Playing Bait and Switch with our Economy

What part of the words “Troubled Asset Relief Program” does Henry Paulson not understand? The taxpayers of the United States just gave the most powerful financial companies in the country more than $700 billion in order to prevent the rest of our economy from slipping into a depression.

However, the Treasury Secretary said that he simply changed his mind and will not use those funds to purchase the troubled assets that lawmakers gave him permission and instructions to buy. Instead, he’ll use the money to purchase the precious “preferred stock”.

Therefore, the tangible relief that was sought won’t happen. The toxic assets are still on the books. They banks already got the money but they are not lending. Wall Street still recognizes the problem and continues to devalue these companies. There has been no tangible progress since the bail-out was announced. However, the taxpayers of the country are light in the wallet to the tune of $700billion.

In order to fix our economy, serious steps need to be made in order to turn this situation around. I believe our first action is to look at our energy policy and the way it has affected our country.

According to the Dept of Energy, in January 2000, the average price of gas was $1.35/ gallon. By June of 2008, the average price was up to $4.13 per gallon. Although our consumption increased by less than 2% during that period, the price went up by almost 400%. The projected usage of India and China 10-15 years from now was always their justification for raising the price. Existing consumption and supply patterns didn’t matter.

The first victims of this increase were the transportation companies. Operational expenses went through the roof as they tried to move people and products from point A to point B. To my understanding, for every penny that the price of gas increases, the airlines lose $25 million.

There was no way our economy could sustain such an increase outside of normal supply and demand tendencies. Many companies initially tried to simply handle doing business with lower profit margins; but, later had to pass on their own price increases to their customers. It became increasingly difficult for businesses to function under their existing pricing and payroll structures. Therefore, many businesses were faced with raising prices, employee layoffs, or both.

Obviously, it became much more expensive for Americans to fuel their vehicles and get back and forth to work. But during this period, the price for everything went up. The price of eggs, milk and cheese all doubled. General Mills and Kellogg were reducing the sizes of their packaging and still raising their prices. Customers were getting far less for much more.

The price to heat your home in the winter and cool it down in the summers also increased. Many regulated power companies lobbied their state PUCs for price increases to make up for their increased delivery costs.

The only thing that didn’t go up during this period was Americans’ salaries. The American consumer was now forced to attempt to operate their homes on the same income but with much higher expenses. The sales of luxury and other non-essential items declined substantially. The automobile manufactures started to announce significant decreases in sales figures. Retailers began to report 20, 25 and sometimes even 40% decreases in sales.

Americans were broke and were not spending their money on new fancy items that they could live without. Disposable income became non-existent.

As more companies went out of business, others continued their lay-offs. More victims were created out of this recession. An obvious victim was the housing market. Not only could Americans no longer afford any new gadgets and cars, they could no longer afford the homes that they worked their lives to purchase, maintain and leave to their children.

Although some Americans fell prey to some punitive loan structures and adjustable rate mortgages that always went up and never went down; many others could simply no longer afford the monthly payment that was no problem for them just a few months ago.

It’s easy to simply blame the foreclosure crisis on our country’s economic woes. However, until we diagnose what created the foreclosure crisis, we’ll be forced to repeat this cycle. We cannot allow any industry to manipulate the delicate balance of supply and demand that we have in this country.

American capitalism has been successful because of its win/win premise. In order to make business sustainable, it has to be good for both the buyer and the seller.

More Proof that We're Being Ripped Off

Yesterday, the EIA announced that oil consumption for the first half of 2008 dropped by the largest percentage in 26 years. Demand for oil decreased by an average of 800,000 barrels per day compared to this time last year.

Also according to the EIA, oil supplies increased by over 100,000 barrels. However, the price of gasoline went from $3.07/gallon to $4.11/gallon.

Supplies are up. Demand is WAY down. But, the price increases by over 33%?? What gives?

The speculators control the market. They are allowed to ignore supply/demand and charge whatever they want.

Until we get them out of the market, it doesn't matter how much we drill.

Tuesday's Tastings

More evidence that supply and demand is not factored into gasoline prices. Americans drove 9.6 billion miles fewer in May 2008 than May 2007. At the same time, gasoline prices rose by 30 percent.

