought more than they could afford, hoping (not planning) to be able to afford the payments which lay in the future. Why should these spendthrifts be bailed out? 2. The lenders knew what they were doing. Could they not contain their greed long enough to lend responsibly, i.e. to people who were good credit risks (which by definition anyone who is borrowing more than s/he can afford is not)?

But the bigger picture is the effect on the overall economy, and on the individual investors whose money was mismanaged by the lenders and who had little or no say in the matter. Not only do these investors have a need (and maybe a right) to be protected, it's good for the economy to protect them. Also needing and deserving protection are the homeowners whose property values are being undermined by the meltdown, even though they have reasonable mortgages or they own free and clear.

But even more than the housing market itself, the real issue here is the effect on the overall economy. People who are losing their homes and their credit are not going to be spending in the retail area or buying big-ticket items. Homeowners not involved but affected are going to be worried, and therefore cautious with their spending. Investors losing or in fear of losing their investments are going to be holding back all they can. Those of us remaining, hearing the news of a financial crisis, are going to rethink buying on credit and are going to reign in our spending. All that adds up to "the R-word".

Therefore, though it goes against my sense of justice and my belief in minimal government interference in the economy, I think a mortgage "bail-out", in the form of "just to get you over the hump", is not only a good idea, but a necessary one. Perhaps this could be something on the order of a federal mortgage guarantee for maybe about five years, coupled with a mandatory refinancing arrangement which would delay the increased payments for a year or two, maybe by extending the mortgage. (This would apply only to those who are currently in trouble and apply for the assistance.)

Of course, the borrowers would end up paying at least as much, probably a good bit more, over the term of the loan. But I think that's small price to pay to keep your home and credit rating. Besides, the borrowers got themselves into this.

"Stimulating" the Economy

Whatever else it may be, good or bad, President Bush's plan to ward off recession is a nearly foolproof political move.

Scenario 1. Congress approves the plan, it works, and fiscal conservatism looks good. Score Republicans.

Scenario 2. The Democrats in Congress block the plan and the Democrats take the blame for the economy tanking.

I can only see one possibility for a loss here, and then only a partial loss:

Scenario 3. Congress approves the plan, and it fails. While Bush and political conservatism could be blamed, the Democrats would have to share the blame since they (the Congress) approved it.

So what about the plan on merit?

Ignoring any political dirty tricks as contributing causes of "the recession", I see two major issues: Gas prices and the mortgage meltdown. I don't think any long-term economic stability is coming until these issues are solved (and I don't see any simple solution).

Meanwhile, the President's intent to put money in the hands of individuals is almost certain to get people buying, at least for a little while, and at least a little bit. That may be enough in the short term. If people are spending, product is selling, retailers are restocking, and manufacturers are producing and workers are working and earning, so workers are spending.

(This classic cycle may break down, though. The part where "manufacturers are producing" does not necessarily lead to American workers working and earning. "Manufacturers producing" may lead to Chinese workers having more to spend, or more likely, to manufacturers having more profit without any workers making more money.)

The Democrats are already posturing.

They want the money to go to the working poor. Fine; they'll probably spend it--then it'll be gone and they'll still be the working poor, but they'll be further appreciative of the Democrats whom they believe have "helped" them.

They want new government programs. Figures; give a liberal a chance to make government bigger and guaranteed s/he'll do it. No matter what it costs the taxpayer. Bad idea at any time, and especially bad now because the result would be more government, increased taxes, and the programs (even if they ever worked) would not affect the economy for months to come. (Oh, wait. That's good, because then, the recession would still be on at the elections, and once the programs finally take hold, maybe a Democrat would be in the White House to take credit for the turnaround.)

Wednesday, January 16, 2008

Hooray for Hollywood! NOT!

Well, apparently it's official: First-run TV is dead for this year. The unfulfilled contracts for new shows were canceled yesterday.

The history of this as I see it:

1. The writers want something which, at least to an uninformed outsider like me, seems reasonable in principle.

2. The producers won't give it to them, so they go on strike.

3. Neither the producers nor the writers will give an inch.

4. The TV season is canceled, leaving the real workers out of work.

Sure, the producers and writers are hurt, and the networks will lose some in advertising revenue (depending on whether they can put on something that will draw audiences). But it's the "little guys", the regular workers who earn decent wages while they're working but are anything but wealthy. It's the merchants who serve these people (and those who serve the big shots, too). And finally, it's all California taxpayers, as more unemployment insurance claims are filed. (I hope Gov. Arnold's new budget provides for this.)

And as this battle for a little bit of money has been raging, "in other news" there has been a lot of worry and fright about "recession". Well, all these "regular" people being unemployed and not knowing when or if they'll get work again, and therefore cutting their spending to the bone, burning through their savings (if any--not many Americans are saving anything), maybe struggling to make their house payments, or maybe failing to make them, during this mortgage crisis, is NOT GOOD.

