Looking into the 2008 Crystal Ball

By Alan Caruba

Between the day after Christmas and January 1st of 2008 is a good time to get one’s affairs in order.

I visited the bank today to get some help because the bank statements and daily report via the Internet kept telling me I had more money than my own calculations told me. It turns out the bank was right and that’s a pretty good way to begin the year. Said the bank officer, “Just begin with what our balance says is in your account and go from there.”

I stepped on the scale this morning and discovered what I already knew. I am at least ten pounds overweight and that’s a modest assessment. I blame it all on family members who, every Christmas, send me FOOD. I should, of course, blame it on myself for eating all of it.

I am reading an interesting new book by an economist who specializes in health-related trends and his thesis is that America’s strong economy is a major factor explaining why so many adults and young people, children, are FAT. Not only has the supply of prepared and packaged food items increased, thanks to modern technology, but we have had the money with which to buy it. Put the two factors together and it adds up to a lot of fat Americans, but it doesn’t stop there. The Chinese and Indians are getting fat too. That’s what a strong economy will do to you.

I am no economist, but I think 2008 is going to be a difficult one for the U.S. economy and may well have repercussions worldwide. Despite a recent bailout of several major banking houses to the tune of some $33 billion, the losses from the mortgage failures are estimated at close to $100 billion. Here’s another factor worth noting. The bailout came from foreign nations that purchased interests in those banks.

They bought in with money that has been flowing out of America at an alarming rate. I read somewhere the U.S. borrows a billion a day just to keep afloat.

A worsening economy, if it occurs, will be a major factor in the 2008 elections. People who follow these things suggest it could produce a Democrat Party landslide no matter who is running for office. There’s no doubt in my mind that the Republican Party is on the ropes. A lot of Republicans want to punish the party for the spending spree it went on for the last eight years, betraying conservative values, and others are just very unhappy with George W. Bush. Will Republicans rally around the party’s choice? No one knows at this point.

Will consumers keep the economy going in 2008? Not if they get nervous about the future and, in an election year, that’s what happens. Decisions are delayed. Investments of all kinds are put off. Spending tightens up.

If voters decide they want to “return” to the 1990’s of the Clinton years, they are in for a nasty surprise. It’s not the 1990’s. It’s more like the post 9/11 first decade of the 2000’s and there’s no robust economy to inherit from Ronald Reagan’s tenure. Taking a page from the FDR years, the Democrats will want to create more programs to help everyone and that just means a larger government. Given the government’s balance sheet, it probably doesn’t matter who gets into office. Taxes will likely have to rise and if that occurs at the same time the economy begins to tank it is going to get very ugly.

There’s a reason why a million Mexicans cross the border. The Mexican economy stinks. It’s the old story of a handful of people who own everything and have all the money. At least in America, there are jobs, but there will be fewer jobs for Mexicans if Americans begin to need them as badly as they do. Americans will insist ever louder that immigration laws be enforced. The present estimate is that one in every five Mexican citizens is currently living in America.

All of us Depression Babies and kids who grew up during World War II and can remember rationing are looking at 2008 and wondering if it could happen again, i.e., wondering if the economy could tank and whether we and our weak sister NATO allies can keep the lid on the Middle East.

One thing’s for sure; wars always begin as a surprise. No one really thinks that will occur.