Wednesday, September 22, 2010

Sleeping Dogs

My dog loves to sleep, he is content having me care for him and returns the favor of unquestionable loyalty to me, watching my home, and protecting my children. However, if he were kicked while sleeping he would awake with a vengeance, ready to attack. I believe the American people, regardless of political affiliation, are like my dog: content, apathetic, happy to be cared for, and quite loyal. But something has changed during the last two years; the 300 million of us have been kicked by the 535 members of Congress and are awake, growling, and ready to attack. We are tired of the politicians in Washington stealing our futures, committing crimes, and believing they are anointed for life to govern us.

Over the last 18 months the elite political establishments have criticized the Tea Party; claiming it was orchestrated by wealthy individuals as “Astroturf.” It was hypothesized it was an organized effort and no one believed the American people would come together April 15 with 750 rallies across America proving it is a grassroots effort. The major news networks incorrectly reported the movement as racist, radical right-wingers, and a split in the Republican Party. Many see this is as a grab for conservatives; so continues Washington’s and the elite political establishment’s misunderstanding of those they govern. I assert the Tea Party movement is America: rural and suburban people, family oriented, hard-working with morals, values and ethics. We understand Congress has passed laws over our objections, exempted itself from those laws, and stolen the future of many generations.

In the primaries last week Tea Party candidates succeeded in changing the status quo. Since April 2009 Tea Party rallies have proven they represent everyone, although portrayed as radical and racist, and even a fad, by the mainstream media. I have watched black, white, Hispanic, women and men marching together to remind Washington they need to hear us. Voter revolutions have occurred before, most notably 1994 was the last time and there was talk of term limits and strong anti-incumbent sentiment. The following years were better for all, debate was forced into the two party system, and a President with an out-of-touch agenda was forced to curtail his radical desires. The single party majority currently controlling the Congress and the Executive Branch of government has kicked the dog, forcing him to realize tyranny comes while sleeping.

Wednesday, September 15, 2010

Burn Qurans

I am disappointed this afternoon, Thursday the 9th of September, after reading reports that Pastor Terry Jones has announced his church will not burn the Quran on Saturday, September 11th, the ninth anniversary of the day America was attacked by Muslim extremists. Last week I wrote in support of the project in New York, building a mosque at Ground Zero. Constitutionally the right to build the Mosque is guaranteed; however distasteful. Similarly, Pastor Jones’ right to burn the Quran is guaranteed; again, however distasteful. I would hope our military could defend itself, but that appears questionable based on public comments.

What truly concerns me is the world’s willingness to cow tow to the Muslim extremists and threats. Are we to believe the world’s largest superpower, the USA, and our western allies cannot defend citizens against threats from religious zealots who have become a political movement set on killing all who disagree with them? President Kennedy’s Secretary of State, Dean Rusk, said “appeasing the aggressor only makes him more aggressive.” Repeatedly, this political movement, called Islam, has attacked innocent civilians worldwide: December 1992 in Yemen, 1993 WTC in New York, 1998 Kenya and Tanzania US Embassies killing 200 and injuring 5000, October 2000 USS Cole, 2000 Rizal Day Bombings in the Philippines, WTC 9/11/2001, 2007 Algiers Bombing, 2008 Danish Embassy, and the 2009 Little Rock Arkansas Recruitment building. Additionally, although not tied directly to Al-Qaeda, the Ft. Hood Massacre, failed 2009 Northwest Airlines bombing, and the failed Times Square bombing were also in “the name of Allah.”

Our President offers apologies to the nations of the world that oppress their mothers, daughters, and wives. The same nations with state established religion, censorship, and political oppression. He finds reasons to coddle our enemies, fails to retaliate, and explains we will withdraw troops to satisfy the demands of the petroleum-based kingdoms harboring the Jihadists who hate us. Our enemy issues “fatwa” for denigrating their political idols and writings, Muhammad, Allah and the Quran. Just check with Solomon Rushdie and the creators of South Park. Pastor Jones is considered by many a red-neck racist extremist; maybe he is a guy with the cojones to stand up to our enemy. Most saddening is General Patreaus’ concern for troop safety which makes me wonder who is winning the war. It appears 2,983 died on 9/11/2001 in vain and there can only be one conclusion: we must all live in fear of Islam.

