Oil - it's not just for the rich

People who dismiss the concept of Peak Oil rarely argue that we have unlimited supplies of oil; more commonly, they argue that we'll develop viable alternatives before we run out of oil. The thinking is, we'll discover more oil, and we'll develop new technologies, and we'll refine existing technologies, and everything will be fine. I like that thinking. The truth is, we have the technology to create more efficient cars (although I was shocked, buying a car last year, to discover that the most fuel-efficient non-hybrids were no more efficient than the old clunker I drove in high school), and we ARE creating more efficient appliances. You can buy a 42" LCD TV that uses no more energy than a bright lightbulb, and it won't even be the most energy-efficient large TV on the market. I like the idea that Peak Oil doomsdayers are crackpots, that life as we know it will continue, albeit a little differently, a little better.

I really, really want to believe that the dollar is stable (we've saved a few of them, it would be nice if they're worth something). I want to believe that everything is rosy. And I keep coming back to a handful of scenarios where oil is only affordable for the rich. 1) Peak oil production occurs as demand continues to grow - rising demand, reduced supply = higher prices; 2) Competing demand from China and India (both with more people, less debt, and a growing share of world manufacturing AND professional employment, while the U.S. GDP is 60% services) for a limited resource drives up prices without there having to be a reduction in supply; 3) A declining dollar, coupled with our high debt (and potentially high interest rates) makes oil increasingly expensive for us; 4) War in the Middle East results in large stores of oil burning up (like after the first U.S./Iraq war), reducing supply; 5) Continued high demand in the face of rising prices convinces the Middle East that they can continue to raise prices without losing profits; 6) War in the Middle East disrupts demand for more than just a few days (it's a politically instable region, with a very long history of skirmishes between nations even before the Israeli infidels arrived); 7) High oil taxes, designed to force us to be more efficient; 8) Economic warfare - Iran gets tired of our complaints about their nuclear program and says "fine, we won't sell you more oil", or any other nation in the Middle East withholds oil or raises prices to hit us where it hurts, our pocketbooks; 9) Terrorists target our oil supply, terrifying Middle Eastern countries into cutting off shipments.

Most people don't remember the lead up to the first Iraq war. It was a series of stories buried deep in the International news section. Some Middle Eastern dictator named Saddam Hussein started begging OPEC to raise prices; OPEC didn't agree. Hussein made numerous pleas without success. Then Hussein placed troops at the Kuwaiti border. I was in high school at the time, on this wierd combination of college-prep courses for the college bound, and an internship program for the non-college bound. I went to school for half a day, then went to work at my internship job. My class schedule went until before lunch some days, and after lunch other days, so my internship work schedule started after the latest class. After the internship job, I went to my real job, and worked until the store closed. Which meant I had a few days a week with a really long lunch break. Some days, I went to the mall, other days, I did homework, and most days I picked up lunch and a newspaper, and went to the park to eat and read. If I didn't get to read the paper on my lunch break, I read it during down time on my night job. I felt like the only high school student in the world who read the entire news section every single day. I also felt like the luckiest high school student in the world, having only a half day of school, a car, AND a job.

That happened to be the year that we went to war with Iraq. My night job was at a little country store with a grill, mini-market, and one gas pump. When Hussein massed troops at the border, I told my boss that he should get the gas tank topped off before prices rose. He didn't. I don't know, I was 17, maybe this kind of crap happened every year. To me, however, it was quite evident that Hussein was motivated, and he was going to get his price increases no matter what it took, even if it meant war. Gas prices took off, and everyone complained, and I didn't understand. I wasn't paying rent; I was paying teenage car insurance rates and saving up for college and I wasn't saving enough and I just saved less and kept buying gas. I didn't have a choice - my internship was 30 minutes away and I had committed for the full school year (and it paid more than minimum wage).

We think of Saddam Hussein as this terribly irrational dictator, and history already pegs him as having attacked Kuwait out of greed. The news stories at the time, however, told the story of a man who desperately needed more money, who couldn't find any other way to get it. Perhaps his reasons for needing more money were specious; like a teenager who desperately wants designer clothing, asks mom and dad for more money, and then steals when mom and dad won't pony up the cash. It doesn't matter though - a madman's perceived need for money is no less motivation to stir up trouble than a sane man's desperate attempt to feed his child. What I learned from Saddam Hussein was that OPEC is not a unified representative of all its members' needs and desires, and that gas prices in America are dependent on nearly inexplicable conditions far away and far from our control. The world doesn't have to run out of oil to cause price disruptions that can cripple our economy.