Seems like a pretty hefty price to pay just so some fat-cats can get a little more, or so some fat-cats can keep from giving up a little, depending on your point of view. (By the way, neither can happen now; they've already lost too much. Doesn't change the impact on the regular folks, though.)

Thanks, Hollywood!

Saturday, January 12, 2008

"The Economy is Falling!"

Chicken Little is alive and well and is a Liberal Democrat.

Anybody remember the recession of 1991-1992? As we headed into the Christmas shopping season of 1990, sales figures were looking good. Even so, the press started talking about recession, and guess what: Retail sales dropped off. Recession came on.

Did the press forecast the recession, or cause it? Well, sales were good, then the reports of recession, then sales fell off, then the economy tanked. You decide what happened.

By the way, incumbent Republican President Bush was defeated by somebody named Clinton, whose campaign emphasized the economy.

So here we are at a Presidential election. Here we are with a Clinton running and a Bush incumbent. Here we are with talk of recession. Interesting!

One difference now is that we really do have a housing and mortgage crisis. We really do have gas prices fluctuating (another area where it seems to me the press is helping to drive up prices by giving a message along the line of "you think this is bad, just wait", which I think only desensitizes the public to the price increases).

But will either of these, or even both, bring us to recession? Only if the public believes the reports. If we do, consumers will buy less, manufacturers will delay expansion, new product releases, etc., and the cycle of pessimism will self-generate and we'll be in recession.

And then the Democrats will blame Bush and his policies and will probably win the White House and Congress. And all it will have cost them is thousands unemployed, production down, and thus government tax receipts down and the deficit up. A real bargain!

So far, though, the public has not bought the story. We'll see if this rare act of intelligence continues. I certainly hope so. My family's income is recession-proof, and mostly we stand to get ahead (make some opportune purchases) if there's a recession. However, I really don't think that's good for the country, and I don't want to see the "little guy" (the one the Democrats claim to be champion of) hurt.

I call for optimism!

There will be no recession! There will be no recession! There will be no recession!

Keep saying that.

Friday, January 11, 2008

What was it really like when we had God?

La Shawn Barber has a post on Christians in St. Louis opposing the distribution of Bibles in the public schools. This prompts me to put down (or put up, I guess) my thoughts and recollections on the whole "prayer in schools" area of things.
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The history of the United States, clear back to a number of the original colonies (most notably Plymouth, but also Maryland and Pennsylvania come to mind) is religious freedom. We haven't always practiced it; we discriminated against Jews, for instance, but it has been our ideal. I believe it has now become "freedom FROM religion", pushed by people and groups who are opposed to God and religion and want to get rid of it or at least marginalize it.

(Many have written about the historical facts concerning "separation of Church and State", e.g. that the phrase, "a wall of separation", was first used by Thomas Jefferson, one of the least "religious" of the framers of the Constitution, to assure the Governor of Connecticut that if that state wanted to establish a State Church (i.e. a formal link between the State and a particular church denomination/heirarchy), the Constitution prohibited the Federal Government from prohibiting it. I'll pass on that exact discussion.)

Instead, I want to move to more recent historical sociology. The claim is being made that the America of today is not unlike the America of the past, that "the Cleavers" never existed, that the past has been whitewashed.

Sorry, not true. Perhaps we never had a "Norman Rockwell setting", but I can tell you from personal experience that we used to allow religion in schools and our society, and both school and society was much better than today, much less: drugs, crime, hate (with notable exceptions), broken families, welfare, to name a few.

At age 14, I ran my father's gas station by myself 5-10 PM. I wasn't in a bulletproof booth, either. (In fact, the cash register was out in the open and required no key or password.) Try that today!

In school, the most difficult behavior problems had to do with talking in class, passing notes, or chewing gum. There were a few occasional truants. Even the roughest kids wouldn't have dreamed of talking back to the principal. (I'm talking high school here, but in recent years I've seen elementary students read the riot act to the principal [who was, btw, an ex-football player]!) (Also, if you got in trouble in school, you got in trouble again when you got home. Very rarely did the parent blame the school, as is too common today.)

In those pre-Murray v. Board of Education days, we prayed and pledged allegiance to the Flag every morning. In high school, Catholic kids were bussed (by the school) to the church every Thursday, eighth period, for religious instruction. Jewish kids were allowed absences on Jewish holidays. (Of course, it's true, too, that the only diversity we had was Protestant, Catholic, and Jewish.)

A further account: In 1942, my aunt recounted in a letter how on a trip to the shopping district, her friend's car was blocked in by a double-parker, and how she got into the blocking car and her friend pushed, and they moved it out of the way. Just as they finished, the owner came along. He got mad at them for putting his car in where theirs had been (because it could get blocked in--he calmed when reminded he had blocked theirs). Notice a few things here:
1. They felt free to move some stranger's car.
2. They were able to move the car. It was not locked or alarmed.
3. The owner was not mad at them for moving his car, but for where they put it.

