Economic disasters and socialism

[altivo]

Only indirectly felt, but it's becoming more and more obvious that the mortgage lending fiasco is only part of what's been going on. It's amazing to me that so many people are still walking around with their fingers in their ears saying "La la la, can't hear you."

Gasoline prices here are within a couple of pennies of the lowest they've been in probably three years. The lowest I have recorded is $2.08/gal on January 27, 2007 (it had been declining at that point and was much higher for the six months prior.) Since just two days ago, we saw another drop of nine cents here, to $2.10. Obviously, demand is way, way down or they'd never be going so low. However, for the moment people seem to have learned a lesson. They are not rushing out to buy more American gas hog cars and trucks, which means that all three US automakers are sinking rapidly (since they declined to invest in fuel economy the way they were told to do, and fought off government pressure to do so, now they have no viable product lines to speak of even if they are willing to lend the money to buyers themselves, the way Henry Ford did a hundred years ago.)

The impact of auto manufacturers closing dozens of plants would really kick the US economy into the sewer.

The tech fields are shrinking rapidly too. I see Sun is planning to lay off thousands, Intel's profit is down because chip sales are down, which means that manufacturing has slowed because there are backlogged inventories of PCs, laptops, and, presumably game consoles.

I went to the supermarket this morning and food prices are still rising. Fortunately, I know how to eat a fairly healthy diet from the least expensive of sources, though it takes a lot more time in the preparation.

I am beginning to be even more confident that the bad monetary policies of the past decade or two, combined with bad planning and a lack of vision in several industries from banking and finance right down to manufacturing and agriculture, are going to trigger a huge recession now and perhaps even a depression. Price deflation and currency revaluation seem more and more likely.

Whomever you decide to try to blame all this on, don't try to pick Obama. He wasn't around in national politics when it started in the 1980s, and he wasn't elected to the Senate until the slide was already picking up speed, yet I'm already seeing people trying to blame him for current economic situations as if he had any power to do anything about it. I'm not his biggest fan by any means, but this kind of thing is absurdly unfair. The policies of the Reagan administration and Bush Sr. started the ball rolling downhill. The stubborn fiscal conservatism of a Republican dominated House of Representatives during the Clinton Administration helped to keep the ball going until the second Bush administration kicked it into high gear with deficit spending and further deregulation (or failure to enforce what regulations remained.) Remember too, before you yell "Socialist!" at Obama, that Henry Paulson's handouts of unrestricted cash first to banks (who refuse to say what they are using it for, but certainly it isn't being lent) and now proposed to go to foreclosees and possibly the auto companies, are every bit as socialistic as anything Obama has suggested.

There seems to be a funny definition of "socialism" going around. Socialism is when somebody else gets a handout, but if I get the handout it isn't socialism. Right. Sure.

Comments

[chris-sawyer.livejournal.com]

At least with Obama, we have a fairly good chance that whatever policies are decided upon, the needs of the PEOPLE will likely be put ahead of business.

[altivo.livejournal.com]

That's my hope, though I'm not sure it will actually happen.

Could we actually see medical care restructured with the patient in mind rather than the profit margin of big drug, supply and hospital corporations? I'd sure like to see it, but I'm not holding my breath.

The same applies to banking, insurance, manufacturing, and even agriculture. It will take a hell of a lot of reform, with powerful interests kicking, screaming, and fighting every inch of the way.

I wonder when Microsoft will start laying people off? I expect it's going to happen.

[atomicat.livejournal.com]

But but, I'm a simple person with a simple mind, and I demand simple solutions and simple causes for complex problems!

The "S" word. The new bogey-man. Ever seen one? Me mum and I were trying to think of just one example, big one, where we're "Socialized" up here like it seems to be understood downstairs there. We came up with not a heck of a lot.

There's PetroCan, Canadian owned gas company basically, but it's not like it's the only gas company, just a way to keep our foot in the door and have a bit of control over long-range development of energy resources. Good, sounds fair, BP/Mobile/Whatever can't come in with a giant truck and haul away the tar sands.

