That’s something we used
to have in kindergarten and grade school. That ends when we
become productive members of society. Unless, of course, you
are a member of Congress. They don’t call five weeks
off from work a vacation; they call it a recess. How could
any business survive if all the employees took a five week
“recess?” Webster’s defines a recess as
a temporary withdrawal or cessation from the usual work or
activity. It can also be used to denote the recesses of the
mind (a cessation from thinking?). It’s interesting
also that the word following recess in the dictionary is recession.
So the economy is left to flounder while congressmen and women
fill up their SUVs and take a five week break. One will even
use the time to jet around the country promoting a new book
on power.
The housing bubble and the financial crisis are not resolved,
but the market has discounted the bad news in these areas
admirably. There will be more bad news from housing and finance,
but if Congress steps aside, the market place will sort this
out. We have been very positive on the direction of the economy
in spite of the aforementioned problems. However, if there
are two issues that could throw our economy into a recession,
it would be the prices of food and energy. Congress needs
to address these two issues immediately. Oil has been well
discussed in the media, and we feel that pressure being put
on Congress resulted in the recent decline in the price of
oil as investors speculate that we will expand drilling. Also,
the global economy has slowed, and the demand for oil has
abated somewhat. That’s unfortunate as Congress will
take this to mean that oil prices will continue their downward
trend, and they need not do anything. We still believe the
economy is working out the excesses created in the years leading
up to the financial crisis and is laying the groundwork for
a major economic boom. But, we need energy to propel this
boom, all sources of energy. Currently, alternative sources
of energy (solar, wind, ethanol) provide less than 7% of our
energy needs. It is doubtful that these alternative sources
of energy are the ultimate solution to our energy needs. Not
all parts of the country get year round sun or wind. As for
ethanol, it requires more energy to convert it to fuel than
it saves, and, in addition, its use is a major factor in rising
food prices. Oil is the answer for energy independence for
the near future until viable alternative sources can be discovered
and that may take decades.
The worldwide economy will likely experience a strong recovery
led by China and India. China’s daily need for oil is
growing by half a billion barrels a year, and they recently
signed a contract with Iraq for more oil. Amazing. We free
Iraq from the yoke of Hussein and Al Qaeda, and China gets
the oil. Wake up Congress. We need oil if we are to stay economically
competitive with the rest of the world.
Now, we have Russia invading Georgia, a former part of the
Soviet Union. Make no mistake, this is about oil. Russia is
buying up all the oil and natural gas they can find. They
even took a submarine and shot a torpedo tube with a flag
in it to the top of the world trying to lay claim to all the
natural resources under the Arctic Circle. By invading Georgia,
they can control the flow of oil and natural gas that fuel
Eastern Europe. They have also nationalized the oil industry
in Russia as has Chavez in Venezuela. Make no mistake, the
Olympic competition for energy is on, and here we sit with
the largest potential energy reserves in the world.
The Fed met and interest rates remain unchanged and will
likely remain that way as the Fed walks a line between economic
slowdown and inflation. Interest rates are not the problem.
They are low enough. Money is not the problem either as there
is plenty of that out there. The problem is encouraging those
that have the money to lend it to those who want it. This,
of course, will happen, and then we will see the beginning
of the next economic boom.
Speaking of China, if you saw the opening ceremony at the
Olympics, you had to be impressed with the pageantry and coordination
of the massive numbers of people taking part. This is a showcase
event for China, and they are putting their best foot forward.
Behind the pageantry though, lurks another world. China has
coal, but it is loaded with sulfur and that creates a constant
thick fog that was evident if you watched the bike race Saturday.
China is also suffering from double-digit inflation and in
effect is exporting it to the US. American companies that
moved some of their manufacturing plants to China are returning
to America. We still have the most productive workers, the
best technology and the most energy efficient plants in the
world. There is even increasing evidence that middle and upper-class
Chinese are buying American made products on the Internet.
So don’t fret, America is doing fine.
Random thought for August 2008:
The huddle in football was formed by a deaf player, who
used sign language to communicate, and his team didn’t
want the opposition to see the signals he used and in turn
huddled around him.
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