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2007-11-08 Home Front Economy

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Posted by Nimble Spemble 2007-11-08 00:00|| || Front Page|| [11127 views ] Top

#1 Time to quit outsourcing, move from oil, and a few other things....

Posted by 3dc 2007-11-08 01:00|| 2007-11-08 01:00|| Front Page Top

#2 We've had since 1973 to move away from oil, and have done as little as possible about it. Outsourcing has hollowed out the capacity of the USA to sustain itself. Between oil & outsourcing, trillions of $ have left the US & are in the hands of other governments like China. We're running out of time.

Posted by Anguper Hupomosing9418 2007-11-08 02:36|| 2007-11-08 02:36|| Front Page Top

#3 If the dollar continues to decline, won't outsourcing become less profitable? The American economy is strong right now in terms of production, etc. We can make everything we need right here at home. Maybe it will be good for us to bring some of these jobs back home again. Also, we are moving away from oil. It seems to me, from a purely logical standpoint and nothing else, that if oil becomes very expensive, then the oil companies won't work as hard to keep alternative energy sources down because they will still be meeting their profit margins as we increase solar, hydrogen, wind and nuclear energy output. The use of carbon fuels was 20th century. We are in the 21st.

Posted by Glaling Turkeyneck1651 2007-11-08 05:00|| 2007-11-08 05:00|| Front Page Top

#4 I also point out that if there is a major *international* financial crisis, the US having a very low dollar might be a saving grace.

At such a time there might be a tremendous flight to currency quality. If the dollar was at normal levels, that could overnight ruin our $1.2T export business, by making the dollar too high. But since the dollar is rock bottom, it would just jump up within normal parameters.

Sarkozy is right to be worried, but not that the dollar is too low, but that the Euro is too high. But he is blocked by Merkel, who doesn't see things that way. I suspect that he knows that Bush has been doing whatever he can to force the dollar lower.

China's dumping of the dollar was easy to foresee, and they are going to lose many billions of dollars by switching to more expensive currencies.

Posted by Anonymoose 2007-11-08 06:26|| 2007-11-08 06:26|| Front Page Top

#5 I gotta ask, Who is China selling these "worthless" dollars to?

How many here remember the good 'ol days of mr Carter and the double digit inflation?

Posted by BrerRabbit 2007-11-08 07:11|| 2007-11-08 07:11|| Front Page Top

#6 World economics is not a 'win-lose' competition. It's 'win-win' or 'lose-lose.' Collapse of the US economy will not enrich competitors, but drag them all down with it. A full global depression will make Americans seriously miserable, but the country as a whole will not starve. Same thing with Australia and Canada. Bigs chunks of the rest of the world will see scenes like Biafra in 1970, or the refugee camps of Darfur. That would likely include China - roofie-bead toys are a 'luxury' item that would not garner much rice in trade.

Posted by Glenmore">Glenmore 2007-11-08 07:49|| 2007-11-08 07:49|| Front Page Top

#7 Happy, happy. Joy, joy.

Posted by g(r)omgoru 2007-11-08 08:27|| 2007-11-08 08:27|| Front Page Top

#8 A recession wouldn't be a good move right now,

When would a recession be a good move?

Sorry, a recession would be a great economic move right now. Better six months ago. The economy over heated. We've got enough housing inventory available to last a year, and more coming on the market daily as people who never should have gotten/taken deceitfully priced mortgages return their houses to the market.

Lots of those construction folks are going to be out of work. Lots of the people who make all the things that go into new houses are going to be out of work.

Instead of recognizing that we shouldn't have partied so hard, swearing off the cheap money and suffering for a while, we're going for the hair of the dog so we can postpone the day of pain and be unable to figure out how much it will really hurt when we can't put it off any longer.

This looks like 1979 so much my head hurts. Nobody fucking learns. And all that ends with Desert One.

Posted by Nimble Spemble 2007-11-08 08:50|| 2007-11-08 08:50|| Front Page Top

#9 World economics is not a 'win-lose' competition. It's 'win-win' or 'lose-lose.'