The Rainwater Prophecy - December 26, 2005

The Rainwater Prophecy - December 26, 2005: "Rainwater is something of a behind-the-scenes type--at least as far as alpha-male billionaires go. He counts President Bush as a personal friend but dislikes politics, and frankly, when he gets worked up, he says some pretty far-out things that could easily be taken out of context. Such as: An economic tsunami is about to hit the global economy as the world runs out of oil. Or a coalition of communist and Islamic states may decide to stop selling their precious crude to Americans any day now. Or food shortages may soon hit the U.S. Or he read on a blog last night that there's this one gargantuan chunk of ice sitting on a precipice in Antarctica that, if it falls off, will raise sea levels worldwide by two feet--and it's getting closer to the edge.... And then he'll interrupt himself: 'Look, I'm not predicting anything,' he'll say. 'That's when you get a little kooky-sounding.' "

Well worth a read. Please, as a personal favor to me, read that article all the way to the end. Saying something with passion - and doing something - are two very different things. My previous husband, when I was very sick, would leave me home alone without help or support, and go out with his friends. When I got better and was able to socialize with them, too, they all told me "gosh, he loves you so much." Saying it to other people, versus showing me that he loved me, are two worlds apart. He loved the idea of loving me a heck of a lot more than he loved the actual mundane process of keeping love alive through life's hills and valleys. Now he's an ex-husband. (And he's a great guy and he's a bastard and there's a whole lot more to the story, but that's the part that illustrates this particular point.)

There's walking the walk, and there's talking the talk. When a person gets rich off their brains, it implies some degree of intelligence, luck, and understanding how things work. It implies they might have a clue. If they walk the walk, too, it's worth a listen before you dismiss their ideas as preposterous. It's worth going beyond listening to them, maybe doing a little more research, before you make a call on whether there's anything there worth thinking about.

And if the guy is just a total crackpot, then I still think the description of his life - how his wife accepts his crackpot-ness, how he lives part of the time on an old family farm in a very poor town despite having multiple homes and billions of dollars, things like that - it's an interesting window on how at least some rich people live, in stark contrast to the popular image of how rich people live.

New Rules Project - Retail - Curbing Corporate Welfare

Here's a thought-provoking piece about corporate subsidies: New Rules Project - Retail - Curbing Corporate Welfare: "Subsidies are rarely provided to locally owned businesses. Instead, these businesses often see their tax dollars used to subsidize their biggest competitors."

Maybe my notion of America is outmoded, but I tend to think that small businesses are some of our most inefficient companies as well as the seedbeds of some of our greatest innovations. I have mixed feelings about government subsidies.

On the one hand, I think a business should fend for itself. On the other hand, I can see the benefit in the government helping essential industries weather tough times - or ramp up new technologies - so that we don't get into a situation where, for instance, we import all our wheat from China and then they cut us off. In a case like that, it would take years to reestablish adequate agriculture to meet such a need. If the theory of Peak Oil - that known oil reserves are being drained faster than new ones are found while nations like China and India increase their consumption - is true, we'll be in quite a pickle if oil becomes unaffordable before we have alternatives in place. Even if the Middle East has thousands of years of oil left, they could cause us tremendous economic harm by choosing not to sell to us.

England was a superpower going into World War I, but it was a has-been by World War II. England was a coal-based economy when the world was becoming an oil-based economy. The U.S. is an oil-based economy; developing countries are less entrenched in oil than we are (for instance, few nations have far-flung suburbs filled with SUVs that drive 1 person to a job many miles away). Developing nations like China, with their bicycle-filled cities and without our massive debt, could adjust to an energy shift more easily than we could. So I think that it's a good thing for our government to invest in alternative energy.

On the other hand, I'm a small business person. LOL. Sounds a little like "little person." Anyway.... It is not efficient for businesses to be investing time and humanpower (like manpower, but politically correct) in looking for government subsidies. That time should be spent building the business. And the thought of paying MORE in taxes than a direct competitor - effectively paying my competitor to drive down my profits - rankles.

On yet another hand, the City of Folsom provided subsidies to Intel, and Folsom was transformed from a backwater distant suburb of Sacramento, to a thriving city with expensive homes, extensive parks, and a brand-new, state-of-the-art high school. Intel paid Folsom back in spades.

Maybe this isn't an either-or question, but a do-it-right question. I haven't a clue how we get backroom deals and lobbyist contributions out of the equation, and put the public good back at the forefront, but it needs to happen. WalMart's opponents ignore the economic value of WalMart's cheap prices (some studies suggest that the combination of stagnant wages and rising prices worldwide these past few years would have been tremendously disruptive if not for the cost-reducing influence of WalMart, Chinese goods, and similar discount providers, and those are worldwide statistics, not just American studies). But I don't see how any community can look at a proposed WalMart and say "yeah, that's gonna be *great* for this town!" And, well, the public costs of disposing of cheap, disposable, impulse-purchase, breaks-easily WalMart crap .... ah, that's a rant for another day.