Sunday, September 12, 2010

Obama is Right

This is probably the most concerning column I have written, not because I agree with the President but because the issue is sensitive, to both sides. Currently, whether to build Park51 (a.k.a. Ground Zero Mosque) is driving passionate public debates. Hesitantly, President Obama voiced his opinion two weeks ago when he said the right to build the project was constitutionally protected. The following day he made further comments stating while constitutionally protected, it may be in bad taste. I must agree with both of his comments. While it may be in bad taste, I do not believe it is a community center designed to protect, or possibly sympathize to Islamic terrorists as has been asserted by some in the media. Ultimately, the court of public opinion will either empower the developers and those funding the project, or send them packing.

I am disturbed by talk radio pundits flummoxing methods. Other than to inflame an ill-informed public there is no other purpose for the front-page debate. The fallacy of the current argument comes from the presumption if terrorists are Muslim then all Muslims are terrorists. I take issue because living in the south, as a white male; I am stereotyped as a racist redneck by the argument racist rednecks are southern white males. Similarly, a German born in the 1920’s is not automatically a Nazi. What has been lost in the argument propelled center stage is the right to build a place of worship, as protected by the First Amendment of the Constitution. The same people who herald the constitution in arguments against healthcare, bailouts, and social programs are quick to stomp the same document when it does not meet their needs.

There are many aspects of the Constitution which may not conveniently fit our desires and likes. However, if we remain consistent in our application, trusting the truths set forth by the founding fathers we will not go wrong. In the case of Park51, it is clear there is no constitutional violation to build. The decision to build is purely local and is governed by the zoning laws, planning commissions, and local electorate. Does it feel good to support building the project? No, but the more important issue at hand is support of the Constitution in the face of our enemies, asserting what separates our country from those who attack us in the name of God.

Thursday, September 02, 2010

It Will Get Worse -Be Prepared and Take Care of Yourself
12/28/2008 – by John Nelson (G8REngineer@yahoo.com)

I originally wrote this during the Christmas Holiday of 2008. Since I reference this paper in my blog, Economic Recovery? I wanted to post it here.--------------------------


My predictions for 2009 and 2010 are below. I felt compelled to put this together because I have shared these thoughts with my wife and many friends. I am bothered because I see a trend in daily newspapers and news programs to report with a degree of optimism, and then with surprise, when the news is worse than they had first reported. But, I keep finding the news is not worse than I expected.

As this year has gone by I have been concerned by current events as compared to history. Our government has bailed out defense contractors and other private companies before. In the 1930’s, the press and government denied what was taking place, but yet we have the benefit of history to know how bad things were. Today there is a certain level of optimism by many people and I hear comments like, “we are Americans and we always pull through.” While that statement may be true, I feel concern to blind acceptance that things are always going to be ok. Throughout this article I make references to natural disasters and other external events. I feel today’s economic issues are similar in that external forces are going to impact individual lives. If you ascertain nothing else from this writing I hope it is that the most significant economic changes in decades are currently occurring and preparing for the worst possible outcome will aid you in dealing with that possibility. Like all predictions or theories on trends, I may be wrong about the severity, it may be better or worse, or about the timing, events may come sooner or later. Regardless, I hope to convey concern and suggest preparation.

