Mike in East Texas, a special guest on Charley Jones’ Texas Overnight show on 1080 KRLD, has a very good breakdown on what’s gone on in the last week that serves as a microcosm of the bigger economy.
The silver crash is of large note, as a lot of people are invested in commodities, and the adjustment to silver came when the New York market silver is traded on came up with a new regulation for silver trading. This affected oil and gold, which people invested in silver are often also invested in, as they began to dump contracts to try and save their positions.
There’s an artificial bubble in energy driven by speculators, whose belief in high energy prices is pretty unfounded. With the economy in a recession (or depression), fuels aren’t being used at the same rate – demand is low. Supply is still at the same level it was before the recession, or close to it. With shale oil reserves in places like the Bakken Formation and untapped and unused oil wells all across the US, supply really isn’t a problem. Demand is low. Speculation is a bubble.
The artificial bubble in precious metals is due to people wanting that oft-advertised “insurance against inflation” and stability – whether the individual buying bullion or the fund manager buying a huge contract. Once stability is actually provided by level-headed governments, banks will begin loaning again, businesses will begin to expand with the capital they’re sitting on, and PM prices will probably go down. Of course, with the radical Keynesians in charge, that’s not going to happen for a while, so the bubble will continue – and gold and silver will still be worth quite a bit, but a drop from $50 to $32 in silver is pretty substantial.
Now what’s the key factor that caused silver to change so dramatically? The market rules changed.
So what’s keeping the economy stagnant? Change.
Uncertainty for a consumer is a killer. If you, Jane or Joe Citizen, wants to make a purchase of X item, but don’t know how much X item is going to cost, you’ll be more likely to hang onto your money, whether X is a house with collapsing value or silver with fluctuating value or even gasoline you don’t need. Discretionary spending gets cut to nothing in a household, because you have to get the things you need before you get the things you want.
Uncertainty for a business is a killer. Do you want to open that new factory? Will the government put new regulations on you? Do you want to hire that new employee? Will taxes go up because government won’t stop spending? When your taxes go up, can you keep that new employee? Can you open the new factory if they put a new tax on factories? What if they send the unions after you? Will the government make you pay for health care? Will health care pass, be ruled unconstitutional, and then be enacted anyway, even after being ruled illegal?
That dynamic change, that fundamental change of the American system, with the observable intent by even former supporters of “change” of remaking the nation in a socialist-communist model, is something that rightfully leaves business and individuals scared to spend. Banks, being businesses, aren’t willing to spend on other people’s projects if they don’t think they’ll come to fruition – and people don’t ask for the money if they don’t think they can pay it back. It keeps businesses, individuals – the entire economy stagnant.
Now, mind you the stock market looks great… but that’s because businesses are all streamlining. That’s why unemployment is so high, and that’s not even taking into account the real unemployment numbers which include those who have “left the workforce” by being unemployed more than 6 months. Businesses are going lean and maximizing profit and minimizing loss as much as possible just to stay alive. That makes them more attractive with regards to stocks. Employees who aren’t of the highest value are going away – and govt is watching them arrive on unemployment, even if it starts writing them off as having “left the workforce”.
Stability and certainty and rule of law mean that things can be accomplished. It means you’re willing to buy that house because you know your taxes won’t jump. You can build that factory because the government won’t change the definintion of dust or declare every breath you exhale illegal.
Nothing distinguishes more clearly conditions in a free country from those in a country under arbitrary government than the observance in the former of the great principles known as the Rule of Law. Stripped of all technicalities, this means that government in all its actions is bound by rules fixed and announced beforehand – rules which make it possible to forsee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of this knowledge.
- F. A. Hayek
Someday I'll find some other economists that share names with hot chicks.
And a final positive note, I’ll give credit where it’s due, even if I do so grudgingly. Obama did a good job of not screwing up getting Osama. I’d give Obama non-grudging credit if it weren’t for the odd circumstances of the disposal of Osama’s body, the odd way the operation was conducted, the blathering by his useless VP who outed the SEALs, the multiple stories about how the engagement went down, and the inherent hypocrisy in most of Obama’s stances concerning Gitmo and the War on Terror.
I think this sums up quite a bit of it:
Thanks to Jawa Report.
Barry, you’re downright hostile to the nation, your wife hated the country until you got to be a presidential candidate, you utterly lie about transparency, you insult people living next to a war zone when they demand you do your job, and you’re actively working to install people whose life goals are to destroy the nation. But you let the people who had to kill Osama kill him, so good work. Especially for someone who loves to meddle and install meddlers, you didn’t f*ck it up. Good job, Mr. President. If for some crazy reason you’re reading this blog, you know that’s about the highest praise you’re going to get, unless…
You did a decent job following one of Bush’s policies that worked – and you left the military alone and you let it work. Now sir, if you want to change something Bush did and actually do it better, remember what he said right before he left office – “I’ve abandoned free market principles to save the free market.” Barry, you need to abandon Keynesian-socialist-communist meddling and that will let the free market work! If you want to jumpstart the economy, let the people work on their own – let us live free.
Then do yourself a favor and read The Road To Serfdom, Atlas Shrugged, and the Constitution. Toss in some books by Sowell, Friedman; and then swing by A Human Right. Then swing on by my place, I’ll give you a tour of where I work, and we can go have a beer – I’ll even buy the first round.