Tuesday, November 25, 2008

Economic Melt Down?

It is funny how the media whipped up oil prices to $150 a barrel and no one has called them out on it. Nothing has changes since those heady days in July, but some how oil is now below $50 a barrel. Sure there were speculators and announcements but the reality is that no new sources have opened up and no new refineries have been built. So, it would seem that the only thing driving up world oil prices were the media inventing a crisis of speculation.

Why do I bring this up? I think the media is doing the same thing with the current economic crisis. They report so much gloom and doom that people are scared to spend any money and that leads to an economic slow down of mammoth proportions. But really, lets look at some hard numbers and see how we stand. I am going to compare the 1980-1982 recession with what we have now. Unemployment high of 10.8% then and 6.5% now, Bank loan interest rate 21.5% then and now 4.0%, and Inflation 10.3% then and 2.3% now. The numbers are not even close, so the doom and gloom is really unwarranted with the exception of the bailouts, which are driven by the gloom and doom. Bad companies need to fail and good ones will pick up the pieces and move on smartly.

The more that the government is lead by the media the deeper into trouble we get. Just think if we had not agreed to pay out a couple of Trillion dollars, what would have happened? House prices would have returned to reality in a lot of places and people would lose some 401K money, but in a year or two things would be chugging right along again. We should have crafted a well thought out oversight plan and reasonable regulations, so we didn't find ourselves in this kind of mess again. Instead, we are bleeding money left and right. We haven't solved a thing and the rich guys get year end bonuses with our money. The companies reaped all the profits, while we pay for all the loses.

We need to stop giving these companies money and let them go into bankruptcy just like everyone else and figure out where they went wrong. They need to figure out that the public is not a piggy bank to be constantly raided when they screw up. Free markets mean that the market rewards and the market punishes, it does not mean that the government allows the companies to rob us blind and then pays them for failure to plan.

As for the media, they need to a reality check and someone to take away their bullshit machine. I know that they have hours of time to fill and this is attention getting, but it isn't doing anyone any good for them to spew hours upon hours of doom and gloom when the skies are partly cloudy. If you don't agree lets hear it and your solution to the mess because we all know that nothing intelligent is coming out of Washington.

3 comments:

  1. Your post is very perceptive. My opinion is that we are in a deflationary depression that will take some years to work through.

    http://tinyurl.com/3nr29h

    The only good thing is that my wife's job is very secure and not subject to whims of the population. If it is discretionary, it will collapse as people run out of credit and savings.

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  2. Speculators whipped the price of oil up. The bubble popped and now we are enjoying a respite of cheap oil. It will rise again soon enough.

    As for the current economic malaise being a figment of the media's collective imagination, I wish you were right. I do not think you are but will be overjoyed if such turns out to be the case.

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  3. I appreciate the comments and I only hope that we as a nation pull our heads out of our collective butts and start doing things right again, like not living on credit and buying houses we can afford without creative financing.

    I agree that we have a long tough road ahead and things are only going to get darker before the dawn. The media frenzy that spurred oil speculators and is now pushing congress around is killing us and needs to stop. McCain was right in that the fundamentals were strong and Graham was right that the recession was a lot worse in people's minds than it was according to the numbers.

    The fundamentals may not be so strong now because companies are abandoning sound financial practices in the hopes of getting a government hand out. They need to restructure and shead costs that don't make sense. That is how business survives, but that doesn't mean screwing the little guy either since those skilled workers are what make a company great.

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