Good News? Globalization Slows Down

Transportation Costs Hit the ‘New World Order’

The Sunday New York Times offered an in-depth analysis on August 3 by Larry Rohter entitled, Shipping Costs Start to Crimp Globalization.

A decade ago oil was going for $10 a barrel and “outsourcing” manufacturing facilities and jobs to low-wage regions of the Third World began to hit American labor hard. We were all told we must simply adjust to a whole new, world-wide way of doing things, and damn the torpedoes that were decimating labor unions and sending millions of skilled Americans into the minimum wage ranks of burger-flippers and WalMart greeters just to (not quite) get by.

Oil is trading today [Aug. 4] for just over $121 a barrel, down quite a bit from just a month ago when speculators bid it up to $138. The drop is attributed to falling demand as conservation kicks in on the user front. $4 a gallon gasoline and $5 a gallon diesel has cut into fuel consumption big time this summer as regular people choose not to drive if they don’t have to, and transportation fleets pool schedules to ensure their trucks, trains and ships aren’t wasting a drop. According to Rohter the big ocean-going container fleets have slowed down 20% to save on fuel costs, which translates into substantially slower turnaround on the goods.

We all recognize that greatly increased shipping costs as reflected in the upside-down cost of diesel fuel (remember when diesel was always a dollar LESS than gasoline?) must translate into an increase in the price of everything that moves by means of diesel fuel. This means inflation in every sector, at a time of stagnant wages, joblessness and increasing costs of basic transportation, heating and cooling for the average citizen.

Continue reading »

Popularity: 4% [?]

The Loan Shark Bailout Bill

…er, Housing & Economic Recovery Act

The US Congress, both House and Senate, finally cleared the Housing and Economic Recovery Act of 2008 today, after nearly a year’s worth of hemming and hawing and slipping goodies into the legalese in the middle of the night. A regular miracle of modern political tug of war and a bill that’s changed its name and focus so many times nobody’s quite sure what’s in it other than a trillion or two to bail out Fannie Mae and Freddie Mac. Having weathered a total of seven [7] Senate cloture votes, President Bush is likely to sign it into law.

No one expects a handout from this bill unless they’re 1. a robber baron, or 2. a loan shark, or 3. a speculator and/or house-flipper (buys real estate only to flip it immediately at inflated price), or 4. an fossil fuels dealer. Thus not surprisingly, the stock market opened low this morning [7-28-08], down more than 134 points at noon. Though Fannie and Freddie were on the upswing on that promise of taxpayer trillions.

Continue reading »

Popularity: 5% [?]

Roundup: Those Silly Financial Advisors

As the economy continues to slide ever deeper into recession – dragging the entire civilized world along with it in one spectacular leap into the great oil scam abyss – we get the mainstream media’s too-cute economic pundits telling us things designed to make us laugh out loud. Which could actually be semi-useful, considering how many neurosciencey-type researchers keep telling us how much humor can help us conquer stress and depression and other unavoidable side-effects of living in interesting times. But only if you actually read their sage advice *as* comedy, meant to lighten your mood.

For instance, the jokers over at CNN Money have some real thigh-slappers on what we regular people should do ‘just in case’ the worst happens (the whole house of cards comes tumbling down). We need to beef up our “emergency funds,” we’re told, as if we had more cash to stash in zip lock bags in the freezer than the two to three weeks’ worth (which we’d still have to scrimp to save up) advised in the post Hold On: The Ride’s Just Starting.

We are told that in the face of bank failures, job losses and investment wipeouts that the “standard advice” is to keep at least three months’ worth of living expenses ‘socked away’ if there are two wage earners in the family, six months’ worth if there’s just one breadwinner. Surely it can’t be that difficult to just take ten or twenty thousand dollars out of your bank or investment portfolio in small bills and find a safe place in the house to hide it from the teenagers, right? Hahahaha. That’s a good one.

Continue reading »

Popularity: 5% [?]

