Unstable Economic Times Ahead – Lessons from the Past
A barrage of economic news has taken place recently, so I thought it might be a good idea to look ahead in 2011 and try to predict how the year could be as an economic standpoint. You may question my ability to do so because I have very little economic training. However, as the best economically and politically in the world did not foresee the arrival of the Great Recession the greatest economic crisis of the eighties, I humbly say that you can not do worse than the experts to predict what will happen in 2011.
At the same time, we will try to remove some lessons from what happens in the economy in order not to repeat the grave mistakes that the politicians have done in recent years. A person should always look at their own mistakes to avoid repeating these mistakes in the future, a life lesson that always seems to get lost in our politicians.
The basic premise that I would do for 2011 is going to be a very rocky and difficult for U.S. households in 2011, worse than in 2010. If the stock market has improved considerably over the last year. Yes, holiday spending is greatly increased on an annual basis. Ford said it would hire 7,000 workers more. Many in the political class and are promoting the good times to come. I would not go so fast, taking into account:
– A recent report on initial jobless claims unemployment was not good, Brand remains above 400,000 for God knows how long, therefore, for a very long time, we saw nearly half a million Americans file week for unemployment benefits for the first time. Labor market may be strong if many Americans are seeking compensation for loss of their jobs.
And while the unemployment rate fell to 9.4%, which was the number of Americans who in despair have stopped actively seeking work rather than growth in the number of jobs available. With many Americans losing their jobs every week and many other stop your job search frustration, spending adjusted consumer will lead to slower economic growth and to further lower the sales tax and income tax revenue stream of government activities that its government budget crisis further.
– The Associated Press reported January 13, 2011 and 2011 will be the peak of foreclosures to American families struggling with unemployment and housing prices freefall combined with the low demand for housing. Foreclosure RealtyTrac monitoring Inc. predicts that 1.2 million U.S. households will resume in 2011, against a million households in 2010. One in every 45 households in the country, more than 2%, received a foreclosure notice in 2010 alone. Therefore, one of the engines of economic growth above the housing industry, it is unlikely to help the economy or homeowners who owe more to the bank than their house is worth.
– An Associated Press article from January 14, 2011 reported that consumer prices rose in December by the most since June 2009. The main cause for the jump was the continued surge in gasoline prices. By some perverse twist of logic, many economists believe it's a good thing because there was not a driver of higher prices for gasoline. What I never understood is who cares what has driven the price high, everybody needs to drive, which is the basis for much of our economy and the country, which excludes gasoline prices to measure inflation and be happy no sense. In the real world, we can not take the essence of the equation and see "core inflation," we still have to drive and drive is more expensive.
– Unhappy with rising gas prices? Well, get ready for food prices as well. According to a Wall Street Journal January 13, 2011, prices for all types of food are likely to continue to go higher in 2011. After the jumps in agricultural products, this week, future Corn rose 94% compared to June, soybeans are 51%, and wheat is 80%. Three factors are behind the rise in prices, according to the Ministry of Agriculture United States:
* The dry weather and floods in various countries around the world world have abolished the agricultural production worldwide.
* It is the basis of the growing demand for food worldwide.
* Corn and other crops are destined for ethanol production.
* The situation became so bad that many are beginning to worry that food supplies could be a source of "social and political instability, geopolitical conflicts and dysfunctional environment, "according to the World Economic Forum.
One expert quoted in the article offers food prices 3.5% and 4.5% in the U.S. this year, compared with only 1.5% in 2010. Worse, the same expert said that the pork may increase up to 10% in 2011. All good news for U.S. farmers that China and other emerging markets to buy U.S. agricultural production, bad news for U.S. consumers that in addition to high gas prices they are willing to pay for increased food prices.
– More evidence that the economy is rough a walk in 2011? The Associated Press reported yesterday that the price of gold rose above $ 1,400 one ounce Tuesday as a result of a weakening dollar. In periods economic stability, the price of gold is generally a significant decrease in other investment options that provide greater potential return on investment. While gold remains high, as always I think some people are very smart there with serious doubts and probably accurate as to whether the world's economies are very strong and growing.
– Remember that all the terrible stories of bank failure and the hysteria of a few years? How will the U.S. taxpayer had to intervene and prevent these banks collapse and take the entire global economy with them? Well, according to a report by the Associated Press this week that does not seem to this spell JP Morgan expects. They announced this week that profits in the fourth quarter were a whopping 47% over the same quarter a year earlier. The bank earned $ 4,830,000,000 in the quarter.
So while many Americans struggle with long hours, prices of unemployed, high gas and food prices potentially high, JP Morgan, and I bet most other banks, they get along quite comfortably, in part due to the bailout debacle that cost billions to taxpayers Americans and billions of dollars without any reason.
– Stay in the area to rescue banks, a report published this week by the office of Neil Barofsky, which is the Special Inspector General for the entire fund bank bailout TARP has found that decisions to save Citi Bank "has not done consistently and appeared be based on "instinct" and "fear of the unknown" instead of objective criteria. In other areas of life, this kind of decision is called Amateur Hour. How does a politician or government official to tens of billions of taxpayer dollars on the basis of nothing more than guts and fear?