Autopac, auto insurance purely provincial in scope, different systems in other provinces. Ours happens to be kind of bundled, small potatoes, nobody cares, non-issue.

Think think think, nope nope nope, blank blank. No wholesale ownership of businesses, industries, anything. There's a few twitchy border issues like weather stumpage fees on lumber are subsidies or ownership, not as if the American farm industries aren't heavily subsidized (and now banking and all the other financial institutions, yipee!)

Let's see, well, there's the Canadian Wheat Board that pools the buying/selling power of our small farmers to negotiate prices and make sure they all don't cut each other's throats at the marketplace.

And that's it. Try as we might we couldn't think of any other relevant concrete examples. More general common-sense regulation in financial markets, which have left us more insulated and set up than most to weather the current crisis.

Welcome to our socialist hell-hole comrade!

[altivo.livejournal.com]

Well, you knew I don't consider "socialism" to be a curse word myself. In general, what you have in Canada seems to work as well as what we don't have in the US. The main thing that Americans have been told to view as "socialism" in Canada is the health care system. We're told that it doesn't work, you can't get to see a doctor, you can't get treatment when you need it, etc.

Of course, down here you can't get to see a doctor, you can't get treatment when you need it, etc. So I'm not sure there's much difference except that if you get sick here it will bankrupt you or kill you, probably both.

In the end it comes down to greed, which is an entrenched problem in the US. If people don't see an immediate personal benefit from something, they don't want to subsidize it in any way. That includes things like not wanting to pay social security premiums or insurance premiums, though they're happy to collect the benefits when the time comes.

[deffox]

Medical seems to be a lose-lose, but I'll still take Canada any day.

In the US I have two siblings with no coverage, and parents with a 'catastrophic' plan where they still pass their ridiculous deductible every year.

Over here they over-ration.
http://www.thespec.com/article/465179

When the US joins the civilized world and gets universal health care, then they can debate which country they want to imitate.

[altivo.livejournal.com]

Even for those with "full" coverage, health care in the US is over-rationed too. When profit margins for the HMO are slim, good luck getting the treatment you need. And somehow, the profits are always slim, because medicine (other than that old specialty of treating the diseases of the wealthy) isn't a profit-making business by its very nature.

[aerofox.livejournal.com]

I don't know what the answer is...

Though it just seems like the Republicans all want to help out those who have money and ignore those who don't. Look at all these execs walking away from the rubble scott free with severance bonuses and whatever money that i would never see in my lifetime!

I think the problem with the auto industry is too much money grubbing and not enough giving the public what they want or need. Example: GM dropped the successful S-10 series and rolled out this BUTT UGLY Colorado that looks more like a BIG truck than the small S-10 it replaced. I want an S-10!

Toyota, Honda, Nissan are making MUCH nicer cars. Why can't the big three?

Oh well, I probably don't know what I'm talking about..

[altivo.livejournal.com]

The big three claimed that Americans wouldn't buy smaller vehicles or more fuel efficient vehicles. To some extent, that was true in the late 90s. The SUV fad was on the rise, and it was easy for them to invest in it because it took little or no research or innovation and produced nice profits.

Still, they had been warned that a crunch was coming down the pipeline (so to speak) and that they needed to be ready. In fact, regulations had been made requiring them to be ready, but they whined and pissed and moaned until the regulations were canceled or castrated. They refused to spend money on research and design, just as the country as a whole refused to work on alternative energy and energy efficiency in other fields.

We had a good push toward energy development starting in the Carter administration, but it was all allowed to die by the time of Bush Sr. because, well, there was lots of money to be made by the oil and coal cartel and oil prices had gone back down. Now we get to start all over again, and it is NOT going to be resolved by strip mining every national forest and drilling for oil in everyone's back yard, no matter how much the oil companies and their pet politicians keep trying to tell us it will.

