The American Truth Machine

The Dow has hit 9000.  That is good.  That means the stock market is recovering.  But will it last???  Are we soon going to hit 10,000, or will we be back down to 8000.  Who knows. 

Let’s face it.  Over $4 a gallon for gas is ridiculous, and it is hurting the middle-class and, thus, damaging our economy.  As long as oil floats around $130-140 a barrel, than we are screwed.  There are many possible courses of action in dealing with this problem, but of course no one can agree on which is the best.  Here is my opinion:  No one course of action will get us off of foreign energy, lower gas prices, and increase national security.  What we need is a confluence of actions to get us out of this crisis.  And yes, it is a crisis.   

So, what do we need to do?

• Increase domestic production
• Decrease consumption
• More alternative energies

It all comes down to those few things.  In fact, you can simplify it to decrease comsumption and increase production.  Now of course, decreasing consumption of anything is usually bad for the economy because out economic system thrives on consumption.  Plus, the less  mid-east oil we consume, the more China is able to get.  Any consumption that we don’t do, they will do it. You could say that China will do the job that Americans don’t want to do.  However, as of right now, it seems that Americans don’t really want to consume less.  Many people are still driving around in there big SUV’s.  Of course, there are signs that the tides are shifting.  More people are buying economy cars (truck and SUV sales are tanking) and more people are taking public transportation.  But still, most people, at $4 a gallon, are unwilling to make major changes to their habits.  

It will take years for gas consumption to go down, and it will happen more because of an influx of alternative energies to the market rather than less consumption.  Cars will be built more efficiently, but most people don’t buy new cars every few years.   

We certainly could increase domestic production.  Drilling offshore, in ANWAR, even in areas of Montana and Wyoming.  However, powerful environmental groups are against eny such action.  They say it will have little effect on the price but devestaing effects on the environment.  I saw that’s a buch of crap.  All the government needs to do is open up these areas of exploration.  The oil companies will make the decision as to whether or not we should drill there.  LET THE FREE MARKET WORK.  And with the new types of drilling technology out there, we CAN drill and be environmentally responsible.  By the way, after Hurricane Katrina, no oil was leaked into the Gulf of Mexico from oil rigs.  Those things are built like tanks. 

So, when can we see lower prices?  One chance is after the Beijing Olympics, when China should stop stockpiling oil (thanks, Stuart Varney of Fox Business for that).  Until then, we might be in for a tought time.  We must get off foreign oil, for National Security and our economy.  If we don’t, our country will face irreparable harm.  

Some scars can’t be fixed.  This is one that will be permanent.     

Are we in a recession?  Technically no, but it doesn’t matter becasue 3/4 of Americans think we are.  We still have economic growth, just less.  This is normal in a typical business cycle.  What is not normal is the banks losing all the money from bad loans.  We have more forclosures than normal and home values are decreasing.  This means the safest investment is now a bad investment.  Overall, I believe will will begin to see negative growth in about three to six months, and we will have a 1-2 year recession.  Not great, not as bad as it could be.  However, It will take nearly a decade for America to fully recover. 

Probably due to the falling dollar, the overall trade deficit fell. 

From the AP:

WASHINGTON (AP) — Despite a soaring foreign oil bill and another record deficit with China, the overall U.S. trade deficit declined in 2007 after setting records for five consecutive years.

The Commerce Department reported Thursday that the deficit dropped to $711.6 billion last year, a decline of 6.2 percent. The trade deficit with China continued to rise, jumping by 10.2 percent to $256.3 billion. That was the largest gap ever recorded with a single country, as Chinese imports surged despite a string of high-profile recalls of tainted products.

The Bush administration credits its free trade policies for spurring strong growth in exports while critics contend that even with the lower overall deficit, the imbalance is still nearly double what it was in 2001, the year Bush took office.

For December, the deficit fell by 6.9 percent to $58.8 billion, a bigger-than-expected improvement to close out the year.

