This past summer I visited a friend in
Colorado. He told me that his seamless
gutter business was doing OK, but that he had a new and difficult problem. He
now has to order parts from so far away that the freight cost vastly exceeds
the parts cost. This is not surprising since Barron’s Business and Financial Weekly
recently reported that “…nonresidential fixed investment as a percent of gross
domestic product shrank to a 50 year low.” Yet many, including those in
government, say that the economy is improving and point to the reviving housing
market. But many of the newly sold homes are purchased for cash by Real Estate
Investment Trusts (REITs), hedge funds and Sovereign Wealth Funds from
“friendly” foreign countries such as Abu
Dhabi and rented out. California alone has added 500,000 renters
and lost 233,000 homeowners since 2007. But this increased demand, partly due
to the investments just cited, has raised the price of the median California home from
$274,000 in May, 2012 to $352,000 in May, 2013, a 28.4% increase. To make home
ownership more affordable the Federal Reserve is trying to stimulate the
economy (under its price stability mandate?) to 2% inflation. This means that
prices will quintuple during an average lifetime.
Real economic growth is being stifled at every turn. The Bristol Bay/Pebble Bay project in
mentioned in a prior commentary with its 42,000 jobs, has been abandoned due to
strictly ideological regulation. Almost 300 coal fired power plants are being
shut down. President Obama has threatened to veto a House bill that would open
the outer continental shelf to drilling with the potential for 1.2 million full
time jobs over 30 years. At the same time the Washington
regulators seem afraid of foreign powers like China that steal our trade secrets
and intellectual property. The National Security Agency estimates the loss at
$300 billion which some equate to about one million jobs.
While the capital that is entering the
is buying assets like our homes our domestic capital is fleeing. Covanta
Holdings processes about 5% of our garbage. They recycle the metals with a new,
more efficient method and burn the rest to produce energy. But because a waste
to energy facility has not been approved since the 1990’s, they are building
their new plants in foreign countries. A recent Indonesian government auction
received as many as five bids for one bond. This is a county where burning down
churches is a popular pastime.
Talk of change continues to eminent from
Washington, usually in the form of increased
regulation. Recent rules governing initial public offerings (IPO’S) of stock
haven proven so costly that middle market companies have been unable to finance
themselves. IPO financing has created 92% of all job growth at public companies
since the 1970’s. In a likewise manner, the new rules governing speculative
trading in commodities contain loopholes for the mega corporations. These mega
corporations, or crony capitalists, in turn do Washington’s bidding. They have driven down
the price of gold so that China
can exchange the depreciating dollars they receive for something of real value.
Almost 50% of the world’s annual gold output now lies within China’s
borders. Schemes such as this are necessary to finance our increasing deficits
since foreign buying of US Treasuries has decreased to $104 billion from $503
billion a year earlier. This slack has been picked up by the Federal Reserve
which now holds about $2.1 trillion in US treasuries and about $1.4 trillion in
mortgage backed securities. If, or when, interest rates rise the Fed becomes
insolvent. Nothing in the world can bail out the Federal Reserve Bank.
But the clever people in Washington, to whom some Americans still trust their well being, have an answer. Instead of the current definition of wholesaler or wholesale trader for an American company like Apple that makes all of its products aboard, the government will now classify them as manufacturers because their product design and production oversight occurs in the
definitional change would have added up to two million “American” manufacturing
jobs in the study year of 2007.
The picture doesn’t look as bleak now, does it? If this reminds anyone of the torture/finger counting scene in 1984 you are probably not alone. Our situation is called an “enormous doomsday machine” by former budget director David Stockman.
While I have no magic solution, I do know that we have some power locally and that we must exercise it. It is essential to support the Newman Ridge project and the expansion of gold mining. We must assume jurisdiction over our national forests and begin productive ventures. Potential developments such as the portable slaughter house for cattle and a Pioneer biomass plant must be explored. Do we have any choice if we wish to survive?
Copyright 2013, Mark L. Bennett