Ultimately, though, it is the American public that must take the blame. Whether or not Bush was legitimately elected in 2000, he certainly did win in 2004. Why? I can't imagine, but he did. People still think Ronald Reagan was the greatest president since maybe Abraham LIncoln, even though he just slept for eight years when he wasn't on television looking grandfatherly and soothing. Others ran the country for the benefit of the rich and to the detriment of everyone else.

Americans have continued to choose wasteful, inefficient vehicles, unhealthy foods, and to resist changes and reforms in the political, economic, and other realms. Now we get the consequences of short-sighted behavior.

We ran the credit card up to the limit, and the bills are coming in.

[aerofox.livejournal.com]

Strange... as I reply to your comment, there is a Chevy ad stating more models to choose from than Honda or Toyota. Gas friendly to gas free...

PHBBBBT

Loriana and I have thought long and hard about building a windmill and/or solar panels on the roof. I had long thought about a heat exchanger system on the roof of the lean-to (long before it was built) as it faces the south and extract some heat from the sun to heat my radio barn... but finding cost effective stuff like that is difficult.

it does seem eating bad is easy and cheap... but the "good for you" food (when available) is costly and harder to find/prepare.

Compare... McDonalds cheap-not good for you. Subway, what is good for you is more expensive. Sure, give us a footlong for $5.00 but keep the 6" version at $4.39.
Twice as many calories for just $.60 cents more!

isn't Subway supposed to be the healthier alternative?

Gee... no wonder America is fat...

[altivo.livejournal.com]

Because everything in America runs on profitability, and more profit is always viewed as better, yes, bad eating and fat is part of the equation. That's why it took so damn long to force the tobacco industry to heel (big profits and they spread them around) and even now, they are just doing business in poorer countries and making fortunes at it. Is it any coincidence that Philip Morris invested heavily in food processing industries when it became clear that smoking was going to decline, if not immediately, then within a decade or two? Hardly. The same kind of executives and thinkers run the processed and fast food industry as those who ran the tobacco industry.

Hence high fructose corn syrup, soybean oil, and all the other cheapest possible ingredients. McDonald's chicken nuggets contain more corn than chicken. And of course, providing an outlet for corn keeps the agribusiness guys happy too, especially if the corn is genetically modified and can only be bought from the same monopoly that sells the pesticides used with it.

Besides, fat people become diabetic and spend a fortune on medical care, keeping the drug and hospital profiteers happy. It all fits together so neatly that it's really difficult to break up the feedback loop.

Subway

[animist.livejournal.com]

That's why I get the "Sub of the Day" meal, at only $5.29 with chips and drink. :)

Re: Subway

[altivo.livejournal.com]

Heh. That's sure more than I could afford on any regular basis. Based on my limited sampling and the published ingredients, though, I do agree that Subway food is generally healthier than McD or other alternatives, and especially so if you choose the ones they recommend as "healthy."

Re: Subway

[animist.livejournal.com]

I don't eat out much, but when I do, I try to get something different and fresh. At work I normally eat things like Lean Cuisine frozen meals, or those noodle bowls that cost 2 for $5 where the noodles are soft. I don't mind a splurge every now and then on eating out. :)

Re: Subway

[altivo.livejournal.com]

Heh. My typical lunch costs 25 to 40 cents: a sandwich and an apple brought from home. And I'm starting to wonder if I can afford the apple, which is not good.

Re: Subway

[animist.livejournal.com]

Not good, indeed

Re: Subway

[soanos.livejournal.com]

(My internet really doesn't want me to reply...)

Noooo! Not the apple! :(

Re: Subway

[altivo.livejournal.com]

Well, it's just at the end of apple season here, when they should be cheapest. We live in orchard territory too, within a hundred miles of dozens of producers.

Saturday at the store the price of apples was already up to $1.59 a pound or more. Just a couple of years ago, it would have been three pounds for a dollar.