I guess the most basic question is, how do we put integrity back into government? How do we get our elected representatives to do what's right for our cities, states, and Nation, without regard for the legislator's personal gain?

Lawmakers pledge to avoid 'moral hazards' - Sep. 21, 2007

Lawmakers pledge to avoid 'moral hazards' - Sep. 21, 2007:

"'We talk about market discipline, but there's no possibility to have
market discipline,' the candidate declared. 'What moral justification do we have
to deliberately devalue the dollar?'

In response, the cautious Bernanke left his own moral high ground for the
safer moorings of policy commentary on the ills of inflation: 'I agree with you
that an economy cannot grow in a healthy stable way when inflation is out of
control.'"

TJ Center » Jefferson Muzzles

TJ Center » Jefferson Muzzles: "Since 1992, the Thomas Jefferson Center for the Protection of Free Expression has celebrated the birth and ideals of its namesake by calling attention to those who in the past year forgot or disregarded Mr. Jefferson’s admonition that freedom of speech ‘cannot be limited without being lost.’"

Is SCHIP just for the poor?

Bloomberg.com: Family Making $56,000 Struggles With `Out of Sight' Health Cost:

"The family's monthly bills consume most of their take-home income. Pulling
out her checkbook, Lori said there's the mortgage ($1,500), utilities ($743),
phones and Internet service ($200), car insurance and gasoline ($205), property
taxes ($230), basic cable television ($48), food ($600) and credit- card
payments ($325) on an outstanding $11,000 balance. That's $46,212 a year, not
including clothes, school books and extra- curricular activities for Carlie.
...
There's also $352 a month on a home-equity loan the Siravos took out to
send Carlie to a private Catholic high school. Tuition is $9,000 a year. ``I'll
do anything for her to be happy and get a good education so she doesn't
struggle,'' Siravo said. Carlie is thinking of a career as a physical therapist.
If Schip weren't available, Carlie's parents could cover only the teenager
through a $230-a-month policy with Horizon Blue Cross Blue Shield of New Jersey,
according to the Web site ehealthinsurance.com. "

Now, let's see, take out: phones and Internet service ($200), basic cable television ($48), and $352 a month on a home-equity loan. We won't even look at the credit card balance - leave that in the mandatory-expenses budget. Take out the little luxuries in this family's life, and you've got $7200 a year, leaving the family $16,988 to pay fungible expenses, health insurance, retirement and savings. Their discretionary income is $16,988; Poverty level TOTAL income household for a family of 3 is $17,170. How is a family so poor as to require government assistance when their free-cash-after-mandatory-expenses/discretionary income alone is more than poverty level total income for a family?

Kudos to the family for wanting the best for their child. But why are taxpayers charged with paying health insurance so the family can afford private school? The cost of private school ($352) is higher than the cost of health insurance ($230). I thought government aid was for people who NEEDED it, but the article seems to suggest that aid is for families who have better ideas for how to spend their money. I don't begrudge the family their little luxuries. I enjoy a fiscally wasteful Starbucks latte, but I'm not getting government aid. I'm just saying that every family has to choose which luxuries to sacrifice and which to continue, and government aid is a safety net for necessities, not a way for beneficiaries to free up cash for more luxuries. Government aid should be for the poor. Private charity can help the middle class and lower middle class, and, heck, the rich, too, if they want - it's private charity.

As a taxpayer - paying very high taxes between California state, social security, medicare, and federal taxes - I have better ideas for how to spend my money than paying taxes to keep poor kids in private schools. We have a pretty strict budget, including $500-600 for groceries, eating out, cleaning supplies, kitchen supplies, wine, beer, and dog snacks, combined. In California, which is probably a comparable cost-of-living to New Jersey (though our utilities costs are a heck of a lot lower). We did purchase a new car last year, an unanticipated expense and one which wiped out our downpayment fund for buying another house. Granted, our budget allows us to save money for retirement, to save cash for large expenses, etc., but what we have left after savings, taxes, and insurance, is quite a bit less than the "working poor" seem to think when they vote for tax increases. Our home is under 1300 square feet, which, along with conservation, helps keep our utility bills low. We would really like a 3,000 square foot home, but the costs would be too high. And private school is a luxury that is simply too rich for our blood. But at tax time, we're "rich".

We got stuck with a family member's kid for a while (a "poor" family member), and had to keep him in private school to avoid causing excessive disruption to his life. We would not have had our own child in private school. We don't care for California's public schools, and our life plan does not lend itself to leaving California before we're too old to have kids, so we don't have kids. But we learned something from having someone else's kid - private schools are way more expensive than just the tuition. Every month, there's another fund-raiser selling overpriced junk to parents to "offset" the school's costs. At the beginning of every year, the teachers send home a shopping list, requiring students to purchase paper and kleenexes and paper towels and ink cartridges. Just hauling the kids to school is expensive. Our fuel budget climbed to $600 a month and then we bought a more efficient car; most parents at the school drove SUVs because they "had to" because the school put transportation responsibilities on the parents, for field trips and daily commutes and mandatory group projects and everything else they scheduled. Private schools are too expensive for the poor or middle class.

