On so many levels it's tough to say where things are heading! There
is so much uncertainty: Recession, 50/50; Super Committee's plan for
deficit reduction and how will it be received, who knows; The
presidential election, anyone's guess; What type of governments emerge
in Egypt, Libya and will they be stabilizing? What's next for Syria?
Is Iran after that? Where does it all leave Israel and will they be
forced to mitigate the nuclear threat from Iran? How will we cope with
climate change? There's a thousand really tough questions and very few
solid answers. I can't remember a time in my life when there seemed to
be so much uncertainty over so many substantial issues worldwide. If
you're a pessimist it is an awful time! Even if you're an optimist is
still an unnerving. A pragmatist could throw up their hands trying to
come up with a calculated answer. It's really to tough to say where
things are heading.
People hate uncertainty. Stock
markets hate uncertainty. I think the only people who love uncertainty
are anarchistic and doomsayers. This is a great time for someone who
would like to lead a rebellion. And, as the political season heats up
around the USA I'm betting some of the political stumping sounds as
close to a call for overthrowing the government as you can get without
seriously meaning it. No doubt that some of them will mean it. (Get
your pitchfork ready.)
It's getting ugly and austerity
hasn't even really kicked in yet. If Euro countries, the UK, and the
USA take the austerity steps they seem to be that are needed to rein in
deficit spending from a gallop to a cantor, let alone a fast trot, there
will be much more pain and protest to deal with. Scenes like the ones
we saw in Greece earlier this year will be much more common across
Europe. In the USA, expect to see Tea Party rallies so large that they
fill stadiums. No security could safely escort Harry Reid through those
tailgating parties.
We are about half way through the Hurricane season, and
already FEMA is broke. Let Katia or whatever storms or other kinds of
natural disasters cause another few billion dollars of damage and leave a
few more millions without power or homeless and then even the weather
is a big factor in turning an already tumultuous time for society into a
downright out of control situation.
Is it a coincidence that next year is 2012? Movies about Armageddon went into production years ago.
Their producers may be starting to get worried about the box office
receipts if we are actually having it. Wouldn't that be the ultimate
irony!
OK, let me try to rise above all this. The world is not
coming to an end! But if it is, consider yourself lucky to have lived
to see it. There's no denying the parallels with the Mayan calendar,
and that recent geopolitical events appear to play into the
"end-of-days" prophets. If it's enough to scare you then go ahead and
get your house in order - worship and repent, tell people you love them,
cherish every day, and take the vacation you've always dreamed of ...
it's all good even if the world goes on for another ten thousand years.
Generation
after generation have had to face tough times and frightening thoughts
about the future. I don't have to list history to prove that. The key
thing to keep in mind is that we always got through it! Mankind finds a
way. Humans are amazing and resourceful creatures. Overall, we tend
to get our way. And while Americans may have grown soft we are bred
from the stock of the people who founded this nation, got through the
civil war, the Great Depression, and won two world wars. We got "enough
tuff" in us to handle just about anything Obama or Bernanke can throw
at us!
What we need is a little perspective in order to see
where the situation with the economy is heading. I will take a stab at
it.
Various governments around the world are broke and the
only way they can get through this mess we are in is through more
aggressive monetary policy. Forget about fiscal stimulus or new taxes
raising enough money to deal with the debt. Call the solution whatever
you like, but I like to call it what it is, printing money. That sounds
bad but first let's get this fact straight. ALL the money in
circulation is fake!! None of it is backed by material assets. We've
been off the Gold Standard for decades. Money js just printed pieces of
paper or digital numbers with lots of zeros. It only has value because
we believe it has value! And, money only has value for two reasons: 1)
People accept it in exchange for what really does have value (goods and
services). 2) There is NOT so much money floating around that there is
more it chasing the supply of goods and services than there is a supply
of those goods and services. With those two facts firmly in mind, ask
yourself the following three questions: 1) Do you really expect people
to refuse any legitimate currency in circulation? 2) Are you worried
about having too much money? 3) Do you expect the Exon/Mobile to say
they are out of gas? If you answered "NO freak'n way" to those three
questions then I believe we all need to stop worrying about QE anything
causing too much inflation! There is way too much fear of inflation. I
like the way Bernanke put it ... I believe he called recent inflation
concerns "transitory!" What a perfect way to put it!!
Even
if oil did go to $120 a barrel again it's only going to accelerate the
rate at which America becomes non-dependent on foreign oil. Watch how
many more businesses and households take real steps to reduce their
demand for oil and gasoline as oil prices go back up again. People will
be going solar, pulling up to the pump in hybrids that get 2x mileage, recycling every ounce of metal or plastic, and
replacing their windows, doors, furnace, and every inefficient appliance
they have before they pay $140 a barrel again. Oil and gas supply
towns like Williston North Dakota will be booming across the USA and oil
will be coming out of every pour before we become dependent on a Libya,
let alone Iran, for their oil. I think just about every American wants
to tell OPEC to pound sea salt and it's about time we did!!! I'm not
worried about higher oil prices. In fact I say, bring it on!!
