Even the wealthy are feeling the pinch of $4 a gallon gas.
Paying for gasoline easily tops the list of economic woes facing families in the United States, according to a survey on how changes in the economy have affected people's lives.
In America, drivers are fuming and politicians are demanding explanations because gasoline has hit about $3.50 per gallon. That's less than half the price being paid by motorists in most industrialized countries. High to us is low to them. Then there are the oil refiners. Relative to the $120 price of crude, $3.50 for gasoline is so cheap that their margins have virtually disappeared. So "high" in Cambridge, Massachusetts and Oxford, Mississippi is "low" in similarly named cities in the UK, and "high" for motorists is "low" for refiners. It depends where you live, and at which point in the supply chain you find yourself.
But assume that prices are "high", which indeed they are by historic standards. We are mistaken when we think these "high" prices are causing inflation. High oil prices can force consumers to spend more on gasoline and heating oil, at the expense of other purchases. Ask any suffering restaurateur or clothes retailer if you doubt that. But high oil prices can't trigger a rise in the general price level -- inflation -- unless someone pumps money into the economy so that, to use an oldie but goodie from the economists' lexicon, there is more money chasing the same amount of goods.
If you want something to blame for inflation, don't look at oil prices, look at the billions the Federal Reserve Board's monetary policy gurus and their confederates at the U.S. Treasury are pouring into the economic system. The cost to taxpayers of saving the financial services sector from ruin is not only making good any collateral the Fed has accepted that might prove worthless, but the run-up in the rate of inflation.
High gas prices are not an economic or political problem. They are the result of the natural workings of markets. There is nothing wrong with the market -- and no reason, other than self-preservation and the false appearance of being able to do something, for politicians to intervene. Supplies are decreasing -- both temporarily through unexpected refinery shut-downs and permanently through stock depletion.
Demand is increasing -- both in the U.S. and worldwide. Both of these will cause gas prices to rise and that's good. If gas prices don't rise, we will consume gas even faster and run out sooner. Higher gas prices encourage conservation and encourage investment in alternatives. High gas prices might be uncomfortable while we search for viable long-term solutions, but they're more comfortable than the alternative: no gas and no solutions.
What will the price of oil mean at the pump?
The price of oil reached new record highs this week -- driven in part by a weakening dollar -- alarming drivers and consumers of just about everything else. Why is oil getting so expensive? Will anything bring the cost back down? And how will we live if it doesn't?
How much more pain must Americans endure before our masters in Washington let oil companies punch a few holes in the Alaskan tundra? Must we shiver pennilessly in the dark before we may extract new domestic petroleum deposits? Or shall we simply keep buying $114 barrels of oil from people who want us dead?
In case Congress missed the news, four U.S. airlines have gone broke during this month alone. Frontier declared bankruptcy, but will continue flying. Even worse, Aloha, ATA, and Skybus blamed unaffordable fuel as they grounded their jets. Aloha said sayonara to 1,900 employees, NBC News reports. ATA’s demise destroyed 2,200 jobs, while Skybus sacked 450 workers, atop the 80,000 positions lost across the economy as unemployment spiked from 4.8 percent in February to 5.1 in March.
Will we finally grow up and harness our resources, or will we childishly weep over imaginary threats to wildlife, dispatch supertankers of cash to the Middle East, and watch our petrodollars sponsor bomb belts and exploding aircraft? Merely asking this question illustrates how desperately this nation needs adult supervision.
Over the past few years Russia has been a relative bright spot on the oil scene, expanding its production by over a million barrels per day between 2002 and 2007. But it looks like Russia is now due to join Norway, Mexico, and the UK as countries that have hit their peak and are about to go into decline.
It's true that both the Saudis and the Russians have megaprojects due to come online over the next year or two, so it's not as if they're just twiddling their thumbs. Overall, though, oil at $100 a barrel sure doesn't seem to be spurring the kind of additional production you'd think it would. It's almost as if there's no net additional production to be had.
Government food programs are getting more business lately.
U.S. government statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.
It's been said the press notice the homeless problem only when a Republican's in office. The same could be said for food stamps, which the media now are using as an economic indicator.
Scary headline in Monday's Times: "As Jobs Vanish And Prices Rise, Food Stamp Use Nears Record." Scarier headline in Britain's Independent: "USA 2008: The Great Depression."Why didn't the Times editors just say: "Economy In Shambles — It's All Bush's Fault"? Or the Independent condemn the president for his war on the poor?