First, I want to provide some background information. I do not have cable television, I do not watch local news, and I do not read newspapers. On a daily and weekly basis I gather my news and opinions from the following sources:
Daily
• Bloomberg (http://www.bloomberg.com) – I first review world markets, particularly Asia and Europe just prior to going to bed and when I first wake. Second, the news wire provided here is far superior to any other source available
• Drudge Report (http://www.drudgereport.com) – a great link to numerous worldwide news articles
• Peak Oil (http://www.peakoil.com) - a link to various energy, climate change, policy, and other news articles
• Kirk Report (http://www.kirkreport.com) – Kirk is a day trader and offers stock information. But, he also links to a huge number of financial articles and opinions focusing on Fed and other central bank policies
• Economic Populist (http://www.economicpopulist.org) – Average people’s opinions about what is currently taking place. Of most interest are the specifics of research including graphs, data, charts and details to defend positions. Short articles, highly informative.
• Seeking Alpha (http://www.seekingalpha.com) – Similar to Economic Populist
• Yahoo Finance Home Page (http://finance.yahoo.com/) – What the average person sees for headlines
• NBC Nightly News (Podcast) – download video each day and watch following morning
• CNBC Fast Money (Podcast) – download video each day and watch the following morning
• BBC Global News (Podcast) – download and usually listen the next day
Weekly
• Kunstler Cast (Podcast) – James Howard Kunstler weekly podcast. Focus is on the end of suburbia due to changes with fossil fuels
• Bob’s Gold Price Column (http://goldprice.org/bob) – what the doom and gloomers think about gold and inflation
• Matt Simmons (http://www.simmons.com) – an energy expert

Change is taking place around us. If you had told me ten years ago that I might find myself living in a situation where I would not have power for 5-10 days, not be able to go to the grocery store to buy food – especially refrigerated items, I would find lines at gas stations, or buildings around me would be boarded up taking on a third world look, I would have laughed! However, I have lived through that situation in the summer of 2004 in New Smyrna Beach due to the hurricanes Charley, Frances, and Jean. From that experience I re-evaluated what it meant to be prepared. I thought I had everything I needed to survive: a couple of gallons of water, a bow saw, candles and a few flashlights. I learned how naïve I was. Since then, I have added a generator, chain saw and spare chains, lanterns, camping gear, stockpiles of gasoline each June, regular testing of the generator, and many other items.

Am I crazy or am I prudently prepared? Any resident of the state of Florida who does not keep minimum supplies is living in a state of denial. Other disasters and events have struck in the last 25 years in the United States and elsewhere – how prepared would you be to take care of your family?
• Northridge Earthquake
• Hurricane’s Katrina, Charley, Andrew, Hugo, Floyd, etc
• Coal Ash Levee break in Tennessee
• Devastating tornadoes
• Mount St. Helen’s
• Christmas Tsunami in Indonesia
• Rogue wave – Daytona Beach 1996 (or so)
• Springtime flooding in the Midwest
• Terrorist attacks of 9/11/2001
• Rodney King riots
• Heat wave in Europe killing hundreds in France
• War in Sarajevo, a beautiful Olympic city
• Cholera outbreaks in Africa, 2008

My point is disasters and upheavals occur regularly, and without warning. Our ability to take care of ourselves is what matters in each case. One need only picture scenes from the news of how Hurricane Katrina victims responded versus the same, significant, devastation from Hurricane Charley in Punta Gorda, Florida and the importance of proper and prudent preparation becomes apparent. More importantly, self-sufficiency and the ability to survive without reliance on others or civil authorities is incredibly apparent.

Most citizens in the United States have lost the ability to think and be self-sufficient for themselves. Take an automobile owner’s manual from the 1960’s and compare it to today, 40 years later. My 1967 Mustang has details on lubricating the chassis, changing a tire, performing valve adjustments, and other maintenance. Today’s owners manual states the warranty will be voided if the work is not performed by an authorized service center. I would assert the average person, especially Generation X or Y, will call roadside assistance and wait 90 minutes to have a tire changed instead of taking 10 minutes and performing the work themselves. Furthermore, if food becomes an issue of concern I believe most citizens will be at a loss. They will not know how to grow or kill food due to the basic belief that food comes from the grocery store. I had a friend share his concerns about the differences today versus the Great Depression – in the 30’s he feels a person would have given his place in a food line to another out of kindness and sacrifice. Today, he feels your life is at risk due to the selfishness of most people and their inability to survive without assistance.

