Will Big Oil Kill The Economy?

Are we watching the American economy falling down another spiral into a more severe recession than we have right now? Though, Obama and the federal government refuse to admit that we are still in a recession, GDP growth is minimal at best and unemployment is still hovering around ten percent. The latest reports say unemployment is down under 9% and job growth is up, but, these are not real numbers and are based on reported numbers and not inclusive of the uncounted, the under employed and the people who have just quit looking. The actual jobless numbers could be closer to 17 to 19%, and in some states its much worse such as Georgia, California and Michigan, where the stated unemployment rate is still above 10%. There is another number not mentioned and not calculated in the numbers. The small self-employed person who is not eligible for unemployment benefits if the business closes. There are thousands of people like this, unaccounted for in the federal numbers and with the construction industry being a big part of these numbers, it will take a lot of growth to catch up.

  The rate of job growth by private sector employment isn’t keeping up with population growth and the only people that seems to be hiring is the government and the health care industry. It is estimated that for every new government employee that is hired, it takes fifteen private sector employees to pay for it, in the form of payroll and income taxes. So, if the government is hiring more than the private sector, then where is the money coming from to pay for them? You have to remember the government doesn't create wealth, it merely just redistributes the money it takes in from the people,the less people working the less money there is to take.  Our national debt is growing faster everyday, right now it stands at over 14trillion and China is owning more and of us, it is taking more and more tax dollars just to pay for the interest alone.

Have you been watching the rises in gas prices at the pump lately? It is estimated that by summer we will paying more for gas, some estimates as high as $5.00 a gallon, than we ever have .Locally, where I live, Georgia, gas is hovering around $3.50 a gallon right now. Is big oil and the government testing the breaking point for the economy with gas prices? With the dollar being devalued by the Fed’s, that simply means that it takes more dollars to pay for the same barrel of oil than it did just two years ago. When it takes more money to pay for a barrel of oil, it takes more of your dollars to purchase a gallon of gas.

With the deflation of the dollar, millions of people still out of work and many more people under employed fighting to stay in their homes, what does this mean for the future of the economy? The feds are at lost on what to do, the continue to speak in circles with no clear answer to how to get the economy going again. The devaluation of the dollar will only make things worse and inflation is already on the rise.This following was issued late last year and has not helped. The US-Treasury is preparing an all-out “currency war,” which has already started to inflate commodity and stock market bubbles, by instructing the Federal Reserve to send signals about a resumption of “quantitative easing” (QE-2) or the printing of dollars to purchase US Treasuries notes, in the months ahead.

To read more on QE-2 simply look it up online, there are hundreds of stories out there, but for this article, I am simply giving you an oversight of whats happening. Basically, it comes to this; devalued dollars mean less buying power and inflation will soon follow.

Everything in the American economy is tied to oil prices in one way or another. Food, clothing and energy are directly or indirectly tied to rising transportation cost. When prices at the pump rise, this cost is passed on by the trucking and rail companies to get the products to the wholesalers or retailer for consumer purchasing. When the farmer who grows food staples such as wheat for bread, has to pay more for the fuel for cultivating, these cost are also passed on to you. As prices rise and your pay remains the same, it taking more and more of your money just to provide the necessities for your family.

Barrel oil prices are not the only thing that may drive us into another economic down turn however. Another driving force in the future of our economic success will be corn and corn by products. Right now, we are taking a primary food and processing ingredient using to supplement our oil supply. We are currently taking corn, which is a food staple for many countries such as Mexico, and burning it in our gas tanks in the form of ethanol. Corn is used in one way or another in an estimated four thousand products’ on our grocery shelves. Also, corn is used to feed our live stock, which gives us our beef, pork and chicken. When the farmer who needs to feed is live stock is forced to compete for the same grain that is being used to fuel cars, prices rise due to pressure on the market to provide the industries with these products. If you do any grocery shopping at all I am sure that you have seen the rise in food prices over the past few months. A portion of these increases are due to corn price fluctuation and the other because of the increased transportation cost. (Just as a side note: the ethanol that they are using to supplement gas is harming vehicles, ask any mechanic. I recently replaced a fuel filter on my truck and it was filled with brown liquid, ethanol, the mechanic said it is causing more and more problems, killing gas mileage by clogging up fuel system components. The average car after running just 12000 miles on ethanol enhanced fuel will loose an average of two to three miles a gallon and fuel filters are the most common cause.) You can look it up online if you want.

