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From the Radical Middle...
The Real Economic Lowdown 25 cent bread on the horizon?
by Robert Falcione October 13, 2008 — There was a day when a ten year-old could buy cigarettes, the polio vaccine had just been discovered, and talk of a serial bus would have sent a kid to the window expecting to see a large box of Cheerios on wheels. Back then, every kid knew how to tuck themselves under their desks upon seeing a "light brighter than the sun" and save themselves from the inevitable atomic attack by the Soviet Union. But nothing compared to the economic terror that was imprinted into the children's psyche, like patterns in a waffle, by their parents. In those days, kids heard countless stories of the Great Depression, and wondered about the misnomer. After all, why was 5 cent bread bad? Understanding economics is difficult, especially for kids. Those parents of Baby Boomers, the Greatest Generation, were experts at spreading guilt around; miss Mass and go to Hell, spend a dime on candy and try to enjoy it while your parents complain they never had any, and visualize tramps in top coats and fedoras standing in line holding bowls every time you eat chicken soup. It was especially difficult listening to those stories while at the same time paying 10 cents for the bus and 25 cents for the movie every week. There was the inevitable lecture over the balance of the dollar a kid got every Saturday, being spent on candy, popcorn and soda. "We never got that much when we were kids," parents would say. But bread was a nickel when they were kids. Everybody had clothes delivered. The clothes were made in America with cotton grown in America and weaved in American factories on machines that were also made in America. But the so-called world economy sent the work packing to the American South, and then hopping all over the world until now, where I can only assume they are made by children who work in some foreign sweat shop for 16 hours a day with materials grown in a similar country that I never knew existed. And the clothes still cost more money than King Midas' fortune. Why is that? Economics is really difficult to understand, especially for adults. Where the heck does money come from, I have often wondered. But the Panic of '29 would never happen again, because the Federal Deposit Insurance Corporation would insure every account up to $100,000, we were told. "Who would be stupid enough to put their money elsewhere?" children everywhere would wonder. Who would have thought that trillions of dollars would be given to people who were unqualified, and that apparently millions of "investors" would leverage even more purchases on the backs of those bloated values — and then fail to shut the water off and turn in the key when they abandon the property and dissolve their LLC? The banks that have failed on this most recent round were apparently co-conspirators in a culture that made a joke of integrity, and a science of obfuscation. Didn't they ever stop to wonder where the money came from? And now, it looks like it was all rather vaporous to begin with, much of it having gone poof! in about a week's time. READ MORE... But the solution is for the government, us, to loan money to some of the failed institutions so that their gambling and their risky behavior will be rewarded. How about all of the people at Foxwoods who lost their money? Or the young father who gambles the diaper money at the corner convenience store looking for a big score for his family? Do they all get a bailout? No, of course not. Just the guy who made $250 million last year, and all of his cohorts. And the reason is because his money trickles down, we are told. What is in this for the young father or the Foxwoods client? Seriously? What reward do they get? What reward do the rest of us get? What would happen if the housing prices continue to fall, because of a glut of foreclosures, and because of an uncertainty in the market? Well, guess what? There's another whole market for homes in that price range, people who have been unable to purchase a home because of apparently inflated values. A whole group of people with good credit who will scoff up those empty condos and foreclosed homes when the price gets to a reasonable level — if it is ever allowed to, in spite of the "recovery" program. The President didn't help with his initial speech on the subject. And although I can't remember any of his words, it sounded like, "We are at the precipice. We are on the brink of an economic disaster of epic proportions if you do not do as I believe you should." I saw bread lines, chicken soup and 5 cent loaves of bread in his speech. And whatever the Secretary of the Treasury said made me feel very similar — or worse! But there was something in common with their beliefs and my beliefs on the economy. Nobody knows what the heck is going on. But I do know a couple of things. My business slashed the prices for our largest group of clients. But we did it in 2007, not in 2008 after the big news. It was clear to some people last year in what direction the economy was heading. Where there is smoke... Gasoline prices are going down, and hopefully oil prices will plummet soon, too. This often happens when there is a line of oil tankers starting in Boston Harbor and stretching from there to Saudi Arabia with nowhere to unload and no one to buy their crud(e). It is the market at work, but only to a degree, since they have a cartel that decides the price we pay when we are gluttonous. Incidentally, for some reason, the petroleum prices drop before a national election and rise after it. Hopefully, this year will be the exception to the rule. So, people should use less gas and oil by driving less, turning the lights off, and the heat or the air conditioning down like they mean it; and convert to renewable energy whenever possible. It is not only chic to do so, it is also frugal and patriotic. In sum, the housing market is easy to figure out. Let it seek its level. The retail and restaurant market is easy, too. Cut your prices to maintain your client base. And if you are the only one doing so in your market space, you will likely increase your volume and your gross as well. Cut your expenses at the same time, and you will increase your net. People will pay you less per unit, keeping money in their pockets to spend elsewhere, and averting whatever President Bush said. And as far as the economics go, there's no way that 17.9 cents per gallon heating oil, 32 cent per gallon gas, or 5 cent loaves of bread is going to scare me like my parents did. Economics is difficult, apparently, even for economists. But this time around, not even the so-called experts are going to shake me from my shoes, and there's good reason. Nobody, but nobody knows a rat's tail or a Martian's red spot about what is going on. All we do know is that despite the overwhelming abundance of ignorance from all corners of the country, and all four edges of the Earth, it will work. Somehow. |
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