What are the Salvos teaching their child when they are, on the one hand, so "poor" they need aid, but, on the other hand, so "rich" they can afford private school AND cable AND extra-curricular activities, but on yet another hand, they cannot afford to insure themselves, to save for the future, to help their child with college? One of my in-laws did exactly this - receiving free car and housing from her parents, receiving state aid for her child (including free health insurance), and receiving tax aid through the Earned Income Credit. She made the exact same choice - put the kid in private school, skip the health insurance and life insurance. She died. She died of something that was easily detected and easily treated, but she didn't bother with checkups because she didn't have health insurance and the cost of healthcare was "too high" until she got really sick. Then, the State of California picked up the tab. The irony - when I found out she was on Medical, which meant she didn't have health insurance, I was shocked. I would have bought her health insurance if I had known. It would have meant cutting back, it would have taken some sacrifices, but we would have made those sacrifices to buy her health insurance. I was upset that she didn't ask for help for something so essential. When she died, we discovered that she had plenty of fluff in her budget - enough to buy health insurance. There were just better ways for her to use her money. In fact, with free housing, no budget for savings/retirement, and no taxes, she had more disposable income than we (the "rich" siblings) did. We would have made the sacrifices she wouldn't. She died and left a child behind.

Credit-Line Decreases Catch Consumers Unaware (Consumer Action: Personal Finance) | SmartMoney.com

Credit-Line Decreases Catch Consumers Unaware (Consumer Action: Personal Finance) SmartMoney.com:

"If past is prologue, credit-limit decreases — and American Express is not
the only credit-card company doing this — is a reaction to what creditors
perceive as increased risk of defaults. Hurricane Katrina, for example, left
thousands of people relying on credit cards for food and necessities and at a
greatly increased risk of filing for bankruptcy. One of the most common stories
John Ulzheimer, president of Credit.com Educational Services, heard during his
visits to the area was that of credit-limit decreases. " ....

"Problem is, when that decrease is unexpected, it can be just as
damaging to one's financial situation. 'You've got to think of the collateral
damage,' Ulzheimer says. 'You could affect the consumer's score in a way that
leads other issuers to increase their rate. And then it can snowball because
payments will increase.'"

Free range and the cost of chicken

I've always thought that the quality of life for a chicken is not much different than the quality of life for a wheat plant - somewhat better circumstances might yield a slightly better crop, but not so far superior that the average American will pay for it. Americans have this funny way of wanting EVERYTHING to have a high standard of living - even a chicken - and trying to vote, coerce, or bully the rest of us into paying for it. We want our chickens to live free on the range, enjoying more space, more reliable food, and a generally higher standard of living than most of the poor PEOPLE in the world. Seemed silly.

Not that I don't have feelings for chickens. My parents bought a cage full of chickens during an back-to-nature phase they went through in the 70's. I went with my folks to the farm, and I felt sad for our chickens' brethren in those stinky, crowded cages. The "farm" was an enormous metal building with rows of cages, packed tight with chickens, set over some sort of catch tray for the chicken manure. We brought home a cage full of chickens; I don't think my parents wanted to go through with the slaughter once the reality set in, but then the roosters sealed their fate - they cock-a-doodle-doo'ed at daybreak every morning. I helped slaughter our chickens and pluck them. I didn't much care for homegrown chicken - they were skinny, probably tasted fresher than my tastebuds understood, and they had pieces of feather stuck in their skin (yuck! I guess nobody taught mom and dad how to pluck a chicken). My older sister went off chicken altogether after having to eat our "pets" Henry and Martha. It took her about 20 years to recover. But I didn't much mind eating them - not that I had any say in the matter - I guess somewhere along the way I realized that Henry and Martha would have been Henry and Martha - and somebody's dinner - whether WE ate them or not. They weren't meant to be pets; they were meant to be dinner. And they did enjoy a civilized, much-loved lifestyle those last few months.

Nowadays, chicken is the new black - we're supposed to eat low-fat, healthy chicken any time we can't eat vegetarian. My husband used to buy the "premium" chicken, not free range but priced rather high. Now, mind you, I think of chicken as a step above tofu - not a superior cut of meat in its own right, but quite tasty in the right recipe. I just couldn't pay $6 a lb. for "special" chicken when chicken isn't very special. We switched to cheap chicken. One day, I got a pack of chicken breasts and one of them was bruised. Seems silly, but never having seen bruised chicken before, it got me wondering. Was it safe to eat? Why have I never seen a bruised piece of chicken before? How did the chicken get bruised?