Longest serving Republican in the U.S. Senate is criminally indicted on 7 counts.

Feds raid meatpacking plant and find child laborers and 18th-century working conditions.

McCain pledges "no new taxes" to Sean Hannity. Quickly backs off of that pledge once he's back into the open.

Los Angeles is ready to ban fast-food restaurants in low-income areas. I'm sure that 16-year olds looking to enter the job market will really appreciate this.

Monday's Musings

Blacks and Latinos with credit ratings identical to whites are far more likely to receive sub-prime mortgage loans.

Is this terrorism?

National average for gas prices below $4/gallon for the first time in a couple of months. McCain says we should thank the president for this. Hey, I'll save my thanks until gas prices get back down to normal levels; especially when we'll be paying more for utilities because of the increase in gas prices.

More info on JC Watts' new African-American news network to be launched in 2009.

The oil and gas industry increases its donations to the McCain campaign from $200k to $1.1M after he changes his support for off-shore drilling.

The Bush Administration is ready to announce a record deficit of $490B for 2008.

Wednesday's Tastings

Looks like Congress is finally stepping up its actions to reign in the oil speculators that have been manipulating the prices and destroying our economy. Of course Senate Republicans and the White House is against the measure. They don't see a problem in the least. All is well in their eyes. Their guys have made billions under the current system.

Condi Rice is in Singapore trying to convince the North Koreans that they really need to dismantle their nuclear program. If we still have to convince them, it means that they haven't stopped. Looks like we once again fell for their games.

Bobby Jindal removes his name from consideration to be McCain's VP.

Feds drop case into Al Sharpton's finances.

Michael Savage is in deep trouble for saying 99% of autistic kids are simply brats that lack parental discipline.

Obamamania hits Europeans. One German newspaper is calling him the black JFK.

The Dems are starting another push for openly gay service in the military. "Don't ask-don't tell" is about to be revisited. I'm sure that's going to really motivate and inspire the troops.

Nigerian militants are once again threatening the oil pipeline. I'm sure that the speculators will raise the price of oil because of this. Now, it doesn't mean that they'll actually attack the pipeline or really hurt supplies. But, the threat alone is enough to raise the price. In their world "hypothetical" supply and demand is more important than "actual" supply and demand.

On a personal note.....Nas' new CD comes in at #1, dropping Lil' Wayne's "Tha Carter 3" down to #2. Screw that Soulja Boy mess. This is true hip hop at its finest.

Also on a personal note DA BEARS start camp today. Oh yeah!!! Football is here!!!

The Biggest Wealth Redistribution Scheme in History

Shell Oil and British Petroleum announced on Tuesday world record profits of $17 billion for the first 3 months of 2008. $17B PROFIT. Their profits increased by 25%. On Thursday, Exxon Mobile announced their quarterly profits at $10.9 billion. Almost comically, they were disappointed that they didn't have a greater increase than their 17 percent jump. Far be it from me to begrudge another person of their lawfully gained earnings. However, their manipulation of gas prices is very flirty with the unlawful and absolutely personal with unethical. If we were fighting in WWII instead of the War in Iraq, both of these companies and the others in collusion with them would be brought up on charges for war profiteering. For capitalism to work, business needs to be beneficial to both the buyer and the seller. If the balance leans too much in one direction, the scales will break. These few companies are bleeding our economy and compressing more wealth than ever experienced in world history. They do it with complete disregard for the rest of the country.

What's going on today is the quietest, but also the largest redistribution of wealth that the world has ever seen. Gas prices have risen steadily without relief for several years. The oil industry through companies and traders manipulate the price of oil without actually physically buying the product, raise the price of gas according to that speculation and the cash is fast tracked to the bottom line. It is a inventory-less process and foolproof way of raking in billions. This is happening totally under the nose of federal regulators and government officials who pretend that they have no idea what's going on and how to stop it.