Hold On… The Ride’s Just Starting

IndyMac Goes Down – Largest Bank Failure EVER

Photo from LA Times

That minor recession that John McCain’s erstwhile economic advisor informed us just last week is “all in our heads” got worse as FDIC moved on Friday to take over Pasadena’s IndyMac Bank. Their audit showed that a surprising number of deposits exceed insurance coverage limits, and when the bank goes down that money is gone… poof, disappeared, “liquidated” by economic reality. According to the Wall Street Journal, this works out to about 10,000 people whose money was in IndyMac – 5% of their total deposit base – who will now have to “learn a lesson” about not putting all their golden eggs in one basket.

The FDIC Quarterly Banking Profile doesn’t look very promising either, so it’s important for people to realize that they are only guaranteed return of $100,000 in regular deposits, or $250,000 in retirement accounts (including accrued interest). Given what has happened in the past as corporations decide unilaterally to loot their portions of retirement accounts in order to try and stay afloat, if things get bad enough the retirement savings of Baby Boomers may well be in jeopardy.

Since 2007 there have been 8 bank/thrift failures, nowhere near the level of failures during either the Great Depression or the notorious S&L ‘crisis’ of the 1980s. But that can change rather quickly, so if you’ve some real money in the bank – particularly in the kind of retirement account we’ve been told for years we’ll need in order to live well in our old age – you may want to divvy it up into more than one institution so the full amount is covered.

Continue reading »

Popularity: 4% [?]

Financial Fallout: Bank Failures, Homelessness

Your bank just locked its doors. Should you worry?

Pittsburgh: Forty people wearing red tee shirts and carrying signs marched right into a National City Bank last Friday morning. They chanted “Criminal Offenders, Predatory Lenders!” and blew whistles. They demanded an immediate halt to home foreclosures.

The group dispersed after police were called and nobody got arrested, but no one got any relief from foreclosure either. The demonstration was part of a national effort by the group ACORN, the Association of Community Organizations for Reform Now, which provides free counseling to low and moderate income home buyers. As more and more families lose their homes, ACORN hopes protest actions will become more and more visible.

From shelters and coalitions for the homeless all over the country, reports are coming in of overwhelmed facilities and no end in sight as new faces join the ranks of the homeless. The ‘lucky’ ones, about 76% of renters and homeowners displaced by the continuing mortgage crisis, are moving in with relatives and friends. The rest are on the streets, living in their cars, or filling emergency shelters. It’s going to get worse.

Continue reading »

Popularity: 5% [?]

Is Bankruptcy ‘The End Of All Things’?*

* [h/t Frodo Baggins]

The cost of everything is still rising fast, despite the influx of ready cash to taxpayers in the way of rebates going to pay arrears on the mortgage or electric bill. The number of people losing their homes and losing their jobs continues to rise as well. And in a little-publicized indicator no one likes to talk much about these days, the number of Americans declaring bankruptcy is shooting through the roof – up nearly 30% [27.0] in the first quarter of 2008 over the same period in 2007. As Samuel J. Gerdano, Executive Director of the American Bankruptcy Institute says…

“Bankruptcies are rising due to the heavy burden of household debt and growing mortgage problems. We expect this trend to continue through 2008.

So there doesn’t look to be any break in the recession cloud this year, with indicators that it may well descend all the way into depression by election day in November.

Continue reading »

Popularity: 4% [?]

The Poor Get Poorer Still

Last month I asked the question, Is It Depression Yet? and linked quite a few opinions of economic pundits about when the recession no one in DC cares to admit we’re in will turn into a full-fledged depression.

In going down the list of ominous signs that we’re going down for the third time, the key ingredient apart from a burst credit bubble was rising oil prices. Well, this last weekend gasoline went over $4 a gallon, and diesel was pushing $5. So while families and workers in cities can start taking mass transit to work and school and just stay home this summer instead of driving to the Grand Canyon, the price of diesel – which runs all our shipping fleets, trucks and trains – is going to cause swift inflation in the price of food as well as everything else that is transported from here to there. It is no longer a wild conspiracy theory that oil will go to $200 a barrel, now projected by the end of this year and possibly right around election time. It could hit $150 this month and no one will be shocked.