Burgeoning research says that hormones and antibiotics in our food can have an impact on our health. Could it also be true that chickens raised in "factory farms" experience more stress - and release more stress hormones as a result? Could those stress hormones be unhealthy in humans? Could humans be absorbing some of those stress hormones? God forbid - could the "free ranger"s be right (though for all the wrong reasons)?

Tax Payers Against a Wall Street and Mortgage Bailout Petition

Sign the Tax Payers Against a Wall Street and Mortgage Bailout Petition"The Tax Payers Against a Wall Street and Mortgage Bailout Petition to Senator Hillary Clinton, Senator Christopher Dodd, Senator Charles Schumer and members of Congress was created by and written by Thomas Roach (citizensagainstabailout@gmail.com). "

Thousands Rally in La. to Support Jena 6

Thousands Rally in La. to Support Jena 6: "He said he didn't charge the white students accused of hanging the nooses because he could find no Louisiana law under which they could be charged. In the beating case, he said, four of the defendants were of adult age under Louisiana law and the only juvenile charged as an adult, Mychal Bell, had a prior criminal record."

Boy, I hope there's more to this story than sfgate has reported, because I certainly don't understand how thousands of people can rally in support of criminal behavior.

"'We all have family members about the age of these guys. We said it could have
been one of them. We wanted to try to do something,' said Angela Merrick, 36,
who drove with three friends from Atlanta to protest the treatment of the
teens."

I have a family member - a teenager - who is, shall I say, morally underdeveloped along with being socially underdeveloped. In less polite terms, I might call him a budding sociopath. When I read about a child criminal/young adult criminal, I do not say "It could have been him - I should go march in support of that criminal"; I say, geez, I hope counseling and strict supervision is helping him. (Apparently, today's private religious schools have been infiltrated by the same "ego building" theories of education, permissive, non-involved parents, and entitlement-mentalitied children as the public schools suffer from.) I think we do our children no favors when we say "well, the crime must have been justified" and our children know that we will listen to them and believe them and empathize with them, the support we show for another criminal tells them "it's okay if you do it, too, because I'll understand when you explain that it was justified." For the good of society - but, more importantly, for the good of our own children - we need to keep them from committing crimes, even justified crimes (killing in self-defence is not a crime, killing in a crime of passion is a justified - though I would say rationalized - crime which typically results in prosecution).

If parents want to try to do something for their family members "about the age of these guys", educate them, give them good values, and put them on the path to a productive, happy life. I'm not supporting or opposing affirmative action when I say this - when white folks see black folks integrating into American society - taking on the language, work ethic, and values of the overriding culture - racism will be a moot point. And when the black community comes out in support of black children (teens? adults?) beating up a white teenager (ah, imagine if the races were reversed?), it FOSTERS the sense that the black community and white community are separate communities working towards different goals in support of different values. It fosters a sense of us - and - them - as different. It creates racism where none previously existed.

NewsMax - America's News Page

NewsMax - America's News Page: "Former U.S. Federal Reserve chairman Alan Greenspan said it is possible that the euro could replace the U.S. dollar as the reserve currency of choice."

Newsmax is not my favorite news source, but they are reporting on an advance copy of a German publication. It will be interesting to see if the domestic press carries any part of that story.

Fortune Q&A with Alan Greenspan: The transcript - Sep. 17, 2007

Fortune Q&A with Alan Greenspan: The transcript - Sep. 17, 2007: Greenspan answers a question, in part: "In the United States, we had the wonderful real estate boom of 1837.
Q: I missed that one.
A: I know.
Q: So did you!
A: Well, I was a little too young to understand what was going on. "

Mostly a very serious interview, as Greenspan sells his new book and reflects on whether history will assess his contributions accurately.

WTRG Economics -OPEC, crude oil, natural gas, analysis, forecasts and data

WTRG Economics -OPEC, crude oil, natural gas, analysis, forecasts and data: " Analysis, planning, forecast and data services for energy producers and consumers."

Provides historical fuel price data and charts.

Currency exchange rates and the price of gasoline

http://finance.yahoo.com/charts#chart1:symbol=usdeur=x;range=5y;charttype=line;crosshair=on;logscale=on;source=undefined

http://tinyurl.com/254ylt

This is a link to a 5-year chart showing the exchange rate for the U.S. Dollar versus the Euro. At the end of 2002, the dollar and Euro traded at about 1 for 1 ($1 was worth 1 Euro). Today, one dollar will buy you about 75 cents in Euros.

If you are a Saudi sheik, and you can sell a barrel of oil for 50 Euros today, and you sold it for 50 Euros in 2002, you're going to expect 50 Euros worth of dollars. In 2002, that would cost an American buyer $50. Today, it would cost $69 American greenbacks. In other words, how on earth could we NOT be paying more to import oil when our dollar is worth so much less on the world market?