One problem society seems to face is forgetting our history. As recently as summer 2008 gasoline prices were over $4.00/gallon. Behaviors were changing: scooter and motorcycle riding was up, SUV’s purchases declined catastrophically, people moved closer to work or considered changing jobs to reduce commutes, trips were combined, leisure travel was eliminated, and overall there was a general trend toward conservation. In 1974, due to political events, Americans had to ration gasoline resulting in huge shortages. Odd and even days were used to determine purchases and none could be made on Sunday’s. An immediate move toward smaller cars was made. To a lesser extent, the same problems arose in the early 1980’s and panic over dependence on oil again ensued.

During 2008, many newsworthy events have taken place, but without the benefit of seeing them all at once it is hard to imagine the economic and societal decay taking place around us:
• Rice and flour shortages on the west coast as Asian populations understood shortages oversees
• Rising global food prices due to US policies on ethanol
• Gas shortages in the Southeast US due to supply problems after hurricanes
• Over a dozen airlines went into bankruptcy or out of business
• Major brand stores went bankrupt (Steak n Ale, Circuit City, Linens and Things, etc)
• More than 170 banks failed as of 12/1/2008
• Christmas holiday spending was the lowest in 40 years
• Year over year housing price decline of 13%
• Unemployment claims are at their highest in 25 years
• Diminishing new job opportunities, compounding unemployment problems
• Dow Jones high of 14,000 in October 2007, low of 7570 in November 2008 – 45% erasure of value
• 1 out of 10 mortgages is in default or behind on payments
• Rising defaults on credit cards and car loans

Throughout the year, news sources have reported events with an element of denial or ultimately surprise when the data become available. Just this week, on 12/26/08 I heard the following reported on Fox News Network:
“Retailers were surprised at the worse drop in holiday sales in over 40 years.”

They went on to report possible reasons such as: there were 6 less shopping days between Thanksgiving and Christmas, a holiday snowstorm that kept consumers away from malls. The comical reporting came next: some consumers may be concerned about job loss and not spending as much, credit cards are maxed out and no new credit is available. Last but not least, they reported that the economy of the United States is consumer based and that the total GDP – the production of all products and services – is 70% consumerism. Thus, without the citizens consuming the economy is grinding to a halt. ‘They’ need to force ‘us’ to start consuming.

Our problem as a country and with our current economic situation is we do not make anything that anyone else wants. We make money and recycle it within our own borders. Thus, growth is a fantasy based on a false reality. The best example is real estate over the last six years; the rapid growth had nothing to do with a true increase in value due to supply and demand. Instead, the easy availability of credit perpetuated a debt-based drive toward home ownership where prior lending standard required 20% down (leveraging of 5:1) now allowed 5% down (leveraging 20:1). Finally, these standards were reduced to 0% or even -5% down – the equivalent of infinite leveraging. This was a house of cards doomed to collapse. During this time, the media constantly reported that housing prices would recover within a three to six months. This took place throughout late 2007 and all through 2008.