Thus I read with interest an article in the June 9 New York Times entitled Rural U.S. Takes Worst Hit as Gas Tops $4 Average. A survey by the Oil Price Information Service did a survey which showed that the price of gasoline has its biggest impact on rural areas, particularly in the Southeast, and that for the people euphemistically called the “working poor” the cost of just getting to work and to the store is quickly eating as much of their income as food and housing. Since their incomes are not rising and aren’t likely to rise, the situation for people in rural areas of the south, New Mexico, Montana, Wyoming and the Dakotas will soon become a choice between food and transportation.

Continue reading »

Popularity: 6% [?]

Is It Depression Yet?

As we start moving into summer I thought it might be interesting to take a look at some economic predictions made way back in 2007 by an “informed” opinionator over at Sustainable Living’s Natural Hub, a Q&A piece entitled Timing of a depression triggered by high oil prices.

An Overview of unfolding recession as the oil economy fades was published in 2006 explaining the various factors that would mark a worldwide recession due to increasing oil prices. Some of its indicators have long since come and gone, others have been with us for years already, and some of the predictions have come true in these last few months. For those of us living in the real world, recession and ‘stagflation’ have been facts of life for years despite the mainstream news media’s reluctance to actually use the word when reporting on where speculators have taken futures on oil and food supplies lately. They won’t use the ‘D’ word either [depression], but here’s a list of signs that it’s already upon us.

Sign 1. “For there to be a deep recession, there first has to be a credit bubble – a high level of personal indebtedness in the community.”

Well, this one’s sure a no-brainer! Hopefully most readers of this blog have made real efforts to minimize or get out from under personal debt over the past few years (exempting mortgage issues), or were never deeply in debt in the first place. Those who consolidated credit card and other installment loan debts by refinancing when the mortgage boom was on may be facing serious issues with that mortgage now, but that’s such a huge issue that if mortgage debt is the biggest of your worries, you’re doing pretty well.
Continue reading »

Popularity: 8% [?]

Mortgage ‘Crisis’ Got You Down?

Consider Squatting in Your Own Home

Today the New York Times reports that governmental expectations that Fannie Mae and Freddie Mac will somehow keep the housing market afloat is starting to look like a pipe dream. With defaults and foreclosures rising drastically, administration officials, regulators and lawmakers are starting to get very nervous…

Will the next big taxpayer bailout have to go to these government-guaranteed mortgage giants? Well, since we got to bail out private investment bank Bear-Stearns, I’d guess so. Too bad we can’t bail out the families losing their homes.

Speaking of which, I got to wondering what happens to the people who lose their homes, given that the rental market is in just the same trouble. Is anybody keeping track of the homeless population? And if the person who used to own the home is now homeless because it’s been foreclosed, what’s the new designation for that family if they decide to simply stay where they are?

I did a little searching and found lots of news and opinion about how neighborhoods decimated by the mortgage crisis are now hosting increasing numbers of “squatters”. Here’s a CBS News video on that issue:

Continue reading »

Popularity: 6% [?]

What’s For Dinner? …Anything?

The market news reports that consumer spending is up again this month. The problem is that this is not as a sign of possible economic recovery from the deepening recession we find ourselves in. It’s a reflection of the fact that people must spend more on basics like fuel and food – prices for both rising much faster than regular people can keep up with – thus must spend less on all that consumer junk our capitalistic system expects us to buy with our overrated “disposable income.”

If you’re reading this blog, chances are you’re like me – I have no “disposable income” because all the income we have must go to simply pay for the necessities of life, and there’s hardly enough even cutting corners. Food, clothing, shelter, transportation, utilities. I have previously posted about the clothing thing, as I haven’t actually purchased new clothing for at least a decade. Used clothing is good enough – even suits and formal clothing – though I don’t dress up much. But the mortgage is what it is. Gas prices are what they are, they cannot be bargained down. And as the price of fuel rises, so does the cost of food and electricity. Thus more of our money must be spent on necessities, even if we never had any left over for junk in the first place!

Continue reading »

Popularity: 9% [?]