Despite the many reasons not to use food stamps to gauge economic health, the media still do it. They're sure that many voters will make their choices this fall based on what the press tells them. Things will change, though, if a Democrat is elected president. Expect to start seeing glowing reports on the economy about a year from now — no matter what shape it's in.
For more than a decade, we Americans have been living on an economic San Andreas fault--a foundation of fracturing competitiveness covered by unsustainable consumer spending with money borrowed from foreigners. A financial earthquake was inevitable. We don't know how high on the recession Richter scale the current crisis will take us, but it increasingly looks like, as they say in San Francisco, "The Big One."
But well short of such a worst-case scenario, the country seems headed for major economic damage that will severely test whatever we have left of safety nets. It took five years from the time the recovery began in 1983 for the unemployment rate to return to pre-recession levels. Once we reach the bottom of this trough, it could be a very long time before American consumers, whose spending accounts for some 70 percent of our economy, crawl out of the debt hole and back into the shopping mall. The Japanese have still not recovered from their similar housing/debt crash in the early 1990s.
Poor, pitiful penny.
Who doesn't care about money? A piece in The New Yorker calling for the end of the penny in America stirred bloggers and presidential candidates alike. The New Yorker article received hundreds of votes and comments on Digg, the social news site, based almost solely on a headline emphasizing one of its more convincing pieces of trivia: “A Penny Costs 1.7 Cents to Produce.”
The penny is obsolete and inefficient, or so they say. What is to be done? Junking the penny has its merits. The clear solution derived from these key points is not to eliminate the penny but to kill of the nickel and make pennies worth five cents. The nickel is a misshapen fraud with a beastly portrait of a godless slaveowner. The penny is a pure classic that bears around the world billions of images of the Great Emancipator in all his Christian mercy, from the filthiest whorehouse to the bedsides of tykes.
After all the work it’s done for us, now it’s our turn to give the penny a leg up. Ditch the nickel. Promote the penny to five-cent status.
A modern penny simply isn’t worth enough to worry about. In 1940, an average one-pound loaf of bread sold for eight cents, according to the U.S. Census Bureau. That means that a penny in those days bought enough bread to make a good-sized sandwich. These days, a penny doesn’t buy much more than a bit of crust.
Accurately comparing monetary values (and bread loaves) across decades is impossible, but by almost any economic measure a 1940 penny had more purchasing power than a modern quarter does; in 1940, then, consumers got by, quite contentedly, without the equivalent of our penny, nickel, or dime. And many people continue to get by without these coins today, since in the actual marketplace consumers tend to treat the quarter as the smallest meaningful denomination.
Mister, we can't use a man like Herbert Hoover again.
Herbert Hoover is a catch-all for political and economic ineptitude in the face of a fiscal crisis. With the United States facing its latest economic slowdown, both parties are pointing fingers and accusing the other of embracing Hoover in some way.
Who is doing such pressuring these days? Not Bush, but that Hoovermonger, Charles Schumer. Schumer used the Bear Stearns collapse to call for "a greater degree of regulation" in the industry that is relevant this time, investment banking.
Hoover knew free trade was beneficial. But his party, the Grand Old Party, was the tariff party. So in spite of himself, he signed a big new tariff, the Smoot-Hawley act, triggering retaliation from U.S. trading partners.
For many decades now, Democrats have contrasted Hoover's concession to protectionists unfavorably with free-trade legislation written by Roosevelt and his globalization guru, Secretary of State Cordell Hull.
Today it is the Democrats who are doing wrong, and they know better. Candidates Hillary Clinton and Barack Obama are both internationalists by temperament, yet they seem to be in a race to see who can repeal the North American Free Trade Agreement first.
Though Bush may be viewed as a laughingstock, he won't have the zero-integrity factors that have kept Nixon and Harding at the bottom in the presidential sweepstakes. Oddly, the president whom Bush most reminds me of is Herbert Hoover, whose name is synonymous with failure to respond to the Great Depression. When the stock market collapsed, Hoover, for ideological reasons, did too little. When 9/11 happened, Bush did too much, attacking the wrong country at the wrong time for the wrong reasons. He has joined Hoover as a case study on how not to be president.
