Friday, December 26, 2008

My New Boots and the Economy

By Alan Caruba

I bought a new pair of boots today. This particular pair is made from soft leather that is casual in appearance and extremely comfortable. Though born and bred in New Jersey, I have worn cowboy boots since the 1960s. I attribute it to spending too many Saturday matinees watching cowboy movies.

Truth is, I had been looking to buy a new pair the replace the rather beat-up pair I have worn for a while, but the catalog just a few months ago was asking about $125.00 for the particular ones I wanted. Then, a few weeks ago it was asking $70.00 for them. And this morning the email offer cited a price of $50.00.

The economy is playing sheer havoc with folks who make things for a living. The news this morning is that holiday retail sales have been as bad as they have been in decades. You have to go back to 1959 to equal the low level of sales.

When I graduated from the University of Miami (FL) in 1959 and completed my military service two years later, jobs were plentiful and, as a journalist, I covered a lot of civil rights marches and such. Then the Vietnam War began to require a lot more young soldiers. History is messy and filled with wars that get young men killed because old men make serious errors of judgment.

People with a little spare cash are picking up some real bargains these days, but mostly consumers are beginning to do something they have not done in a very long time. They are either not buying stuff or buying a lot less stuff. That’s what people do when it occurs to them that the economy is in the toilet.

In a consumer society that is bad news for people who make and sell real stuff for a living. The flip side is that you can now buy a home for something approximating its actual value instead of the inflated prices of the last few years. .And you can get some very good terms on your mortgage. Time was you couldn’t get one unless you could put down at least twenty percent of a home’s price, but when those prudent mortgage loan standards went out the window so did the economy.

It didn’t help that the federal government via some truly bad “social justice” legislation was putting intense pressure on banks and mortgage loan firms to lend money to people who could not ever afford to pay them back. Now foreclosures are going to play social havoc in the same places the government thought it was helping.

I have a friend my age who has been on Wall Street for a very long time. I asked him this morning if all those people who were “bundling mortgage-backed assets” and other fancy securities knew that it was all a scam that had to go bad at some point. He said yes. He avoided them and advised his clients to avoid them.

There’s a very real difference between a new pair of boots and some gussied-up security whose value is going to disappear in thin air. You can put on a pair of boots and wear them for years. You cannot recover the value of something that never really had a value except for the folks trading them as fast as they could. Those folks made a lot of money, but they never made anything real like a pair of boots.

The new administration, we’re told, is ready to let loose a huge “stimulus package” to “jumpstart” the economy. The level of U.S. indebtedness is going to skyrocket, but the folks in Congress don’t seem to understand that the government cannot just keep printing money without turning the U.S. dollar into a Zimbabwe note for one billion dollars that won’t even buy a loaf of bread.

The level of lobbying to get a piece of this new government pie is going to be intense. In time we will learn of a slew of idiotic projects that skimmed off the federal largess. It always happens. As I recall, the last stimulus package did nothing at all for the economy.

It never seems to occur to Congress to dump the ponderous U.S. Tax Code and write a new, fairer one.

It never seems to occur to Congress to pare back the monstrous tangle of regulations that drive up the cost of doing business or anything else in America.

And it surely will not occur to Congress to not raise taxes at the very time when people need to hold onto every dollar they earn.

I expect Congress and state governments to start taxing everything. I mean everything! Tolls will go up. The price of public transit will rise. The poor will get poorer. The middle class will shrink. The number of bank heists will increase.

Cutting programs, laying off civil servants, and renegotiating pension plans, et cetera, just never occurs to most governors and legislators.

I’m pleased that I waited for the price of my new boots to decrease, but I feel sorry for the boot manufacturer and for his employees. It’s not their fault the U.S. economy is in trouble. We know whose fault it is, don’t we?


Dave's Daily Day Dream said...

Those of us on a fixed income or living on the principal are scared. We are "land rich" and "cash poor". The bottom line looks good, but getting from there to the Kroeger or Safeway is often difficult. Those in Washington D.C. will continue to encourage a fiat system of currency because it allows them to propose more "fixes" (eg "Just throw money at it! Hire more SEIU folks!).
Just look what has happened to the greatest educational system in these United States (California) since they started that money toss. We are incredibly well managed, from top to bottom, but the graduates can't make change.

Unknown said...

VERY well pointed out on the topic of Congress/Govt pointing the finger at everyone else on who should be doing the cutting.

Just reading the text creating the SEC from the late 1930's is headache inducing and "modern" legislation is no becoming monstrously over-complex. Attempting to cover or create as many loopholes that only a specific set of people can hope to understand.

Damned lawyers have forced the codes & regs to become so complex that they've made sure that there will always be a need for lawyers!