Why is the dollar worth less? Because there are so many of them floating around the world, because we import so much stuff - oil from the Middle East, Venezuela, Canada; loan funding from all over the world; almost everything from China; truffles from France. We don't export enough of our own American-made products to allow our trading partners to send those dollars home to us. Our biggest export is debt. If our dollar continues to decline in value, international lenders/investors will eventually demand a higher interest rate on our debt to make up for the "equity erosion" resulting from a declining dollar.

So Ben Bernanke, our esteemed Fed chief, is faced with an ugly choice. Option1: lower interest rates, and the value of the dollar declines even more. The interest on the Federal defecit will end up costing American taxpayers more if our international lenders demand higher rates. Imports cost us more, including oil, while exports cost our trading partners less, so we sell slightly more domestic goods. Option 2: Hold interest rates steady, and our investment markets suffer the consequences of their recent actions. Which probably means a recession, and some banks and mortgage companies - and their investors - going under or taking large losses. Option 3, which no one wants to discuss: Raise rates.

News - County adopts budget, braces for leaner times - sacbee.com

Sacramento: News - County adopts budget, braces for leaner times - sacbee.com: "Much of the morning was spent discussing whether to end non-emergency care for illegal immigrants at county clinics. For this fiscal year, officials estimate the county's Medically Indigent Services Program will treat between 2,500 and 4,000 undocumented immigrants, costing the county between $1.4 million and $2.3 million. Such undocumented clients represent between 5 percent and 8 percent of the indigent services workload."

Interesting article. The County's CFO warns that continuing to spend in the face of declining revenues could mean a lowered bond rating (and higher borrowing costs) and the County's response is "let's see what fees we can raise."

Okay, so the County is facing financial strain, and their citizens are facing financial strain, and, instead of spending less, they want to add to their constituents' financial strains in little tiny ways.

And, of course, health care is another battle.

American Dream's Harsh New Reality - News & Analysis - Business & Insurance Update - DHI - FIS

American Dream's Harsh New Reality - News & Analysis - Business & Insurance Update - DHI - FIS: "As the housing boom of the early part of this decade unwinds, the U.S. is facing a harsh new reality: Annual home foreclosures may surpass new-home sales from builders. "

Housing appreciation during the boom created the "wealth effect." People borrowed against their houses to send their kids to college, or to pursue a dream, or to start a business. People also borrowed against their homes to buy cars, RVs, boats, and vacation homes. What is wealth, but freedom? Freedom from certain financial fears, freedom to actually say "take this job and shove it," freedom to spend a little more on ___ than you should, but, hey, I can afford it. Lack of freedom creates a poverty effect - I may have lots of money in the bank, but I still have to put up with my boss' B.S. because I need this job, I pay the top tax tier, but I'm still stuck in a house that doesn't suit me, I'm "rich" but I sure can't afford to get sick.

So we're talking about a very small portion of the population actually losing their homes - the referenced article says about 1.8% of households. We aren't mentioning the folks who sell their homes before they hit foreclosure, nor the ones who take in roommates or get a cash infusion from relatives. And the 1-2 million figures assume that employment and the economy stay strong. We're a resilient economy - we've ticked along for a very long time, and we haven't had a Depression since early in the last century.

But. But the economy has expanded on the "wealth effect." Our savings rate has gone negative. People have been spending their home equity, instead of living within their incomes. We outsource the most productive jobs - the ones that create products - and our primary employment sector is services. Oh, sure, services includes financial services and other high-paying service sectors, but services don't build economic wealth for a nation the way building a better mousetrap does.

When I look around my community, and I see jobs sent to China, India, Malaysia, I see people being laid off, I see people losing their homes, I see people dying from a lack of health insurance. I see the Democrats poised to take control of the country, and raise taxes as they go. I see a federal deficit that threatens our national financial security. I see the U.S. Dollar losing value against the Euro (good for exporting, bad for filling my gas tank). I begin to think that maybe I should wait to buy a new sofa, maybe I should be a little more careful with my money. I'd like to remodel my kitchen, but if the housing market keeps dropping, those remodeling dollars are money down the drain.

So I wonder, how can the "wealth effect" bouy the economy to such lofty heights two years ago without the "poverty effect" slamming it back down to earth?

Fortune: Flight of the honeybees

Fortune: Flight of the honeybees - September 3, 2007:

"We wouldn't starve if the mysterious disappearance of bees, dubbed colony collapse disorder, or CCD, decimated hives worldwide. For one thing, wheat, corn, and other grains don't depend on insect pollination. But in a honeybee-less world, almonds, blueberries, melons, cranberries, peaches, pumpkins, onions, squash, cucumbers, and scores of other fruits and vegetables would become as pricey as sumptuous old wine."