Not so. Compare the British economy and standard of living from 1928 to 1978 to the American economy in the same period. A very large portion of the decline was due to the eclipse of the pound by the dollar due to the adoption of socialism by the Brits after WWII. We're following in their footsteps, only more slowly.

Posted by Nimble Spemble 2007-11-08 08:56|| 2007-11-08 08:56|| Front Page Top

#10 If Americans were not net exporters of everything except industrial jobs many people would like to see return, this would be a problem. As it is, this is a hit for tourists who would rather visit Canada than go to Disneyworld but that is about it.

As for China and anybody else who is owed money by the US treasury. All those hundreds of billions are now worth considerably less... If I was a Bilderberger thinker, I would suggest devaluation of the dollar is part of an offensive against the ChiComs.

Posted by Excalibur 2007-11-08 09:07|| 2007-11-08 09:07|| Front Page Top

#11 As it is, this is a hit for tourists who would rather visit Canada than go to Disneyworld but that is about it.

1. Tell me that when gas hits $5.00 a gallon, keeps heading higher and you're happy you haven't gotten a raise in a year because your next door neighbor hasn't found a job in the same time.

2. Finance is about confidence. Multi-lateral defence treaties are about confidence. When people loose confidence in a country's currency, it means they are loosing confidence in the country's ability to maintain its financial house in order and to maintain its place in the world order. Why did people laugh about Italy's constantly devaluing currency and its revolving door governments? Because it reflected their inability to get their act together in any sense.

Rationalize what is happening all you want, but when the history is written, this crisis will be seen as a major historical inflection point for the US and right now I think we're choking.

Posted by Nimble Spemble 2007-11-08 09:18|| 2007-11-08 09:18|| Front Page Top

#12 A very large portion of the decline was due to the eclipse of the pound by the dollar due to the adoption of socialism by the Brits after WWII.

BS. The fact is that British economy had been going down since about 1880. WWII made patent that British industry was often no longer capable of issuing half decent products: despite some outsatanding products, mainly planes like Spitfire, Mosquito or the Merlin engine they issued a lot of lemons (think in British WWII tanks), obsolete designs (their naval aviation designs was a joke) and ship for ship their Navy was outclassed by both the Japanese and German ones. Post WWII just continued the trend with British industry being wiped out of market after market in branch after branch. As an example the only car they managed to export was the tiny and crappy Aistin Mini (who made contemporary French designs look high end). As another example of stagnation and lack of investmaent British trains continued to be powered by coal long after mots of Western euuropes was using electriacally powered trains.

Posted by JFM">JFM 2007-11-08 10:14|| 2007-11-08 10:14|| Front Page Top

#13 I remember Carter times, but I also remember a decade later when the pundits were sure Japan was going to buy the U.S. lock, stock, and barrel. A decade after that, the pundits were sure the Arabs were going to buy the U.S. lock, stock, and barrel.

The Chinese are not stupid: they will not benefit by shifting too much too fast. But they will benefit by periodically inciting panic and buying the undervalued investment products.

Posted by Darrell 2007-11-08 10:15|| 2007-11-08 10:15|| Front Page Top

#14 The Chinese are not stupid: they will not benefit by shifting too much too fast. But they will benefit by periodically inciting panic and buying the undervalued investment products.

Agreed. But the Chinese aren't the only other player in the game. And in one Chinese induced panic, some other player may do something very stupid leading to things unravelling from there.

Posted by Nimble Spemble 2007-11-08 10:35|| 2007-11-08 10:35|| Front Page Top

#15 I thought I couldn't understand the economy, but after reading these comments and listening to the pundits I don't think anybody does. I do know that anything that is transported has increased in price. The plywood we use has doubled since the first of the year and our shipping costs (UPS) is 12% higher than last year.

