Ok my bad, never claim to stick to one subject if you’re an avid blogger and something insanely crazy happens like this economic blowback (to take a word from candidate Ron Paul).
I want to talk about this with some perspective. To say that the sub-prime mortgage fiasco is whats causing this economic slow down and ultimately the source of an alleged recession is like saying that an oil spill off the coast of Coos Bay only affected fish. This doomsday recession has been a long time coming and we should not be surprised.
Who is to blame? Everybody… You, Me, Big Business, Small Business, China, Japan, The World, perhaps Mars and other aligned planets. So if we’re all to blame then how it is that it all came down to this?
It all starts years ago when companies who are planets in of themselves got trumped by unlikely players… Retail. Walmart in the most demeaning way under a Regan Ran system should not of had the power to wield prices and force industry to change their practices to be competitive. In the ideal economical since, manufacturers of goods should set the price based on the parts needed, energy costs to make it, and the labor costs to assemble… add to that the profit margin and divide that by the estimated number of demand and you have what retail stores should just accept as the cheapest price which they mark up and now tee shirts that are 79 cents are now 7 bucks, but it all comes back us and fuels the economy since that tee shirt worker ends up renting a car for some reason and passing your money you paid their company back to your company that gets returned to you through a pay check. It’s cyclical, but that is if we do things strictly with in the North American boundaries. To save money or to supply demand, production could go as far south as Guatemala or North to Canada, but in some way it would all come back.
However…
This is just manufacturing and we know that the power structure is whacked. Our demand for unreasonably underpriced goods is causing one portion of the economic pyramid to weaken.
The plot thickens further.
Housing prices experienced a boom when the new notion that a house didn’t cost $100,000, but rather $100/mo housing spiked. Now a regular income family could not just afford one house, but 2 and sell the second one to fund their child’s education or to have a secure retirement. Prime mortgages did similar duty, but if you couldn’t afford the down payment it didn’t matter. With now “Short Term Sub-prime” a couple who should be starting in a hoopty shack can buy a supremo Fresh Prince of Bel Air house, live in it for 4-5 years and sell it for a bigger castle. Well… guess what… They really couldn’t because it was only a matter of time (5 years of the good times) before the chips were called and no one wanted in.
The list of bloopers go on and to be honest…. we all bonked.
America dried up and we were starving for water, but eventually we sucked up the whole world’s assets and we’re still thirsty.
Bottom line: We’re in seriously bad shape
Time to be worried: Now
Nothing short term can literally fix this. This fiasco took a decade or more to get in and it’s going to take two decades to get out.
Jobs are going to be scarce, People who would visit the quaint tourist town are staying home this decade, and gas….. gas is going to make a Geo Metro a luxury car since it’ll spike.
The costs are going to be profound world wide. Soon the Euro and British saviors who rushed to America to suck up “bargains” due to our outrageously low currency are also not going to be able to ‘joy ride’ to America since what happens here (i.e. multi-national corporations) will resonate where ever the counter parts exist.
Depression? If so… it won’t be like some 30’s version depression. Debt will sky rocket and no amount of credit cards will cover it. To consolidate debt will render huge costs and we’ll eventually be forced to choose what we buy, not choose freely. It won’t be pretty… Boutique shops will suffer and if it continues even monster giant starbucks will downsize to save itself.
This writer’s strike is a luxury for writers who are able to do so, but I predict the demand that once was there for them might get cut and a regular uncompromised wage they were earning could be replaced with a layoff. And HDTV mandates worsen the whole structure even more since it not only effects consumers who have to ditch their TV’s and buy $1500 HDTV’s, but whole TV stations are being given a death warrant to change or die (since an SD signal will be outlawed).
The snap back to reality is going to hard and swift, but if you start now the impact will lessen. It’s important, though counter intuitive, that when “experts” tell you to “spend your cash; save the world” that’s a cue to save everything including all pennies on the dollar.
~J