A Healthy Dose of Economic Reality

Just in case you have a friend who still believes that anyone elected in the 2008 election is going to wave a magic wand and make things all better in four years, here is a little something that you can send them that just might smack them back to reality.

Yesterday the Wall Street Journal reported:

"An Abu Dhabi sovereign-wealth fund has purchased a majority stake in the Chrysler Building, an iconic New York City skyscraper."

photo courtesy of Wikipedia

Reuters is reporting:

" Home foreclosure filings jumped 53 percent in June from a year earlier, although they were down 3 percent from May, and foreclosures are expected to rise further, real estate data firm RealtyTrac said on Thursday.

Foreclosure filings rose on an annual basis in 39 states to a total of 252,363 properties during the month, with Nevada, California, Arizona and Florida posting the highest foreclosure rates.

One out of every 501 U.S. households received a notice of default, auction sale or bank repossession in June, RealtyTrac said.

'June was the second straight month with more than a quarter million properties nationwide receiving foreclosure filings," said James J. Saccacio, chief executive officer of RealtyTrac. "We have not yet reached the top of this foreclosure cycle.'"

U.S. News & World Report is reporting:

"As if the U.S. economic slump, the housing crisis, surging oil and food prices, and a general sense that things are not going all that well weren't enough, a new study forecasts that China will become the 'pre-eminent world commercial influence' by 2035, when it surpasses the U.S. economy. The study released today is by Albert Keidel, who specializes in China economic issues at the Carnegie Endowment for International Peace. It is clear that China's economic juggernaut will have far-reaching implications for economic, diplomatic, and military matters in coming years--the subject of Keidel's study titled 'China's Economic Rise--Fact and Fiction.' "

Just one day before the Nation's birthday celebration, NPR reported:

"62,000 jobs were cut from company payrolls in June, and the number of laid-off workers seeking benefits also rose sharply last week in further signs of a slowing U.S. economy.

The separate Labor Department reports Thursday seemed to underscore that the economy is in a substantial downturn, if not a recession.

The cuts in June marked the sixth straight month that employers have trimmed payrolls. Gains in education, health services, leisure and hospitality, and government were not enough to offset heavy losses in construction, manufacturing, business services and retailing."

And yesterday the CEO of 12 US Airlines sent the following open letter to their customers:

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers.

Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

The nation needs to pull together to reform the oil markets and solve this growing problem.

We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com.

Richard Anderson CEO Delta Air Lines, Inc.		Gerard J. Arpey Chairman, President and CEO American Airlines, Inc.
Bill Ayer Chairman, President and CEO Alaska Airlines, Inc.		Dave Barger CEO JetBlue Airways Corporation
Mark B. Dunkerley President and CEO Hawaiian Airlines, Inc.		Robert Fornaro Chairman, President and CEO AirTran Airways
Timothy E. Hoeksema Chairman, President and CEO Midwest Airlines		Lawrence W. Kellner Chairman and CEO Continental Airlines, Inc.
Gary Kelly Chairman and CEO Southwest Airlines Co.		Douglas Parker Chairman and CEO US Airways Group, Inc.
Douglas M. Steenland President and CEO Northwest Airlines, Inc.		Glenn F. Tilton Chairman, President and CEO United Airlines, Inc.

Friends, the preceding is not an obituary but a strong cautionary warning.

The world has changed and America will either lead in the change or be left to pick up the scraps that fall from the table. So, now is not the time for fear mongering, rash actions, petty divisiveness, empty promises or pining for the good old days.

Regardless of the outcome of the US election in November, the problems we face won't disappear overnight. However, the next President and Congress will set this nation's course for the next generation. So don't let politicians, the media or partisan PACs lead you around like sheep. Before you fall for the rhetoric and the hype, gets the facts. Then get involved and stay involved.

And most importantly, before you get involved decide where you stand on the issues. Know your own mind.

This is what I would suggest to anyone who needs to decide on which candidate to support:

-- First Step

Make a chart (on paper or computer) which includes:

• a column for listing the issues (economy, war, education, health, climate change, crime, food safety, trade, immigration, etc. ) Try to keep the list to no more than 8-10 issues or this process may get overwhelming.
• a column for ranking each issue in order of importance to you and your community
• a column in which you will list your current position on the issue
• allow a column for each candidate that you are considering supporting. In these columns you can note whether the candidate agrees or disagrees with your position
  

It will be easier to do this on the computer because you may need to revise your lists several times.

-- Second Step

List your issues and your current position on each. Don't rush this process. It doesn't have to be done in one day or one week.

-- Third Step

Rate your list of issues in terms of importance to you and your community.

-- Fourth (and most important) Step

Do your research. Get as much unbiased information on your issues as possible.

Great sources of information are:

• OpenCongress.org
• GovTrack.us
• Project Vote Smart

If you normally listen to only conservative news sources try also listening to opposing views from time to time. Conversely, if you only get your information from liberal media outlets and blogs try listening to the opposing view occassionally. To my knowledge no one has died yet from listening to the other side's opinions.