Posted by Thrairt Oppressor of the Lichtensteiners6029 2007-11-08 11:21|| 2007-11-08 11:21|| Front Page Top

#16 The chickens have come home to roost: The US' insatiable spend-on-credit habits have created a perfect storm. Domestically, the housing market crash has only just begun and its effects on the world economy can't possibly be predicted - by the Fed, or anyone - because of the complexity of the financial instruments that we've created to prop up the borrowing (read up on derivatives for a crash course in how to 'hide the risk'). China's dumping dollars because we've shown ourselves poor stewards of our money and no longer worth the risk. People have been predicting this for years. And we haven't seen anything yet with regard to the price of oil. It's straight economics at work: demand for oil will *never* go down so long as China and India continue to grow at their current rates. That means prices will continue to rise, putting a big squeeze on all of our wallets and creating inflationary pressures. Lowering interest rates exacerbates, rather than helping, those pressures. Put it all together and you've got recession, best case. Worse case: stagflation, where the economy contracts at the same time prices rise, a central banker's worse nightmare. The Fed's doing dumb shit like lowering interest rates and politicians' creating 'bail-out' funds for folks who stupidly overinvested in the housing market is a nowhere strategy that merely delays the inevitable. The party's over, guys. Tighten up the belts and stock up on Alka Seltzer, 'cause this one's gonna hurt. Hate to be doom and gloom, but the writing's on the wall.

Posted by Geoffro 2007-11-08 11:32|| 2007-11-08 11:32|| Front Page Top

#17 I think I'll go buy that rug I want today. It is going to cost more tomorrow.

Posted by Glaling Turkeyneck1651 2007-11-08 11:38|| 2007-11-08 11:38|| Front Page Top

#18 What this will do first, I think, is decrease the number of jobs for illegals... whose exodus, triggered by highly publicized ICE arrests, has already started. After all, with the dollar falling and employers checking papers more carefully, the benefits to trying for a job and a life here are significantly reduced.

Posted by trailing wife">trailing wife 2007-11-08 12:17|| 2007-11-08 12:17|| Front Page Top

#19 Nimble Spemble: Important note. 7500 houses were foreclosed in Las Vegas *last month*. Other than the prices of houses dropping like a rock, it also means that the price of rentals is going to go down.

That is, people who couldn't sell will decide to rent. This is very good news for house and apartment renters, and even university students.

For a long time, even apartment rents in a given market have been ridiculously high, approximately 50% of what a wage earner has left after losing 50% of their gross to taxes and FICA. By having rental prices slashed, renters are going to have a lot more discretionary income.

Posted by Anonymoose 2007-11-08 13:55|| 2007-11-08 13:55|| Front Page Top

#20 That is, people who couldn't sell will decide to rent.

That is the decision I made. Rent out the extra rooms rather than sell in this pathetic market.

Posted by rjschwarz 2007-11-08 14:15|| 2007-11-08 14:15|| Front Page Top

#21 Rents here in seattle are going up, primarily because more apartment buildings are being converted to condos, so there is less inventroy.
with the glut of foreclosures only just beginning, i would think ( in my own econ 101 sort of way) that a bank would be happy to renegotiate a contract and get SOMETHING for a house, because with that glut, buyers, at least in the short term are going to be in the driver's seat.
unscientific economy observation points: truck traffic on the interstates, train traffic, and costco parkng lot vacancies.

Posted by USN,Ret. 2007-11-08 15:02|| 2007-11-08 15:02|| Front Page Top

#22 For a long time, even apartment rents in a given market have been ridiculously high,

It's good for renters but bad for homeowners who need to pay the mortgage. Say for example that you have a mortgage payment of $1500 per month - you have to add several hundred dollars on top of that for taxes, $150 for a property manager, you need to store away a couple hundred for maintenance (long and short term) and then there is vacancy. If the home goes unrented for just one month every other year, it is the equivalent of dropping the monthly rent by a significant figure. Then there is insurance, (fire, liability) and termite control, etc. etc. etc.

The tax benefits help much - but it takes a long time before renting a home is actually profitable. Those greedy landlords aren't as greedy as you might think.

