Making Ends Meet
Grandma Thunder is concerned because we already see price increases affecting our budgets. What will happen after the election?
Price of Gas
We have a store in a Travel Plaza which gives a window into the great American economy. About a month ago we were leaving when we saw tape around the pumps and the cars and trucks had all been chased away. No Gas? Flying J has the best and most affordable gas in the state, cars and trucks come from far to gas up. A hillbilly walking from the pumps was disgusted. “Can’t fight the oil companies,” he said, his voice apathetic.
He has a point. Exxon Oil has made 9.45 billion in profits already in 2012, that is almost $104 million per day. That is a lot of power. it is said that power corrupts and absolute power corrupts absolutely. (Lord Acton) It seems their power is absolute. They paid only 13 % in taxes, less even than Romney. What can we as mere mortals do about this?
Our founding fathers crafted a system where power was balanced. The Justice, the Senate, the House and the Executive balance out each other. Two hundred years later this system is still working. Maybe it is not working so well any more for we have a declining standard of living. I think it is working it is just that our Nice Government Men aren’t doing their job. The Government can use the Anti-Trust Laws to stop cartels like Exxon/Mobile riding roughshod over our interests.
There was a question given the President in the second debate:
Your secretary, Steven Chu, has now been on record three times stating it’s not the policy of his department to help lower gas prices. Do you agree with Secretary Chu that this is not the job of the Energy Department?
Of course it is the job of the Secretary to bring all energy costs down. He has all the tools he needs to break up cartels yet lacks the courage to sue them? Or could it be that he thinks he serves the Democratic Senate Environmentalists? Read my past post “Endangered Species“.
Not too long and the gas was flowing again but the price had hiked to $4.49 per gallon. The price has been dropping since then and is now down to (gag on it) $4.27 per gallon. I am willing to bet my bottom dollar that when the price settles out it will once again be in a higher range.
Price of Food
I went to the grocery store last week and I spent over an hundred dollars. For just the two of us this is outrageous, and double what I spent only four years ago. Why should prices go up like this?
About five years ago I was on my way back up the mountain where I live and stopped at Ralph’s in Castaic where the store had just had a power failure. I wasn’t concerned because I had cash on me in small denominations. I was able to go in the store, pick out what I needed, use my calculator to add it up and count out exact change and I presented myself to the counter where the computers weren’t working. The cashier was adamant it just could not be done. I left empty handed and went hungry. In times like this you need a food backup. Note well:
- The food distribution has become increasingly mechanized. Even Denny’s trucks in prepared meals from a central point.
- The ingredients of one small taco may travel the distance of more than twice around the globe. Such a system of food distribution is quite fragile.
- It also raises the question of how healthy such food can be, having been treated with toxic preservatives to traverse such long distances.
- This is the new age of cyber-warfare and terrorism. You are naive if you believe that you will always be able to walk around the corner and buy all the food you need at Ralph’s. It may well be there but doubled or trebled in price.
The United States government regulations mandate that a proportion of the fuel used must come from renewable energy sources. International food shortages are being exacerbated by taking tracts of land previously for produce and converting these to fuel production. Such bio-fuel farming is subsidized by the U.S. A. government. In the face of growing food shortages it is time to rethink these subsidies and regulations.
There are some things you can do to protect yourself against high food prices and food scarcities. You can find a community garden. You can grow food in your backyard. There are places out of the city like where we live and work where you can create a safe life.. Most people however have lost the skills. Once again it comes back to getting yourself educated and then acting. We do not learn this data in our schools.
There is a place in New Cuyama where you can go to learn the sustainable lifestyle. They have classes. Click on the title to go to their web site.
A better system of food distribution is also a conversation you may want to start with your elected officials.
Imagine a box10’ by 10’ fully sealed into which you put a hundred dollars and 10 balls. What is the price of each ball? That is right $10.00.
Now add another hundred dollars. What is the price of each ball? There is now a total of two hundred dollars in the room and the price of each ball will be $20.00. The price of each ball has just gone up.
It works exactly in the same way in the whole economy.
The Federal Reserve is tasked with keeping an adequate amount of money circulating in the economy. Too little and the markets slow down, too much and prices begin to rise.
So what is all this about Quantitative Easing, QE1, QE2, QE3 and now we get QE4 and so on to QE99 and more. . . Most people don’t understand monetary policy and moreover what is being done is done behind a screen of smoke and mirrors. You may well ask what our elected officials have been doing about this problem. The House has passed a bill to audit the FED, something that hasn’t happened in over 100 years. That’s right. NO AUDIT EVER. The Audit-the-Fed Legislation was stopped by Obama and the crusty Democratic Senate where the bill still languishes today. Benanke says that if audited it would open up a can of worms. How very right he is. The simple truth is that when the Federal Reserve pumps too much money into the Economy, prices go up and your standard of living is compromised.
It gets worse.
What Benanke is doing is saving the banks at your expense. He is buying up financial assets (loans) from the commercial and investment banks and other private institutions like AIG Insurance. I have a friend who works in the title section of the Bank of America and he has told me of the mountain of repossessed house titles still languishing on the books, not yet moved out and back into the economy. This is a stuck flow and only when all is cleared out, will we begin to approach anything like normal in the housing market.
So what the Fed is doing is buying back this bad debt from the banks. The exchange is very simple. It is our good American debt backed by taxpayers in exchange for all the bad debt owned by banks. He is letting the banks (who accepted and issued the bad loans) off the hook.
The most annoying thing about the fed policy is that the FED is also paying the big banks NOT TO LEND money. They had a pay-for-no-lending program initiated during the crisis. The sad thing is that this bank handout continues while average Americans who have lived within their means earn nothing on their savings.
The FED is paying banks 0.25% interest on their excess reserves banked with the FED. This money. 0.25% interest isn’t much, but it’s more than the banks are paying you to keep money in your savings or money-market account. The Fed needs the smoke and mirrors; they need a way to continue to secretly bail out banks without it being obvious.
How successful have they been? Over the past few years, this program has secretly funneled about $12 billion in risk-free cash (rough estimate) directly to the banks, just for being banks and for not lending. I ask you what is the job of a bank; is.it not to extend good credit, especially to Entrepreneurs? The financial crisis is over now, and the banks are in good shape. But the Fed’s still pays them not to lend.
Now it is fine for me to say that the Democratic Senate is not doing their job, and they aren’t; that the Fed isn’t doing their job and they aren’t; that the Department of Justice with its antitrust power is not doing their job and all of this is true. If they were we would have a better standard of living.
But let me ask you a very salient question, are we doing our job? In the broader scheme of things a good system has a balance of power. We are tasked with keeping our elected officials in line. That’s why we have a vote. Time to get educated!.
I encourage you to read Magic Money. It is light and entertaining way to get in your financial basics and it is free for a limited time.
Quote for the Day
The cost of living is going up and the chance of living is going down – Flip Wilson