Analysts said the decline in the dollar over the past two years has helped spur strong increases in U.S. exports, with American goods now cheaper and thus more competitive in many overseas markets.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said that the smaller December trade deficit will help to boost overall economic growth from the final three months of last year from the initial estimate of a mere 0.6 percent expansion. He predicted trade and a better reading on inventory stockpiles would boost growth in the gross domestic product to 1.1 percent when the figure gets revised later this month.

In other economic news, the Labor Department reported that the number of newly laid off workers filing claims for unemployment benefits fell by 9,000 to 348,000 last week. That was larger than the 6,000 decline that analysts had been expecting.

The country’s trade performance is expected to be a major issue in the upcoming presidential campaign, with Democrats arguing that the huge deficits have contributed to the loss of more than 3 million manufacturing jobs since 2000 as U.S. companies moved production to low-wage countries such as China.

Lawmakers have introduced a variety of bills to impose economic sanctions on China for what they contend are unfair practices such as manipulating its currency to keeps its value low against the dollar, which makes Chinese goods cheaper in U.S. markets and American products more expensive overseas.

The administration opposes these efforts, arguing that they could spark an all-out trade war if China moved to retaliate against U.S. exports. As an alternative, Bush is seeking passage of three pending free-trade agreements with Colombia, Panama and South Korea in an effort to solidify his legacy of pushing free trade deals to promote American exports.

In an effort to counter charges that it has been lax in enforcing current trade laws, the administration has filed several unfair trade cases against China with the World Trade Organization.

In its first official condemnation of Chinese trade practices, a WTO hearing panel has found in favor of a complaint brought by the United States, the European Union and Canada alleging that China’s tax policies on auto imports are an unfair barrier against imports, according to a preliminary ruling obtained Wednesday by The Associated Press.

The $711.6 billion deficit for 2007 was still the third highest on record but represented the first annual decline since 2001, a year when the deficit totaled $365.1 billion. Much of the deterioration in trade has represented ever-higher prices for foreign oil.

Last year, exports totaled $1.62 trillion, a new all-time high and an increase of 12.7 percent from 2006.

Administration officials contend that the double-digit gain in exports showed Bush’s strategy of pursuing free trade deals to remove barriers to U.S. exports was working. Sales of American farm products, capital goods and autos and auto parts all set records.

Imports also hit a record at $2.33 trillion, up by 5.9 percent from the 2006 level. That increase was led by a 9.5 percent jump in oil imports, which hit an all-time high of $331.23 billion as the average annual price for crude oil rose to a record of $64.27. With oil prices rising further at the beginning of this year to above $90 per barrel, analysts expect the oil bill to keep rising in coming months.

After the $256.3 billion deficit with China, the United States recorded its next largest individual country deficit with Japan, a gap of $82.8 billion, which was down 6.5 percent from the previous year.

The deficit with Canada, America’s largest trading partner, fell by 10.6 percent to $64.2 billion as U.S. exports, helped by the weaker dollar, rose at a faster pace than imports from Canada.

The deficit with Mexico increased by 15.5 percent to an all-time high of $74.3 billion, surpassing the imbalance with Canada.

The deficit with the European Union fell by 7.8 percent to $107.4 billion as U.S. exports to that region have been helped by the weaker dollar which has dropped to record lows against the euro.

 

You wanna know how to really fix the economy?  First off, to please investors and help out Wall Street (and Main Street, too), make the Bush Capital Gains taxes permanent.  And while your at it, make all the Bush tax cuts permanent.  Also, there is some law from a while ago (like over 30 years ago) that basically forced banks to give out loans to people who could not afford them.  This law was never really enforced until the Clinton Admn., which is when the mess really began.  Let’s get rid of that.  This stimulus package is a nice election-year jesture of bi-partisanship.  That’s it.  It is not going to stimulate the economy, in my opinion.  Besides, ever heard of the business cycle.  We are bound to hit a recession every once in a while.  We just don’t want to hit it too hard. 

Let’s accept the fact that we are in for a period of economic slowdown, and we might just stumble into a few quarters of negative growth (recession).  Still, the sky is not falling, unless of course you are under that US satellite that is supposed to come down soon.