-- Lastly, review your results and rate the candidates.

I know that what I've outlined sounds like a lot of work but your future is worth it.

When Knowledge Obviously Was Not Wisdom

Today, the US is facing both a food and an energy crisis.

Many scientists and politicians once thought that bio-fuels was the answer to the ever increasing demand for oil and its rising costs. However, now that food crops like corn are being diverted to the production of ethanol, costs for everything from meat to milk to eggs is skyrocketing. In addition, scientists and environmentalists are now realizing that the ethanol production process is harmful to the environmental and actually adding to the problem of global warming.

Now some politicians are ready to limit ethanol production and expand drilling in protected areas of the environment in order to meet America's energy needs. However there is already a great deal of evidence showing this to be an impractical solution. One, because of the irreparable damage that he will due to the environment. And two, because, in the case of the Alaska Pipeline, the ground no longer stays frozen solid enough months of the year, in order to move the oil tankers in and out of the area.

In some circles voices are demanding that OPEC lower prices. Ironically, this cry is often coming from those that believe in letting "the market" drive the economy. Many of these voices are suggesting the Kuwait and Iraq should remember their "friends"? Are they saying that "it was really all about the oil"? Meanwhile oil companies like BP & Shell are reporting record profits.

While addressing Congress today, Senator Chuck Schumer (D-NY) succinctly pointed out that the money from most American's stimulus checks will end up in Saudi Arabia. He suggested that the passage of the Saudi Arms Deal be blocked if they do not increase oil production. It seems that so many events over the last seven years have come down to ARMS & OIL.

Some politicians and business interests are trying to sell the idea of clean coal. Ask the people in Appalachia, whose air and drinking water is being poisoned by mountaintop mining, if there is anything "clean" about coal.

And of course there are the proponents of nuclear energy -- a process for which there is no viable way to dispose of the waste product.

As bleak as this conundrum of food, energy and environmental problems sounds, I am sure that the world's scientists and business community will find the answers. But will they learn the real lessons?.

Will world leaders finally learn that :

• just because we have the knowledge to do something it might not always be wise to do it
• just because an idea has a short-term benefit that he should also be evaluated for its long term consequences.
• we have always lived in a global community

In an article for the Washington Post, Stephen Mufson painted a very clear picture of the ties between food and oil. Here's an excerpt from his article, " Siphoning Off Corn to Fuel Our Cars".

Across the country, ethanol plants are swallowing more and more of the nation's corn crop. This year, about a quarter of U.S. corn will go to feeding ethanol plants instead of poultry or livestock. That has helped farmers like Johnson, but it has boosted demand -- and prices -- for corn at the same time global grain demand is growing.

And it has linked food and fuel prices just as oil is rising to new records, pulling up the price of anything that can be poured into a gasoline tank. "The price of grain is now directly tied to the price of oil," says Lester Brown, president of Earth Policy Institute, a Washington research group. "We used to have a grain economy and a fuel economy. But now they're beginning to fuse."

Not everyone thinks it's fantastic. People who use corn to feed cattle, hogs and chickens are being squeezed by high corn prices. On Monday, Tyson Foods reported its first loss in six quarters and said that its corn and soybean costs would increase by $600 million this year. Those who are able, such as egg producers, are passing those high corn costs along to consumers. The wholesale price of eggs in the first quarter soared 40 percent from a year earlier, according to the Agriculture Department. Meanwhile, retail prices of countless food items, from cereal to sodas to salad dressing, are being nudged upward by more expensive ingredients such as corn syrup and cornstarch.

Rising food prices have given Congress and the White House a sudden case of legislative indigestion. In 2005, the Republican-led Congress and President Bush backed a bill that required widespread ethanol use in motor fuels. Just four months ago, the Democratic-led Congress passed and Bush signed energy legislation that boosted the mandate for minimum corn-based ethanol use to 15 billion gallons, about 10 percent of motor fuel, by 2015. It was one of the most popular parts of the bill, appealing to farm-state lawmakers and to those worried about energy security and eager to substitute a home-grown energy source for a portion of U.S. petroleum imports. To help things along, motor-fuel blenders receive a 51 cent subsidy for every gallon of corn-based ethanol used through the end of 2010; this year, production could reach 8 billion gallons.

Now, however, the legislation is being criticized for making food more expensive while gasoline prices continue to climb. Rick Perry, a Republican who succeeded Bush as Texas governor, has asked the Environmental Protection Agency to waive half of the "misguided" ethanol requirements because of rising food costs; every penny increase in per-bushel corn prices costs his state's livestock industry $6 million a year, he said.

Hopefully, US leadership will get serious about finding longterm sustainable solutions to today's food, energy and environmental issues and the American public will get serious and realize and any solution will involve a little sacrifice.