I'm not worried about food inflation either. America has the
greatest agricultural supply industry in the world. And in the process
we've learned to manufacturer the most amazing farming machinery and
equipment the world has every seen. We have corn combine tractors that
need their own zip code. That bodes well for many American firms who are
positioned fantastically to profit from the demand coming from
developing and emerging continents like Africa and Asia, as well as
South America. Food inflation will be tackled with the tools and other
farming technology. that America leads the world in. (And by the way,
our cheap dollar isn't hurting the firms that make and supply this
equipment.) A tangential benefit that I see coming from food inflation
is how it will cause Americans to rediscover something wonderful that we
gave up to the giant industrial farms - family farms. One way
American's can address food inflation, let alone the effects of all the
additives in processed foods, is to get back to "home grown" or at least
locally grown produce, meats, and dairy. This isn't just good for our
health, it's good for jobs in our communities as we source more of our
table from local farmers and markets.
No matter what we do to turn our economy around it isn't going to
happen until we fix the housing industry! Given the fact that the
housing industry is at depression levels it's a wonder that unemployment
isn't as well above where it is today. Personally, I see that as
evidence of how strong and diverse our economy really is. But the
housing industry is still vital to the health of our economy and just
like the automotive industry, the housing industry needs to make a
comeback. I believe it will and with it will come the jobs. And, with
both we will be pulling ourselves out of the economic malaise and seeing
brighter days
I know I can't get off that easily with
just saying "I believe housing will make a comeback" without giving some
reasonable logic for why it will. So here is the reason and it's much
simpler than you than you think. The solution for the housing industry
plays a lot like a game of musical chairs. Only instead of players
getting out of their chairs there are lots of distressed homeowners who
need to get up out of the homes and slide over to another home a lot
like it. Now I will explain.
The game begins with Bernanke's "operation twist" in
order to drive down long term interest rates. As if they aren't low
enough already, the 30 year mortgage is apt to go a level we haven't
seen in our lifetime and our children will never see in their lifetime.
Couple historically low interests rates with a remarkably attractive
pricing index and fantastic supply and people have an opportunity to buy
a home is that is possibly the deal of the century!!
The
great housing values and affordability is all well and good but if
people can't qualify for a mortgage it's not going to do a lot of good
for home buying or the housing industry. I believe that is about to
change. It makes no sense for someone to be disqualified for a home
that they truly can afford because they failed to make the payments on
an overly priced house with the mortgage that they never should have
been given. The situation in the housing industry is just insane and
government regulators and the private sector have got to come to terms
with the fact that someone who was just foreclosed on or who simply
handed back the title and keys and walked away can be highly qualified
to buy another home right away regardless if they have a 200 credit
score. When we stop the insanity and let those people get a mortgage
with some reasonable down payment, or even to refinance their current
mortgage with no equity, that will be the day when we start to turn back
the housing industry crisis, for that is the day when the musical
starts and a lot of desperate homeowners will get out of their "chairs"
and move to a home they can afford and start to make payments they can
easily live with. And when the banks and other holders of mortgages
start eliminating their non-performing loans and liquidating
their properties we will all start to see brighter days!!
What about the government and size of entitlements you
may ask. OK, I saved the best (or the worst) for last. If you ask me
that could well be the biggest prize for having to live through this
painful recession. For the first time in over a generation we may
actually begin to shrink government! That includes Federal, State, and every level and agency. Hallelujah!! Less government
means less spending and less spending means less government borrowing. That means businesses are in less competition
with the government for capital borrowing or workers. No apologies to
many greedy Union leaders who had it coming and have been destroying
rather than helping our country!! (When the Unions recognize how they
can be part of the solution I will applaud you, but thus far it has been
far the opposite.) The problem with our deficit and debt is simply that
there are just too many living off of too few. Let's stop calling this
overhead "entitlements" because it starts off with the premiss that
people are entitled!! Too many people have been given pensions and
benefits that they should not be entitled to! That is the tough truth! I
don't say that rolling back entitlements won't be painful for some, but
it can be done and it has to be done! If I agree with the Tea
Party on anything that is it. And, I'm including the military in this.
Enough already! No, too much already! While there are some tax
loopholes that have to be closed, we can not tax our way out of this
deficit. In fact, if we want American company profits made overseas
to be repatriated and invested in the USA we actually have to cut
corporate taxes! Every dollar that goes into government has to be
looked at as a dollar that could have been better spent by you! Every
dollar a business has to hand over to government is a dollar that the
business could have been spent on labor or invested in research,
development, plant & equipment or even distributed as dividends to
help fund someone's retirement income.
As government shrinks the economy can grow, but only if
there is sufficient monetary stimulus to ride us through a truly soft
patch. And, only if regulators encourage more energy self-sufficiency by
letting more towns like Williston to raise domestic supply. And, if we
get reasonable about who qualifies for a mortgage today regardless of
what happened with their last home mortgage. Entitlements are the past,
America needs to invest in the future. The biggest crisis we have in
America is finding the leadership that sees our problems for what they
are and has the courage and ability to articulate the problems and solutions and inspire us to tackle them. That is what I really mean by the title for
this post "tough to say!"