I had to set the background for where we have been before I felt I could make predictions on where we are going. My synopsis is below with a predictive narrative and finally recommendations to plan for the next 2-3 years:
• Housing – there will be no recovery in housing before the end of 2010. Housing prices in some areas inflated as much as 2%/month (24% per annum). Historically, housing rise at a rate equal to or just above inflation. Thus, it will take 10-15 years to work back to the 2006 highs. This is compounded further by an inventory of 4 million homes for sale when historic inventories are between 2 and 2.5 million. Last but not least, lending is not available to purchase homes with debt.
• Credit – Consumers will not have credit readily available until late 2009 or early 2010. Our consumption based economy will remain frozen until the spending engine can restart.
• Equity Markets – The Dow and S&P500 remain over valued. Current estimates of average earnings for the S&P are about $55. Thus, the S&P is trading on a forward multiplier of about 18-20. Analysts have consistently overvalued earnings and multipliers throughout 2008. Many blue-chip, dividend paying stocks are trading closer to a multiplier of 7-10. Historic norms are 14-15. Thus, using a multiplier of 10, the S&P should be at 550.
• Currency – The Fed has printed huge sums of monies. Taxpayers generally pay about $1 trillion per year in federal income taxes. In the last 12 months Congress and the Fed have promised about $7 trillion in bail outs, stimulus, and balance sheet increases. As large as the numbers are, a huge deflationary move has taken place due to the erasure of debt, thus offsetting some of the severity of the inflationary monetary policies. If other governments reduce lending rates and increase currencies, the dollar will not be devalued. However, inflation is inevitable.
• Oil and Energy – Oil has plunged to the mid-$30s from a high of $147/bbl in July 2008. Commodity markets tend to overshoot both directions to the high side and the low side while supply and demand realign. The issue with oil is not one that we are going to have no oil. Instead, the marginal cost to produce each subsequent barrel of oil is higher than the preceding barrel. This is the root concept of Peak Oil; supply will not keep pace with demand. Hubbert’s peak in the early 1970’s in the United States is well-documented and the same will apply to world supply and demand. During the peak there will be wild oscillations in prices, supply, and demand. We are at the beginning of the peak and experiencing the swings.
• Climatic Change – the Green lobby is promoting huge expenditures due to perceived global warming. Regardless of political views, climatic change appears to be taking place. The summer Artic ice in 2008 melted at a rate that allowed transit across the polar ice cap from North America to Asia and Europe that had not been possible due to being previously frozen for the last thousand years. Plants not exposed for a thousand years appeared this summer. The Greenland Ice shelf is melting at an unprecedented rate and the risk of a significant piece sliding into the ocean is increasing daily. There is less snow and ice to reflect sunlight causing a possible natural exponential warming trend that can not be reduced. Salinity values in the North Atlantic are changing, thus impacting the flow of the gulf stream and the natural cooling process in the northern hemisphere. These changes may be normal on a geological time scale which we can not measure or they may be due to increases in carbon in the atmosphere driven by man made changes in the last 150 years. Regardless, they appear to be taking place at a significant rate. This climatic change will impact coast cities, farming communities, water supplies, and world hunger.
• Geopolitical Issues – The middle-east remains an area of concern with religious based hatred of western civilizations being a catalyst for terrorism and oil policy changes. Israel has ramped up hostilities in Gaza Strip and India and Pakistan are both nuclear powers with increasing hostilities. Russia is establishing herself again as a world power, particularly with an interest on controlling energy and pipelines feeding Europe.
• Politics in the United States – A new, inexperienced president will try to create policies to save the country as he promised during the campaigns. At the same time, the House Speaker, Nancy Pelosi, has a strong liberal agenda that she believes she can now accomplish including: union supported legislation, national health care, increased taxes and wealthy producers, and a general move to a more socialized country. President Obama will work to pass legislation to make owning firearms more difficult, most likely through taxation on ammunition or illegality of personally possessing ammunition like Switzerland successfully implemented in 2007. He will try to create 3 million jobs, but that will not impact the economy for 5-7 years. He will support another stimulus package and saving the auto makers, moves that will further add to our debts.

In 2009, I see a temporary stock market rally based on the euphoria of a new president and false confidence that he can implement programs that will save the country and the average person without significant ownership or pain on their part. The House will pass another stimulus package which will not stimulate the economy as consumers hoard cash out of fear of losing their jobs. The president will be tested by events in the middle-east that will ultimately result in him appearing weak as nothing can be done to prevent the hostilities that have brewed for thousands of years. Throughout first quarter 2009 unemployment will continue to rise at unprecedented rates, reaching 10% by April and 12% by July. Housing prices will continue to decline as lending is not available. As unemployment increases, consumers will further reduce spending worried about their own future and possible job losses. Those that have a job will be reluctant to consider moving and will not purchase existing or new homes.