Now we look at the home building industry and the ongoing foreclosure crises. It estimated that right now, there are more homes in foreclosure than we have ever had. These home foreclosures are forcing pressure on the building markets that hasn’t been seen since the 1970’s. Prices on existing homes are so low, that people can purchase an existing home only one to two years old, cheaper than a builder can build it. The independent home builder is all but a thing of the past at this point, no one is willing to put money on the line for spec building, with the hope that it will sell. There are thousands of construction people out of work right now in the industry with not much hope of recovery in the near future. A large number of people in the construction business are not well educated, but they have skill sets that allow them to make a good income and support a family. However, with that said, the lack of education doesn't allow them to transfer to another job in another field, so many of these people are in financial crises with no help in sight. A self employed sub-contractor doesn't qualify for unemployment benefits, so they remain a part of the uncounted unemployed.

Realtor's are still urging home builders to quit producing new homes in hopes that we will be able to help the market in the future by reducing the inventory of homes already for sale. But, how long will this take to happen? With millions of homes in foreclosure now, presumed to empty by spring or summer of next year, and millions more already sitting empty, it could take years to unload the existing inventory.

The only way we will ever get the inventory down is for employment numbers to rises, so people with jobs will be able to purchase them. According to some in Washington, we may be faced with the realization that 10% unemployment may be with us for at least two more years. Does this mean that the glut of inventory in the housing market will be here for that long or longer? In the mean time, more and more home builders are filing for bankruptcy and shutting their doors. For every business that shuts down, that just means more people out of work. The sub-contractors and employees of these companies are then forced to either lay people off or shut down as well. These people are also home owners and potential home buyers, who will face their own crises in the future. So circle of bad new continues, where does it end?

Is there anything we can do? Yes, but only to a point. The first thing that you have to do is to take care of your own financial matters. Reduce you debt to a bare minimum. Most people over the past couple of years have already started trying to cut miscellaneous expenses down and pay down credit card debt. Many more people have invested in gold as a hedge against the falling dollar and a possible collapse in the next years ahead. As things begin to get more expensive, you will need this extra money to pay for the increase in gas, food and necessities such as heat for your home and clothing.

 If something happens in the next year, and inflation starts to hit all time highs and food prices go thru the roof, people will be back to deciding weather to spend money on food, gas or shelter. Right now food prices are up 15% from just last November, (example: Golden layers canned biscuits, $1.69 8pk can in December, now $1.99) this is real, and if you go to the grocery store on a weekly basis you know it's true. Food prices will continue to rises to coincide with oil price hikes, at the same time it takes more money to purchase food for your family, it will take more and more money from the budget to pay bills coming due. Then family are back to the choices they had to make in 2008, eat or pay bills, then the circle starts all over again. People start loosing homes, jobs, and economic disaster for individuals and business.

We all can hope that with the new members of congress that were elected in the past November’s elections, that maybe they can slowly begin to turn things around. In order for the private sector to have a chance of recovery, we have to reduce the governments thirst for money. If we don’t cut government waste and spending, we may be in this downturn far longer and it may be worse than anyone ever dreamed. The American people have suffered while the government has grown faster than the private sector over the past two years, now it time for the government downsize. This way, it can afford to operate without asking the people who create jobs for those who need them, to sacrifice more money to support more government. It will take some bold and hard decisions for the new congress to accomplish this goal, we must support their efforts and continue to keep pressure on them to do the right thing.

After the State of the Union address by President Obama, I was hoping to see a glimmer of hope that he would be willing to work with the congress to at least slow down spending. The Federal Government is out money and quickly running out of time to fix it, right now they can seem to agree on anything.The national debt at an all time high, the cut that have been proposed is only equivalent to the interest that we would pay on the debt for about a week.

There is still the hope, we work hard, continue to live our lives and pray for better tomorrows. We must stand behind the politician that are willing to make the tough decisions no matter how painful at first. If we don't start somewhere we will never get anywhere.