Surely, this drain of American dollars will be felt in the years to come. Every time quarterly profits are announced, another benchmark is set. Oil companies have broken more records than Jim Thorpe. Inrespective of their drain on the economy and historic profits, we still give federal subsidies and special tax breaks to these companies and they have the conscience to defend it. On the backs of the American people, these companies have redirected more American wealth than any in history and we are still subsidizing them. When the House of Representatives passed a bill to remove these subsidies to finance the development of alternatives to oil, President Bush threatened to veto the measure. He says they shouldn't be singled out. They are making record profits under a slow economy with every industry struggling because of them, and Bush doesn't want to "single them out". Some people think Bush's coziness with the oil companies are behind these prices.

Meanwhile, the rest of our country is struggling through the closest thing to a recession we've seen in years. Almost every industry from the airlines (national commerce), to the trucker drivers(interstate commerce) to the cab drivers (local commerce) throughout the country has been negatively impacted specifically because of gas prices. Of course, this means they have to raise their price to consumers across the country. Food prices are up almost across the board. Milk, eggs and cereal are at all time highs. Schools are raising lunch prices. Power companies are requested rate hikes to counter how they have been impacted. Every company that moves a product or physically distributes services has been affected. All of the extra cash is being directly funneled to the gas and oil companies. They defend their profits.

The worst part is it is all a farce. My friends, this is nothing more than a scheme. It's an illusion and slight of hand that would make Criss Angel blush. Oil companies will say that they have no control of gas prices. They blame it on OPEC and slither back to behind closed doors. "Gas obviously comes from oil. If OPEC raises the prices, we have to raise the price of gas." Now, that's true to an extent. But, oil companies are charging us today's market prices for oil they secured at yesterday's market prices, if they bought it at all! It is pure profit for these companies and they are doing it on the back of almost every American citizen and company in this country.

Monopoly Power not Subject to Supply and Demand
Because it is early spring, our nation is coming off of its regular low driving season. Doesn't matter. Prices have gone up steadily even irrespective of the fact that usage has gone down. The EIA announced that inventories rose by 1.1M barrels. We have plenty of supply with low demand and are still paying record prices at the pump. There was no major hurricane or other natural disaster to negatively impact our economy.

Now, peak driving season is about to get underway as families across the country get prepared to take their summer vacations. This is the time that gasoline usage increases; which affects supplies and raises the prices. This is also the time that U.S. oil refineries have decided to reduce their output to levels we haven't seen since Hurricane Katrina destroyed the gulf coast. We'll have even less gas circulating through our economy. "Good time for maintenance" they say. Therefore, record prices are expected to go up even higher this summer; even outside of normal trends. They always seem to justify the price going up. But, we never see the decrease when usage trends favor the consumer.

Americans don't have much choice but either pay the rate or ride a bicycle to work. The oil companies have a stranglehold on our economy through their monopoly. Conserving doesn't really help much as it slows our economy even more without really addressing the issue. Drilling in ANWR and other parts of our country will not help much. American companies that drill today for oil within the United States still charge OPEC pricing along with our Canadian and Mexican "friends". If we buy crude at OPEC level pricing, American citizens still won't see any difference in their wallets. Additionally, the increased supply probably will not help. We don't get the benefits of supply and demand today. Taxing their excessive profits will not lower our rates as we still pay the same price at the pump. It just takes our money from the oil companies and give it to the government. I'm sure Americans would prefer to simply keep their money.

The solution is simply to reinstall capitalism to the oil industry. The subsidies and tax breaks that we give them today should be redirected to finance new competitors. For American drilled oil, these competitors should be mandated to charge special a American rate for oil distributed within the country. We also need to develop and promote alternative sources of energy and devices that will be compatible with these sources.

Pelosi's Gas Plan

Gas prices are killing the country. The oil companies are raping Americans in the biggest fraud in the history of our country. Republicans frequently argue against financial policies that only serve to re-distribute wealth. However, given the world-record profits of the oil companies now-a-days along the severe struggle of every other industry and regular Americans; I'd submit that we are now under the largest re-distribution of wealth scheme in American history.

Pelosi has a plan to eliminate the billions in tax breaks and federal subsidies that we give the oil industry. However she wants to use this cash to finance alternative fuels. I disagree.

My next column will address gas prices and the economy as a whole. Stay tuned. It will be a barn-burner. I'm taking no prisoners.