Posted by Glaling Turkeyneck1651 2007-11-08 15:07|| 2007-11-08 15:07|| Front Page Top

#23 Moose, It's hard to say about rents. People foreclosed on will leave the house they previously owned and go to the rental market and add demand, driving up rents. If the house enters the rental market, that will offset the new demand. But if the house sits empty for 6 months while the bank tries to sell it at any price, rents will not drop.

Also going on in the real estate market is abandonment of obsolescent units. This may sharply decelerate in a falling price period as owners cannot sell the property for a new use and have additional former owners entering the rental market.

And different markets will have different dynamics.

So there's no sure thing here except that a lot fewer houses will be built in the next 12 months than were in the last 12. And that will be true no matter how low the Fed drops the interest rate. So we're going to get inflation and the dollar will continue to fall, and the price of oil (NOT included in the core inflation rate used by the Fed) will continue to rise and the Chinese will get PO'ed about the losses they are suffering because of our Fed policies till the Fed has to raise interest rates and then it will hurt all the more for having been delayed.

Just as every new President gets tested in some foreign policy crisis early in the term, so does each Fed Chairman. And thus far Bernanke is a failure.

Posted by Nimble Spemble 2007-11-08 15:38|| 2007-11-08 15:38|| Front Page Top

#24 Bernanke decided to print money to bail out people who loaned money to the wrong people, Bush decided to finance the whole war on terror on credit. It's a double wammy of stupidity.

I have already seen my food cost double since December and that is just the tip of the iceberg. My state imports electricity from Canada my power my power bill also will be going up.

I give Washington DC and the New York bankers, investors and speculators a huge F. The US is going into shithole status and may remain that way. I am just a little pissed about it.

Posted by Sock Puppet of Doom 2007-11-08 16:14|| 2007-11-08 16:14|| Front Page Top

#25 Food is the other item not included in core inflation.

Posted by Nimble Spemble 2007-11-08 16:17|| 2007-11-08 16:17|| Front Page Top

#26 The Fed is in a real pickle: raise interest rates to prop up the dollar, and you slam the housing and stock markets, causing a recession. Lowering interest rates stimulates the economy, but erodes the dollar further and sparks inflation.

That Bernanke - a self-professed inflation fighter - chose to lower interest rates in the face of evidence the economy is *very* strong already and doesn't really need any more stimulus (3.9% GDP growth in Q307, led by a 3% growth in consumer spending) tells me he is scared shitless of a full-fledged collapse of the financial system that could occur if he did what he knew was right: to raise interest rates more (or at least leave them where they were), cool the economy down gradually and engineer the holy grail of central banking, the proverbial 'soft landing'.

The problem is that what happens domestically is only part of the equation. External shocks - significant rises in the price of oil or threats by foreign debt holders to 'dump' the world's premier reserve currency, for example - can undo even the best laid plans.

I wouldn't want to be Bernanke. Hardest job in the world.

Posted by Geoffro 2007-11-08 16:56|| 2007-11-08 16:56|| Front Page Top

#27 Agree with everything, Geoffro. But postponing the day of reckoning does not lower the chance of those bad, bad outcomes. It raises them.

Posted by Nimble Spemble 2007-11-08 17:21|| 2007-11-08 17:21|| Front Page Top

#28 Excuse me if I am pessimistic and think that the only thing the Fed and Bernanke are concerned in is how much profit NY Bankers, investors and speculators make. The rest of use can go to hell in a hand basket. I am afraid this is going to make the Carter recession look like the good times.

While our currency goes to hell Bernanke, Bush and Congress are covering their personal asses and screwing the country with. The NYC fatcats are making out like bandits, bailing on our currency and leaving the country.

Posted by Sock Puppet of Doom 2007-11-08 17:40|| 2007-11-08 17:40|| Front Page Top

#29 Nimble - Couldn't agree more. Scylla, meet Charybdis.

Posted by Geoffro 2007-11-08 18:26|| 2007-11-08 18:26|| Front Page Top

#30 The Oil Hydra
By Victor Davis Hanson

Oil is nearly $100 a barrel. Gas may soon reach $4 a gallon. And Americans are being bitten in almost every way imaginable by this insidious oil hydra.