Company earnings will decline as consumer spending slows and worldwide spending continues to decline. The stock market will test new lows at 7000, 6000, and finally 5000 before settling into a period of flat trading between 5000 and 6500 for three to five years. The media will begin to report, with surprise, a rise in consumer prices and producer prices in late 2009 as inflation begins to take hold due to the failed policies of the Fed and Congress. Housing again will not restart because lending rates will increase from 5% back to rates not seen since the early 1980’s of 12-14%. Oil prices will also increase for three reasons: a devaluation of the dollar against world currencies, reduction in supply from OPEC to gain a foothold back to the $80/bbl level they desire, and the previously discussed middle-east tensions causing further supply concerns. Hyperinflation will take hold in early 2010 causing President Obama to sign executive orders for price controls on basic staples such as milk, bread, flour, and sugar. Ensuing hoarding and shortages will occur as citizens try to stockpile supplies in anticipation of shortages. Riots and general unrest, particularly in New Orleans, Detroit, Washington DC, and Los Angeles will be reported. These riots will occur because the average population has not been taught how to survive or be self-sufficient. Instead, they have been raised as consumers with all of the requirements of civility readily available at a nearby Wal-Mart.

My recommendations are to prudently prepare. Just like an impending storm in a coastal Florida city, preparation will be the key to survival. Some of these changes will happen slowly, others rapidly. Preparation may be as simple as just thinking about what might happen. Regardless, good preparation may involve purchasing or stockpiling goods not normally kept.
• Investments should be made over the short term with sales into rallies and purchases in the troughs
• Short the S&P with the SDS if the symbol goes below 80 (or 85) and sell when above 110. You can repeat this strategy many times
• Reduce debt – do not take on new debt
• Refinance at historically low interest rates. They will be at 10-15% in the future. Refinance below 5.25%. You will not see this again in your lifetime.
• Do not make debt based purchases when rates are rising or above 9%. The monthly cost of cash flow is 30% minimum
• Hoard cash – it will diminish in value, but cash is king. Cash provides options.
• Make wise purchases – do not buy luxury or un-needed items
• Adequate preparation for 7-10 days of survival without power should be a minimum requirement regardless of where you live
• Tools for debris removal, house repair, and fixing and repairing household appliances should be available
• Basic first aid kits should be kept in all cars and at home
• Personal relationships should be made with local doctors and police to facilitate first priority care for you and your family
• Consideration should be given to a safe haven, a place to go
• A family plan should exist in the event of communication failures (no cell phones)
• Arming with a shotgun, rifle, and pistol should be done. Weapons can be used for protection, hunting, or trade if needed. They will last a lifetime and if political policy changes they may become very valuable
• Further preparation should be made in the face of inflation – spend an extra $20/week grocery shopping on staples and dry goods
• Ammunition, Gold, and Jack Daniels will be the currency of the future. Whether or not you own a gun, purchase one to two boxes of shotgun shells, 9 mm, or .38 cal ammunition monthly. Purchase a bottle of Jack Daniels monthly. All can be sold later.
• Learn basic first aid
• Consider solar power supply options and re-evaluate power tools owned to be rechargeable
• Explore basics of wind and solar electricity to charge power tools and items to maintain basic civility
• Inverters that convert 12-volt battery supplies to 110 to use with modern amenities
• Find outdoor solar lights at garage sales or store sale’s racks and use as indoor lighting by moving the solar panel outdoors and the lights inside
• Accumulate good camping gear – lanterns, sleeping bags, stove, and tent. Camp for a weekend or longer periods to understand what it is like to live without basics. Add to gear over time to improve survivability. Every time I camp it seems I want more flashlights, batteries, knives, propane, and lanterns to make my life easier. If it rains I want to stay dry – bags, containers, tarps, etc.
• Blankets, jackets, scarves, gloves
• Store all tools, gear, in organized easy to take with you containers
• Ensure tetanus and other immunizations are up to date
• Stockpile basic medicines such as Aspirin and Benadryl, iodine tablets for radiation exposure
• Keep Mylar, Duct Tape, chain saw blades, tarps, nails, screws, tie wraps for emergency repairs and protection against weather, gas hazards

All of the above can be part of your basic lifestyle and should help you feel prepared without feeling like a nutso preparing for the end of the world. Choose to consider living with the idea that Wal-Mart and the grocery store may not be there tomorrow.