Re: Subway

[aerofox.livejournal.com]

They are still doing that down there? heh, they no longer honor that deal in my neck of the woods :P

Re: Subway

[animist.livejournal.com]

Well, of course. :) That's one reason I don't mind that Louisville is behind the times. It's like what Mark Twain supposedly once said about Cincinnati: when the world ends that is where he wanted to be because everything came there ten years late!

[soanos.livejournal.com]

I know what you are talking about. I think it is the "In America, everything is BIG!" attitude, coupled with Tim "The Toolman" Taylor "Raarh, more power!" attitude. And probably many men who have a poor self-esteem. Advertising really has a large influence on people. Especially men. :)

And I think there was something with "Keeping up with the Jones's", which just makes it worse.

I am quite happy with my japanese car. It may not be luxurious, big or expensive and doesn't have immense amounts of horsepower, but it takes me from point A to point B. With a relatively low fuel cost. To me, it is a real no-brainer to go for a big, fuel-inefficient car. :P

I tihnk I can guess why exactly GM dropped S-10. You said it was successful? Of course. They couldn't get the rest of their junk sold so they decided to take the economical, sensible option away from the consumer to make sure people buy their large, ugly trucks. :)

[altivo.livejournal.com]

Actually I believe the S-10 has been under pressure for a long time due to safety regulations and a poor crash record. Of course, if Americans would stop driving like brainless idiots that wouldn't be such an issue, but those ads in which the vehicles are driven like race cars on ordinary roads don't help things at all.

[dakhun.livejournal.com]

Deflation is easy to prevent. You just print more and more money, and that causes inflation by itself. And then you cut the fed rate to near zero and then go on an economic stimulus spending spree with all the fresh money you just printed, "bailing out" each and every corporation capable of telling a sob story while holding its hand out, and that causes more inflation.

In the 1930's the US was still on the silver standard, so they couldn't do that.

There is nothing stopping them from doing that now. You see yourself that the prices of things are still rising despite the fact that we are all in a recession already - doesn't that tell you anything? There is not going to be deflation because they everything they have done, and everything they will do, will prevent it. I'm more worried that they will try so hard to stimulate everything that inflation will go through the roof, despite the economy not doing all that well, and it'll pretty much be a rerun of the 70's.

You lived through the 1970's, so I'm sure you can see the parallels if you think about it.

[altivo.livejournal.com]

Oh, sure, I lived through the 70s but I don't see this situation as very similar to that one. There was massive inflation, but what I remember is the Nixon administration trying to put the brakes on inflation rather than stimulating the economy. In fact, what I remember best were the Nixon "wage freezes" that kept everyone from getting any raises at all for three years, except of course corporate execs who kept just inventing new compensation packages for themselves. I worked for a state university at the time and of course they were more than eager to freeze everyone's wages and benefits "to be patriotic" but the top administrators (predictably) kept getting "promotions" and it was OK to change salary levels if you promoted someone...

Another general stimulus handout isn't going to cause inflation. People are so saturated with debt that they are going to do the same thing they did with the previous pittance: pay down their debts with it. So far the stupid Paulson tactic of handing money to corporations has done nothing either, except maybe generate some mergers and acquisitions. It hasn't stimulated anything at all.

At the present rate, I expect to see price drops simply because the inventory has to move and there will be no way to move it. Consumers are not just scared, they really don't have any money to spend. With the projected unemployment rise to 10% or more over the next three months, even fewer will have money to spend.

I see two factors in the continued rise in food prices. The first is fuel costs, which went into the stuff being sold right now. That decrease in cost won't become noticeable until shipping prices and diesel fuel prices have trickled through. The other is a product of where I live and shop. I go to the nearest small town, which has one supermarket. It's an independent, family-owned store that got too optimistic a couple of years ago when things were flying high on the rebound from 2001 and expanded to not one, but two other nearby towns. They have competition in both, where they have none at home. Though they aren't admitting it in public, I'm quite sure they are struggling to keep it all going, having overextended themselves. WalMart opened a big superstore in Woodstock, just nine miles away, a year ago. It includes a supermarket that does have cheap prices. People are going there instead, which is forcing the local chain to cut back on staffing and the number of product lines handled and to raise prices. This will of course be a spiral that is going to kill them in all three locations unless they recognize their mistake and cut their losses.

