Thursday, March 10, 2011

Finally - economic turnaround?

Well, maybe. We are finally in a cycle of job creation, and manufacturing is up at the same time. But not enough to call this a recovery. Not Yet. We have seen manufacturing gains (49,000 last month, 33,000 this month) but there are still formidable hurdles facing us. The price of energy. The greed of the limousine liberal elite. The public employee unions. Our lethargy in facing a menacing threat from Islamists. Our failure to address the threat of those who hate God and are undermining America because it once stood for Christianity. The specter of high inflation still looms, and just around the corner, unless (as I do) you count that it has already begun.

The fact is, I still don't think this will be a real recovery. The last "recovery," from 2002 to 2006 was hollow and fake. Real income and wealth in Blue Collar America declined. The only increase was in what we bought by borrowing and amassing debt. In this "recovery" there is a sizable increase in spending, and yet the Baltic Dry Index and Rail Index are showing a slow slide. This tells me that what extra spending is being done is not durable goods, but really is an increase in waste of consumer dollars on things like video games, phone "ap's," and cable or satellite TV.

This increase in borrowing and spending in US households is a reversal of the sudden frugality that gripped the nation just a couple years ago. And while it may temporarily lead to the appearance of better economic times, it is just a repeat of what led to this crisis in the first place.

Just a couple of After Thoughts

Gas Prices. I forecast before that they would hit $3.50 by May, and said a couple weeks ago, the turmoil in the mideast is not the cause of rising prices. Well, I need to modify that slightly. I estimate 20 cents a gallon of our gas prices is due to the turmoil in the mideast. But while that 20 cents is a temporary rise, the steady rise in prices due to increased demand around the world will continue. Currently I expect the price of gas to top $4 (here in Texas) and go on up to around $4.20 to $4.50 in the next 12 months. I don't think we will see a massive downturn like the last one, but I do think the upwards climb in both usage and price of fuels will stall and either level out or turn back slightly downwards. At what point that stall will occur is beyond my expertise.

Prices of energy and commodities will continue upwards as a portion of our wages for the foreseeable future. There may be times of respite, but the days will be increasingly more difficult, until the Biblical expression of "a quart of wheat for a days wage" is true. Unless there is a die off of over 1/3 of the earth's human population, with no similar die off of other species, we are indeed going to be seeing a worldwide famine in the next 10 to 40 years.

We could delay the more difficult days ahead for quite some time if we would pursue nuclear, oil sands, coal and natural gas with fervor, and forget the silliness of the global warming fools. But ultimately, our population has already reached a point where the earth cannot sustain our food supply, and our fate is sealed. Now, it is only a matter of when.

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