Okay, so do I look at the freedom from crime that's obvious in a first-hand report from that time, or do I believe the people today who assert that things were the same then as now?

Another contemporary report, this one from much earlier: In his account of the America of the early 1800s, de Tocqueville noted that women were safe walking along the street without escort, a marvel to the Frenchman. Today, we hear reports all too often of women being raped on college campuses and other seemingly safe places and of child abductions and molestations. Then and now, the same or different?

Do I think that the changing view of the place of religion in the public sphere has had an effect on our American way of life? Is Bin Laden a Muslim?

Thursday, January 10, 2008

California is the new New York?

As California voters approach not only the primaries but referendums on increased gambling on so-called Indian land (which would allegedly give the State more money), Gov. Arnold has released his new budget, with massive cuts in education, public safety, recreation, and prisons, to name a few areas.

Such phony-baloney! This is what they do in New York and other political-hack-run states: Threaten cuts in the most obvious, most emotionally-charged areas, and then get a budget through with no cuts at all.

Hello! There are so many areas where real, meaningful cuts could be made! (That's if anybody actually wanted to cut the budget.)

But this time around there's a twist: The Governor favors--in fact, he arranged--these deals with the gambling interests.* Looks like the voters are being scared into voting for increased gambling and increased dependence on the tribes to fund the State government. If history repeats, 1. the voters will pass this "easy money" set of measures, and 2. the State will not benefit.

Several years ago, based on a promise that Education would benefit, the voters approved a state lottery. Education budgets were tight before the Lottery and have stayed tight; the only changes have been CUTS in the education budget!

Hillary sheds tears. Arnold cuts the muscle and bone out of the budget but leaves the fat. And the voters keep on voting. P.T. Barnum** was right; there is a sucker born every minute!

"No one ever went broke underestimating the intelligence of the American public." H.L. Mencken.

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*Sometime maybe I'll say something about the First Americans and "gaming". Bad deal.

**Or whoever actually said it.

Wednesday, January 9, 2008

Where are the soap commercials?

On Tuesday I found myself in a public space with full-time news on the TV. It was nonstop "let's talk for several hours while we sit here waiting until there's news". They even had a countdown timer, time until the polls close!

That was it! I am SO TIRED of this election!

First of all, the campaigning and the "news" coverage have been going on for at least a year (feels like decades). This started way earlier than I can ever remember. Secondly, there was no news whatsoever until the Iowa caucuses closed last week, nothing but speculation, but that didn't stop anybody from talking. There were more predictions than at a psychics' convention! Same for the days between Iowa and New Hampshire.

Here's where I have a huge problem:

1. Predictions are pretty much useless, and polls are pretty much useless; it's only the actual ballot that counts.

However, I worry that the predictions themselves tend to affect the outcomes. I mean, people do tend to be influenced by public opinion; people do tend to like to be among the majority, to have voted for the eventual winner. (Or people tend to vote for the underdog--your choice of theories; both have adherents.)

2. Even the primaries themselves are of limited value. Here's what happens: The state delegates, receiving from their voters via the primaries a mandate to vote for a certain candidate, go to the convention and vote that way on the first ballot.

If there's no clear winner (and has there ever been?), the candidates are free to vote as they wish, which will usually be for the favorite of the party leaders (after all, these delegates are loyal party members).

3. Claws will be retracted and the people who were denouncing each other as worse than Satan himself are now on the ticket together and/or lavish in their praise of and devotion to each other.

It's all such a big game! And we voters are totally fooled by it! And the media is exploiting it and us by hyping it (yes, the blog-o-sphere as well as MSM, I hate to admit--although I will say that many bloggers are talking the issues more than predicting). They tell us for days, weeks, months before how the vote will turn out. Then after the votes are in, they tell us why they were right or why they were wrong (doesn't matter which).

Okay then. I guess I'll jump on the bandwagon with a prediction: At the Democrats' convention, Hillary or Obama or Edwards will come in as the leader, having gotten there by accusing the closest of the others of treason, felony, and generally not being a nice person. One will go out as the Presidential candidate and one will be the "always have been convinced s/he is the best for the job and certainly better than the Republican" Vice-presidential candidate.

I can't make anywhere as clear a prediction for the Republicans, but the same scenario will play out. Maybe Romney and Huckabee (not necessarily in that order) will find that their religious differences are not a problem. Maybe Giuliani and Thompson (again, without necessarily being in this order) will have a lot more in common than they're currently admitting to. Anyway, the two, whoever they are, will have always been the best of friends.

In Bill's words from just before the New Hampshire voting, "Give..me..a..break!"

Meanwhile, I think I'll watch a lot of reruns while the news is on. Too much soap opera nonsense for me.