I despise WalMart both for their strongarm market-busting tactics and their abusive treatment of employees. This is exactly the kind of economic condition in which they thrive, by using their massive capital and inertia to undercut local merchants and drive them out of business, terminating more local full-time employment and replacing it with part-time, no benefits jobs. Their profits were up in the third quarter where other retailers were flat or declining. I expect that pattern to continue, and I will resist shopping at WalMart as long as I can.

Food is the only area in which I regularly purchase that is still showing rising prices. Everything else is declining, largely through lack of sales. Clothing is down, and being offered at markdowns on top of that. Auto dealers are begging for people to buy and offering absurd incentives. The price of a haircut or a radio is flat or dropping. Medical costs are rising, but that's nothing new, they've been advancing at a rate much higher than overall inflation for years now.

[dakhun.livejournal.com]

Nixon administration

Nixon was earlier than the time period I was thinking about.
The specific recession I am thinking about occurred after Nixon resigned, and was spurred on by a spike in the price of oil (we just had one a few months ago now). There was a stock market crash in 1974 very similar to the one we are just in. Then from 1975-1981 was the highest burst of inflation since WW2.

The only prices (and spending) I see declining in core spending items are gasoline, autos, and housing. And that's all fine by me, since those are the very same items that got the most overinflated. By the law of averages they simply must come down eventually.

Spending on discretionary items will probably pick up in the new year once everyone realises that their own shadows aren't all that scarey. :-P Honestly, the whole fear complex over this recession is a bit overdone. The recession is out there, happening now, so there's no reason to be afraid if it might happen or not, because it is happening already. Deal.

[altivo.livejournal.com]

Other markets are declining, restaurants and entertainment among them. Restaurant business is in dire straits, and bankruptcies are increasing (such as the Bennigan's collapse, which was very abrupt.) Restaurant prices have risen for the moment, but that is only exacerbating the situation as people are choosing either not to eat out or else to go only to the cheapest fast food places, where, interestingly enough, prices are declining at least if you consider all the "special deals" being offered to try to attract business.

I haven't seen analysis of travel and hotels, but I expect those are under pressure as well.

[dakhun.livejournal.com]

Yes, that would be discretionary spending. I think that will all pick up again some time next year, because by that time, people will have a better idea whether they will be losing their own jobs or not. Even in the direst of straits, 75% of them won't be.

[doco.livejournal.com]

I am thinking that if the Albrecht brothers weren't both in their mid-80s already, now would be the prime time for them to tackle the American market once and for all. That's exactly the scenario you describe that made Aldi thrive in the '70s - in fact, there's a little quote that goes "The worse off the people are, the better off we are".

Of course, that doesn't always hold up - milk is at a historic low again despite the quarrels about the milk prices last year, because the stupid farmers have been overproducing *again*, thanks to EU subsidies....

[altivo.livejournal.com]

Aldi is all over the place here. I suspect that the reason they haven't made greater market share acquisitions is rooted in the chaotic nature of the stores: you can't find anything, you can't tell if they even have it, and there are no staff to help you find out. Shoppers who are willing to take whatever they find in the store get even better prices at Sam's Club (WalMart associated buying club chain) while those who have specific shopping lists find Aldi simply too frustrating an experience.

[doco.livejournal.com]

I think it's more the American public's mindset - somehow, the average joe expects to buy their milk in 5-gallon jugs and have their groceries packed into paper bags by a pimply 16-year old while cashing in the coupons from the newspaper (or, a more modern version, the weeky e-mail newsletter).

It's a bit like the British, who were of the opinion that buying anywhere else than Marks & Spencer's would be a degradation of class. Then Lidl came around.

Speaking of Lidl, I correct my point: Aldi hasn't been particularly "successful" over the past 30 years in the US (as far as you can call 750 stores 'not successful'), but once the managers at Lidl decide to jump the ocean, Wal-Mart *may* be in trouble.