Farmers are the often-forgotten story of the Great Depression. They were hurting when Wall Street and Main Street were partying. Today's farmers live in a completely different world, of course, but risks to the supply of affordable food are still ominous for the larger economy. The honeybee thing has been in the news for about a year now and scientists are just figuring out what's causing it.

I tend to think of our economy kind of like a family. A family with some assets (or natural resources) and decent jobs can make some financial mistakes and come out alright. You can overpay for your house and do just fine as long as you keep your jobs, right? You might not be getting ahead, but you're holding steady. It's when things are close to the edge, and then multiple bad things happen, that families lose ground. You're not making enough, you're paying too much, you're still fine, then, bam, the insurance company turns down your medical claim, then, bam, your car breaks down, then, bam, something else and suddenly you teeter over the edge. Our country is overspending, under-saving, and it's committed to some pretty big expenses along the way. Hopefully, we'll keep doing just fine. Hopefully.

But if food becomes a challenge? Global wheat prices are rising, the Italians are protesting the high price of pasta, the Chinese are sending us tainted food products, and we're wasting tons of corn on gov't-subsidized ethanol, but it's just worrisome right now. If squash, cucumbers, and onions became pricey luxuries (squash? have you ever grown squash or zucchini? you can't give that stuff away as fast as it matures!), what happens to the produce that becomes cheap-by-comparison? Increased demand, increased prices. What happens to the leisure product production jobs when every dollar is being squeezed til it screams just to feed, house, heat, and transport your family?

Danger: Steep drop ahead - September 17, 2007

Danger: Steep drop ahead: "Danger: Steep drop ahead: Even if the credit crunch passes without a major catastrophe, the prices of stocks, bonds and real estate have a long way to fall."

"First, house prices may move on euphoria in the short term, but long term
they depend on family income - the ability to pay mortgages and rent. At levels
well above the normal four times family income, the market gradually loses
first-time buyers until prices break and fall back to affordable levels."

Author: "Jeremy Grantham is chairman of investment firm GMO, where he
oversees quantitative products and investment strategies."

This was the headline article on CNN Money on 5 Sept. 07.

Mortgage Cancellation Relief Act of 2007

Search Results - THOMAS (Library of Congress): "`(A) IN GENERAL- The term `qualified residential indebtedness' means indebtedness which-- `(i) was incurred or assumed by the taxpayer in connection with real property used as a residence and is secured by such real property, `(ii) is incurred or assumed to acquire, construct, reconstruct, or substantially improve such real property, and `(iii) with respect to which such taxpayer makes an election to have this paragraph apply."

So, if I'm reading this right, cash-back-at-close deals are a grey area not specifically addressed, and free gift with purchase deals (all those houses that came with cars, vacations, flat-panel TVs, etc.) get wiped clean. The defaulters who strip the house of everything before they lose it (I kid you not - I have seen ads on Craigslist saying "if you can remove it, you can buy it, but you have to get it before __" whatever date they have to be out, selling the cabinets, appliances, fixtures, etc.) and accept cars and other crap in conjunction with buying a house, they get to keep that for free. But the guy who wins a car on a TV game show has to pay tax on it.

At least cash-out refis aren't included.

Fact Sheet: New Steps to Help Homeowners Avoid Foreclosure

Fact Sheet: New Steps to Help Homeowners Avoid Foreclosure: "The President Calls On Congress To Change A Key Housing Provision Of The Federal Tax Code So It Does Not Punish Families Who Are Forced To Sell Their Homes For Less Than Their Mortgage Is Worth. Current tax law counts cancelled mortgage debt on primary residences as taxable income. For example, if the value of a home declines and $20,000 of the homeowner's loan is forgiven, the tax code treats that $20,000 as taxable income. The President proposes temporary relief to ensure that cancelled mortgage debt on a primary residence is not counted as income."

Will a tax cut fix this mess?

Bloomberg.com: Opinion: "Moving is never pleasant or cheap, but that is the main cost to the subprime defaulter: He hands back the house, whose value has presumably plummeted, to the people who lent the money to buy it, and walks away. He rents. (Shrewdly!) In effect he bought a very cheap call option on the U.S. housing market. While he waited to see if his call option made him richer, he lived in a much nicer house than he could otherwise afford and probably wondered why rich people had become so recklessly open- handed. "

Why is this the only time I have seen the media report this particular kernel of truth? Lewis goes on to say:

"A more convincing victim, I would have thought, is the person with weak credit
but strong resolve who stood to benefit from a subprime loan -- and who now
can't get one because the market is scared of his shadow. "

You can't contain this mess with a tiny little tax cut. And you aren't doing anybody any favors, anyway, because the truth is a lot of people just plain overpaid for their homes these past few years. I was tempted to do it, too - when life says "it's time to buy a house, buy a different house, sell a house", it's pretty hard to tell life "lump it - the market's bad right now". But that's exactly what a lot of responsible folks did.