The fact that the Treasury Department claims to have made money in the rescue of Citi Bank does not erase the fact that they had luck. You can not expect to do much in life as clueless as Mr. Barofsky claims the Ministry of Finance and the government has and still be as simple coincidence. Especially because billions and billions of dollars in cash of taxpayers involved.
And worst of all cases, worse than the base of roulette bets that took billions of dollars? The article presents new concerns that, despite all the political positions of many U.S. banks are larger than have been a few years ago, making them still "too big to fail. "Barofsky said Geithner, Treasury secretary, said:" If the government now has better tools to cope with future financial crises future, we may have to do great things again. "
These are essentially code words for some of these banks, like Citi is too big to fail and will have to bet large amounts of taxpayer money again to save them from themselves. So have risked hundreds of billions dollars of taxpayer money for no reason, no logical process and may return to the starting point before the Great Recession.
– Speaking rescue, no discussion on this topic is complete without mention of GM. Recent reports indicate that if the price of GM stock is significantly higher (53 cents per share, compared with the amount of high-end 30, is now), American taxpayers are unlikely to recover money to rescue the company has received. A study committee also concluded that even if the company is on track towards stability, future plans "to raise problems "due to a variety of mediocre products, a temporary restructuring in Europe and increased competition in the world. It seems that 53 per share not happen soon.
Therefore, all these new and somewhat pessimistic today what we should have learned:
* Must have learned that the government does not create jobs, the private sector creates jobs. After hundreds of billions of dollars spent on recovery programs known as unemployment remains very strong and dynamic not a good thing. Not all governments promoted economic policies, dismantling of cash for equipment, etc. have been total failures, except for its success in spending taxpayers' money. In the future, finding ways to let the market heal itself, not the government and politicians. The latter two have demonstrated beyond a doubt that they are useless in this area.
* We should have learned that the economy remains strong that any government program should be working his way back to health, the best the government can do is let nature take its course and leave the track. All Programs government to help the housing market, the foreclosure relief, the first home buyer program repayment, low interest rates, etc. were a total failure and you just lose the most money of taxpayers, while delaying cleanup possible reserves market and the excess risk of bad credit.
* We should have learned that our politicians do not learn that almost everything in the world is connected to everything else. Therefore, trying to solve the energy problem with a poorly thought out and in the absence of corn ethanol program, not just look to the energy program, but also cause economic problems food market. To solve any problem in life, we must understand the causes and interconnections within each problem. Our politicians have a difficult time with that concept.
* We should have learned it is never a good idea to enter the private sector to protect the stupid and business leaders in crisis themselves. GM should never have received money from ransom. They could have gone through a bankruptcy proceeding as most other companies without government assistance, that have emerged from bankruptcy and have always been a viable business without the help of taxpayers. Now the American taxpayer will never see a positive return on that money, the government China now has more than 10% of the company because of how the U.S. taxpayer support of the company and the company is about to make more cars outside the U.S. in the country, so do not even get the benefit of U.S. jobs for more money from taxpayers. No company should never be too big to fail. They do not, is called the free enterprise system.
* We should have known, based on the example of GM and rescue the banks, the government should stop all practices social welfare. GM's approach is the American taxpayer in the future, will the Chinese consumers. The main objective of the banks will not be in service customer and loans to stimulate the economy, will be on how to take advantage of interest rates and other exotic financial arrangements for profit. U.S. farms are swimming in profit potential, given the tight food supply the world, be it a good time to cut farm subsidies for government agribusiness much of the country? Cut the practice of social welfare, the real market is perverted when it perverts the electoral process through donated campaign funds for social assistance recipients of the company.
Some simple steps can help put these lessons:
* Step 1 – enable the citizens of that person to contribute to election campaigns, to eliminate the incentive for companies being and the ability to reward welfare donations campaign targets.
* Step 2 – implementations of real problem solving process to finally resolve the energy crisis without screwing the environment or food prices in the process.
* Step 3 – Implement a process to replace members of the committees of Congress when I leave operate at satisfactory levels, I hope to replace them with people who can solve the problems of the committees.
* Step 4 – requires all elected officials to attend and pass a course on basic economic theory to understand how you can solve basic economic problems, not aggravate them, we hope prevent us to relive the nightmares of scrapping first-time homeownership discounts, etc in the future.
* Step 5 – removing agricultural subsidies only one form of welfare.
In short, I can predict that we pay more for gas in 2011 (taking into account tear gas today) we will pay more for food in 2011 (taking into account three factors mentioned above), we will not see a price increase Much of our homes in 2011 (with all the seizures occur market, the excess is removed the price), we will not see an explosion of employment growth (not the current level of unemployment claims received each week), we will not to see tax cuts in 2011 (from the poor financial conditions of the federal government and states), we will not reduce our national debt in 2011 (as Pelosi, Reid and Obama have already torpedoed the deficit of the Commission without debate), we will not see GM pay his debt to American taxpayers while focusing abroad, and banks are too big to fail, probably taking too many risks, but Washington hopes to rescue his friends. Have a nice day!
About the Author
Walter “Bruno” Korschek is the author of the book, “Love My Country, Loathe My Government. – Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class,” which is available at www.loathemygovernment.com and online at Amazon and Barnes & Noble. Our daily dialog on freedom in American can be joined at www.loathemygovernment.blogspot.,com.
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