Two billion people in China and India are now eager consumers. They want the cars, gadgets and lifestyle that Westerners have claimed as a birthright for a half-century. Their growing energy appetites mean that the international petroleum market may remain tight, even if Americans - who use almost twice as much oil per day as China and India put together - cut back on imported energy.

The Middle East is raking in billions each week. At best, our so-called friends in cash-laden Saudi Arabia subsidize fundamentalist mosques and hate-filled madrassas worldwide. At worst, our enemies in petrol-rich Iran are after the bomb, send weapons into Iraq to kill Americans and fund Hezbollah jihadists.

War in Iraq, rumors of fighting in the near-future in Iran and tension on the West Bank only panic markets, raise oil prices and further enrich our grinning enemies.

The nearly half-trillion dollars we will soon pay for imported oil does a lot more than prop up Russia's Vladimir Putin, Venezuela's Hugo Chavez and Iran's Mahmoud Ahmadinejad. The petrodollar drain also contributes to our trade deficits, falling dollar and a general demoralization of the American people.

Our oil habit not only makes us dependent on some creepy suppliers, but we look like fools as we work nonstop to hand over our earnings to those who are rich by an accident of sitting atop oil someone else found and developed.

There is talk in this country of a gradual transition to alternative fuels, solar power, wind machines, plug-in electric cars and nuclear power. Supposedly Americans will soon be less dependent on imported oil - while helping to slow global warming - as we are weaned off our fossil-fuel addiction.

But let's talk about the present: If oil continues to climb, ultimately, it will change our very way of life. Hard-pressed families will shell out thousands more a year in direct transportation and heating and cooling costs, and more still as consumer prices inflate.

It may have always been unwise for commuters to buy large SUVs and V8 supercab trucks. Now, though, we may reach the point where these pricey huge vehicles will sputter to a halt. Indebted Americans will still shell out monthly payments to pay off their parked dinosaurs, only to drive them for emergency or ceremonial occasions.

Also expect rising popular anger at an asleep-at-the-wheel government that for the last 20 years should have been doing a lot more to mandate conservation, subsidize alternate fuels, encourage nuclear power and open up oil fields offshore and in Alaska.

Instead, doctrinaire free-market purists and radical environmentalists, hand in glove, for years have thwarted both conservation and exploration.

True, in a perfect world, the market would teach Detroit not to build gas-hungry big cars. Yet in the here and now, we are needlessly burning scarce fuel as too many 7,000-pound mammoths deliver single 180-pound drivers to work - while the auto industry continues on its path to irrelevance.

Meanwhile, green politicians may not want messy oilrigs off their coasts, or tankers up north among the ice and polar bears. But so far very few of them have sworn off jet travel, nice cars or ample homes.

Oil companies claim that they are only passing along escalating costs from overseas suppliers over which they have no control. But around a third of our oil is pumped here at home.

Think about it: The cost to extract oil from existing older wells is relatively fixed. For much of the 1990s and early 2000s, oil prices had been steady at between $20 and $30 a barrel (when adjusted for inflation) - and domestic oil companies did quite well. So now at near $100 a barrel, these corporations are raking additional profits of over $60 a barrel - potentially a domestic windfall of hundreds of billions of dollars each year.

Is there an easy way out of the mess we've gotten ourselves into?

Maybe a Silicon Valley genius inventor or entrepreneur will step forward with a breakthrough new energy source.

Maybe our government will start a crash project on the scale of the Manhattan Project to conserve and produce more fuels.

Maybe China and India will consider radical conservation measures.

Maybe countries like Iraq, Libya and Russia will start reinvesting in their oil infrastructures and double production.

Maybe the Middle East will finally settle down and soothe jittery oil speculators.

Those are too many maybes to wait for while our way of life hangs in the balance. It is past time to demand from our presidential candidates, as well as the current government, exactly when and how they plan to slay this many-headed oil monster.

Posted by Leonard Plynth Garnell">Leonard Plynth Garnell 2007-11-08 21:12|| 2007-11-08 21:12|| Front Page Top

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