Plenty more went ahead and bought houses that, in Sacramento, were probably overpriced by an average of $150k. The people who keep their houses will never come out ahead on that - even if the market eventually comes back to that price, they'll still be $150k behind their neighbors who bought AFTER the correction or BEFORE the bubble. And since most Americans seem to focus on monthly payment and completely ignore actual purchase price, let's put that in terms folks can understand - on a nice, sane, 30-year fixed mortgage at 6%, including property tax differential - that $150k equals about $1,000 a month, every month, for 30 years (or a total of $360k). I know - almost none of my neighbors paid as much for their homes (even the larger homes) than ours cost. The difference, though, is that our neighborhood priced out at $20-30k difference in purchase prices back in the 90's, while today's purchasers have much, much bigger losses in equity. $150k is a couple year's salary for many of them.

The mess has been made. Blame lies everywhere. The cleanup will be long, slow, and painful. People believed that their homes were "worth" whatever their neighbors' homes sold for during the bubble. Lots of existing homeowners spent that money through HELOCs and refis. But those prices were based, in part, on people who didn't care WHAT it cost, as long as they could afford the payment. And the payments were ridiculously low, because no one seems to have cared that the teaser rates would reset, and the banks let them get away with that, but no more. That cat's out of the bag, and nobody's going to get her back in there. Still other comps were based on cash-back deals. Some were outright fraud. Spend 15 minutes reading ocrenter's blog to get an idea of what I mean. So bubble peak prices in many, many areas were not real prices to begin with.

I was at an auction a few years ago, where some one-ounce gold coins were being sold. Gold traded at about $450 an ounce at the time. Some idiot bid $650 each for a lot of 10 gold coins. He overpaid by about $2,000 on ten ounces of gold. Today, gold trades at about $650 an ounce, so the guy broke even, except that 1) he would be up $2,000 if he'd just gone down the street and paid market price at a dealer, instead of trying to impress his friends at an auction, and 2) he had $6,500 tied up for two years before he broke even - at a bank, he would have made $462 in interest on $6,500. Of course, the key point is that gold was worth what it was worth, and having some idiot pay too much for it didn't change that fact. With housing, it takes the collusion of banks to enable a whole bunch of idiots to drive up housing prices, and the banks aren't playing that game anymore.

Here, kitty, kitty. I've got a nice bag for you, kitty. Be a nice kitty. Get back in the bag. Damnit, get back in the bag. Ouch! Bad kitty. Bad kitty! If you don't get back in the bag, the Fed is going to declaw you. I mean it this time.

You have got to read this article

Bloomberg.com: Opinion: "Sept. 5 (Bloomberg) -- So right after the Bear Stearns funds blew up, I had a thought: This is what happens when you lend money to poor people."

That's how it starts. It gets less politically correct from there. At one point - mind you, he's talking about subprime mortgage holders, homeowners - "Some of these poor people must have skills. " Good God, are the bankers giving mortgages to people with no skills?

Anyway, the article is a shocking, entertaining read. It's quite the contrarian view, with more than a few nuggets of truth scattered amongs the outrageous hyperbole.

NAR: Research: Real Estate Insights: Monitor

First, a pile of data with just a few notes. Commentary to follow as I gather up my data and sort out my thoughts.

No Quick Action Expected on Mortgages: "'We may have as many as 1 million to 3 million people who could lose their homes, not because they lost their jobs, not because the economy collapsed, but because they got bad deals on mortgages,' said Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee."

CIA - The World Factbook -- United States: "Population: 301,139,947 (July 2007 est.) "

So, out of a population of 301 million, as much as 1% of the population could lose their homes? Or did Senator Dodd mean to say that 1 to 3 million homes are at risk, with typically two or more occupants affected? Still a tiny portion of the population being affected, if you believe Sen. Dodd's figures.

NAR: Research: Real Estate Insights: Monitor: "Existing-Home Sales: Home resale activity fell 3.8 percent from May to June to a seasonally adjusted annual rate of 5.75 million units -- the lowest level since November 2002.

New-Home Sales: New-home sales fell for a second consecutive month, posting a seasonally adjusted annualized rate of 834,000 in June. This is 22.3 percent below a year earlier."

Another NAR Report: Existing Home Sales

From the Mortgage Banker's Association: Characteristics of Outstanding Residential Mortgage Debt: 2006 34% of owner occupied housing units are owned free and clear. "
According to this data, about 70 percent of outstanding loans have been originated since 2000." Data-rich report on breakdeown of outstanding mortgages, though a lot of the data is from 2005. Chart 10 shows outstanding loans by loan type, and I find it interesting that FHA and subprime seem to have traded market share.