Ok so im not typically very political or very much interested in what the media thinks I should care about but I have been getting more and more interested in the current state of the US economy as of late. Mostly b/c of the reactions and the finger pointing that is going on and the fact that I think most of it is absurd. SO lets take a stroll through my observations about the two big buzz topics that are going on right now.
First up - The housing market
Ok so like 6-8 years ago I think it was don rumsfeld (sp) went on what I can only call a power trip and abuse of authority and started cutting the federal interest rate in an attempt to boost the economy. Now in general I am all for a little relief when it comes to interest rates but it just seemed to me like he was out of control at the time. It seemed like every other week he was cutting the rate again and again. Why? Instant gratification (this will be a recurring theme) Yes by slashing the interest rate Rumsfeld was able to create the appearance almost instantly that he was doing a good job. However slashing interest rates doesnt change outwardly how much $$ people have only how much they think they can have in terms of credit available and the risk (interest) involved in repayment. SO its no surprise that with the interest rates falling like the current US dollar that people were going out in droves buying up all sorts of things. Cars, Houses, boats, tons of big ticket items. Well I remember when Lisa and I purchased our house. It was a wonderfull and opportunistic time and we got a smashing great interest rate for our mortgage and are still very happy with that. However at the time we were "told" by the realty chick that we could afford a house that was significantly more than we purchased. We crunched the #'s and disagreed yet she kept pushing for us to buy more or live beyone our means now and figure it out later (again instant gratification) We declined and bought what we felt we could afford -AT THE TIME!- WOW what a novel concept. We rejected the notion of an Adjustable rate mortgage to get more than we could afford and went a more humble route. Why is all this interesting? Lisa and I have Zero worries about forclosure right now. Not b/c we are wealthy beyond imagination but b/c we live within our means which seems to be a concept most americans can not or refuse to grasp. We are actually thinking about capitalizing on the current forclosure crisis and snatching up a swanky house just b/c of how cheap everything is right now. So again I ask what did everyone expect was going to happen. You let the american population make irresponsible decisions and aprove them for loans that are by any logical calculation unrealisitc and then cry about it when the rates hit the fan. I have even heard reports that people are suing their mortgage company in an attempt to not lose their homes. I have no idea why anyone would think they could win an argument like that, I mean it would be like suing McDonalds b/c you only ate their food and got fat.....oh wait......never mind......
Next up the Gas Crisis (insert spooky boogy man like sounds here)
Ok im going to try to keep this simple so that everyone understands. Oil is a commodity not a right. I just want to establish that right from the get go. SO lets have a lesson in supply and demand. Lets say we have two boys Chris and Tim. (yes I know original names) Well lets say Tim is in the basement of his house and discovers that the previous owners left a box of baseball cards in the basement. Tim takes the time to salvage the cards and clean them up package them in nice little wrappers to preserve them and keep the dirt out. SO now Timmmy is like any kid and he wants to buy toys and candy and what not. Well Timmy aint got no job but he does have these baseball cards so he goes to Chris and asks if he wants to buy any of them. Chris isnt into baseball cards but realizes they have an inherrant value and so he says ok I will give you a quarter a card. Timmy is like Yo these are like totally vintage and billy across the street will give me like a dollar a card and so Chris is like fine go sell to Billy. But billy doesnt have any money so Timmy sells the cards to Chris for a long time one at a time at a quarter a card. Well one day Billy comes into some money and realizes that the cards Timmy is selling are very valuable and offers Timmy his dollar a card option again. But this time hes got money. Now Chris starts to panic b/c hes been buying those cards at a quarter and stockpilling or reselling them for more. SO he counters the dollar with 1.50 and so on and so on.
let me spell it out.
Chris = The US
Timmy = The middle Easy
Billy = The rest of the world -specifically china
The baseball cards = oil
Its simple supply and demand and is one of the most basic economical concepts around. Supply stays constant (if we are lucky) and as demand increased so does price. Lisa and I have been telling people for years to stop complaining about gas that was $1.50 a gallon stating that over in europe and the rest of the world - even canada - the price of petrol was 2- 3x's+ more than the US. Why should we assume this was going to last? SO we did what we do best. We were the #1 consumer so we got the best price. Now however China wants as much as we get and they are willing to pay for it. SO we have to pay too. Again oil is a commodity not a right. (another concept americans seem to have issues grasping)
SO again like with the housing market we are blaming everyone we can think of but ourselves. We are blaming big oil companies and their astronomical profits, which if you take the time to look at are at roughly the same percentage of profit as when gas was a lot cheaper. It only sounds like more b/c gas costs more. but it costs them more too.
We blame the President. Please. The presidential seat currently is in my opinion almost powerless to make any real changes quickly and has to be approved by so many other peopl that if you really think that the prez is the reason gas is so high then you would have to blame every single politician in the country and it would have to be the largest conspiracy in the history of the world and is highly unlikely b/c it screws them over as much as it does us.
We blame the opec for not pumping more, inflating the price and generally doing what we would be doing if we were in their shoes but arent so its wrong. Seriously. Think about it. Say that the US could swap with the middle east in terms of being the world supplier of Oil. Do you really think we would be taking a sympathetic ear to developing nations? Do you think we would be setting a fixed price and then increasing production so that supply met or exceeded demand in an effort to stablelize the global economy. ORRR do you think we would be laughing all the way to the bank as we bragged about how awesome we were. I think if the shoe were on our foot we would be doing the same thing.
SO who else can we blame. I dont know and I dont care I want to drive a car that has the aerodynamic efficiency of a block of wood and gets 10 mpg city and 12 mpg highway. Why? B/c im american dangit and I desere it and I want whats coming to me right now!
SO those are my thoughts on the current economic crisis in america and why I feel that its our fault. All of it. We should have seen what was coming as it was the only logical end to this scenario but we chose to keep our heads burried in the sand and assume it would all work out. Well its not and things are going to be a bit tougher for those who assumed their poor choices would never catch up with them.
cheers!