Some of us are doing well ;)

[gabrielhorse.livejournal.com]

I'd say your theory about an oncoming depression is dead-on. Personally, being outside of the marketplace for a few years and watching everyone struggling under Bush's policies pretty much brought home to me that we were approaching nohing short of total financial ruin. Obama may do us some good, but we'll be lucky as a nation if this mess is over in four years.

You know, it's funny- I've been getting ahold of more food for little or nothing recently (past month or so especially), moreso than since I started living on my own, money too. It seems everyone is so busy worrying, they're in such a funk, they pass up opportunities right & left, or just plain old forget they bought food. I found a full, unopened bottle of Gatorade this afternoon that someone had absentmindedly thrown away! Brand new! I've seen homeless people wake directly over 3 quarters and not pick them up. Everyone is so mentally wrapped up, they're barely functioning at all!! *sips free soda and munches on a bag of chips* It's funny how life seems to have flip-flopped for me, personally :P

[soanos.livejournal.com]

I see a pattern there:

Price of necessities going up.
Price of optional luxuries going down.

Let's hope things stabilise eventually.
Increasong medical costs sound really bad to me. :\

[loriana.livejournal.com]

Wow.. so much I could say here. I'm feeling to crappy though.

I think your views are pretty dead on though.. I do think this could very easily slip into depression. The united states economy, on a daily basis, is stated as being 70% consumer based (I read that as "Frivelous luxury and service based").

So it REALLY doesnt take much to upset this applecart. We dont make anything anymore, that the rest of the world wants, and yet we consume what the rest of the world makes.... funny how that really messes things up ;P

I still wish "Boom Town" by Bill Plympton was available on YouTube. Its reported by some to be about military spending, but makes more sense when you think about it as the united states economy on the whole.

meh.. brain too cloudy to make good points--- besides- I think you nailed my views anyway.

*HUGS!*

[altivo.livejournal.com]

Mmm, hugs. I'll take all of those I can get. No deflation permitted.

[soanos.livejournal.com]

*HUGS* This one won't deflate either. :)

[altivo.livejournal.com]

*giggles and hugs back*

I should act pitiful more often.

[saythename.livejournal.com]

We've been living with the saying;

"Slow and Steady Wins the Race"

here in this rustbelt city our whole lives.

We've looked around in wonder at people living
far FAR beyond their means, and meanwhile looking
down on us as "poor" because we didn't say yes
to every credit card application that came in
the mail.

Now the economy is "crashing" and people like that
have to live a normal life like we do.

Its like watching addicts going through withdrawl.

[altivo.livejournal.com]

Yes, and it's going to get a lot worse. Unfortunately, those of us who were sensible all along are going to suffer right along with the rest.

[soanos.livejournal.com]

Well, I am sure you could all just migrate to Finland. That way you might be able to evade some of the flak. ;)

[altivo.livejournal.com]

Ummm... I used to have a gift for languages, but I'm afraid I'm too old to learn Finnish in the time I have left.

[cabcat.livejournal.com]

Sensible people welcome in Australia :)

I don't think there was anything there I didn't agree with.
A capitalist society would not bail out private companies at all.

[altivo.livejournal.com]

Well, yes and no. Things are all interlinked though. Studying the history of the 1930s depression shows that. Yes, the US auto industry almost certainly deserves to crash. A lot of very stupid decisions have been made there, both by management and the labor unions, and repeatedly over many years. Now they will reap the consequences.

But... How much else depends on that? All the companies that supply materials and parts? The car dealers? The towns like Belvidere, Illinois, where the whole economy is based on a Chrysler plant. If that plant shuts down, thousands are out of work and stop spending money. So the waitresses and cooks in the restaurants, and the people who operate grocery and clothing stores, and so forth start to go out of business because they no longer have any customers. It snowballs quickly.

So there's an argument for trying to stop the avalanche by blocking the first collapse. Unfortunately that's a big expensive gamble.