Test your preparation with the following questions:
1) I live in a winter storm area; can I survive the cold and snow without power for 7 days?
2) A tree lands on my house during a rainstorm, can I make repairs on my own?
3) A train derails spilling chlorine gas, what would I do?
4) I am traveling and a terrorist attack occurs, communication is cut with my family. What would we do?
5) Price controls take place and bread costs $10/loaf. Can I cook and survive?
6) Social unrest is occurring and the National Guard has implemented curfews. Power is out and the grocery stores are closed. What would I do?
7) Gasoline is available in rations of 20 gallons per month, what would I do?
8) We are evacuating to another locale due to …….I find myself in tense situations while buying gasoline, what would I do?
9) A nearby levee breaks flooding our town and my neighborhood, what would I do?
10) An earthquake occurs, or the ground shifts resulting in the collapse of my home, what would I do?




Books and websites I recommend
• “The Long Emergency”, James Howard Kunstler – a rather prophetic view of what is currently happening written in 2004
• “World Made by Hand”, James Howard Kunstler – a fictional look at ‘life after’. After collapse of the government due to some event such as war or social disorder we are living like it is 1890 again
• “The Creature from Jekyll Island” – How the Federal Reserve was created and the control of banking over all decisions
• “Jericho” – The CBS Television series, two seasons. The writing/acting is horrible in the first few episodes but improves. It is too much like other CBS shows. However, it strengthens. You should take away from this the relationships that form, how people deal with crisis, and the warring tribal nature that develops between towns
• “Atlas Shrugged”, Ayn Rand – a fictional look at the world in a sense where producers choose to no longer be victimized by policies that take from those who make
• “Lucifer’s Hammer”, Larry Niven – a fictional book I read in 1979 about a meteor colliding with the earth. The hero is an engineer who prepares and survives through self-sufficiency
• Peak Oil, Life after the Crash (http://www.lifeaftertheoilcrash.net/) – Worth reviewing to gain education about possible changes in the future
• Build a Wind Turbine (http://www.mdpub.com/Wind_Turbine/index.html) – Want to build a practical windmill or solar panel – great site to see someone doing it

Wednesday, September 01, 2010

Economic Recovery?

Last week Vice President Joe Biden took credit for the economic recovery underway. I disagree based on facts. First, the unemployment rate is 2-3 points worse than projected without a stimulus package. Second, four important housing numbers last week illustrate no recovery: existing home sales fell 27% over the prior month to a historic low, new home sales fell to the lowest number since 1963, existing home inventories rose to a historic level, and interest rates fell to a historic low. Third, the teen jobless rate is at the lowest level since 1948. Fourth, the GDP was revised downward for the second quarter by approximately 30%, thus deflating the optimism the already sluggish number was a sign of recovery. Fifth, the ratio of job seekers to jobs remains high at 5:1 versus historic averages.

In December 2008 I wrote a seven page paper detailing my predictions for the economy after the presidential election. One friend poked fun saying I had written my “manifesto” while away in the mountains. Interestingly, I re-read the paper before last week’s numbers came out and my predictions were prophetic. If we disregard the stock market, I accurately predicted any lack of recovery. In hindsight though, main street does not care about the Dow Jones 30 Industrials, nor should they. The pundits of financial television spoke of “green shoots” and pontificated recovery for the last twelve months while working Americans have lost jobs, homes, and credit. Concurrently, bankers subsidized by TARP have profited handsomely.

The biggest problem in measuring this recovery is the data itself. The DJIA changes, and has changed since the crash in March 2009. Thus, this index of companies is not the same index it was in the 1930s, or even 18 months ago. Second, the government has changed its methods of measuring inflation and unemployment. Our 9.6% unemployment rate, indicating we are in better condition than the Great Depression, is closer to 20% when measured the way unemployment was reported in the 1930s.

I therefore assert we are in a “Hidden Depression”. There are no soup lines, but 40.3 million Americans receive food stamps. Unemployment benefits have been extended to protect families. Unlike the 1930s, we own more “stuff” and it appears to protect our personal falls. Sadly, our leaders are repeating the failings of the Great Depression: providing false optimism, ignoring main street and rewarding banks, and implementing policies doomed to failure.