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I Am A Ray Of Freakin’ Sunshine February 23, 2011

Posted by Mitchell in Bad Times Ahead, Destined for the Gulags, Home.
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In the previous post Geoff tries some strategic optimism in the comments to help get me out of my “panic”. However, as I gaze into my dark, little crystal ball I have deep forebodings.

In the middle-east we have nations falling like a bunch of falling things. The latest of which has an ugly, oddly-dressed man who is threatening to torch his own oil-fields in a desperate bid to save his reign. Meanwhile in Egypt I think it’s likely that the government (and thus the Suez Canal) will fall under the control of the radical Muslim Brotherhood, who I think will use it to extort money from the Infidel nations. With either of these things alone the price of oil / gas will skyrocket. Both can easily come to pass.

I live in Not-So-Fabulous-Lately Las Vegas. This is very much a boom-town that had explosive growth from late 80’s to about a few years ago. For all of those years Vegas was very good at two things: filching money out of the wallets of the tourists who came here to party (and maybe get rich), and converting desert into neighborhoods and shopping centers. Those were the two very powerful legs of the economy here. One of those legs (construction) has been lopped off mid-thigh and the other one is hopping on the unstable national economic ground. Drastic rises in fuel prices will almost certainly sweep that leg. If that happens, Las Vegas will be devastated. This is a terrible place to try and weather any economic storm now, much less the hurricane that I think is coming.

In my own personal circumstance I have a fairly cushy and stable employment with a local quasi-governmental utility. The organization has long-term plans and will continue with them for the present which means steady employment for me. Of course, this was all based on models with only growth in the size of the city for the next 50 years. The picture becomes very different if the casinos start laying off people and perhaps even closing. Most of the people here came from somewhere else. I can easily see thousands of people flooding out of the city every month to return to where they came from and where they have family & friends. This will be a crippling blow to the organization’s revenue, and I can’t see that they will have any choice but to cut extraneous services (and departments) to preserve its essential core service and nuts-and-bolts infrastructure. My department is in the business of trying to get our customers to use less of our product and even paying them to do things to help them do this. Do you really think we’ll continue to do that in this scenario? Yeah, me neither.

On top of all this we have 0bama & Geithner’s bizarre financial gyrations and the Mt. Everest sized debt they are piling up. The Zero is already building his  high-speed WTF bullet-train to financial destruction. Yes, it’s nice that Wisconsin and New Jersey are trying to do things to take on public sector unions and whatnot. I wish them all success. And Yahoo! We have the GOP in charge of the House! Still, I get the feeling that it just isn’t quite enough.

I hope things don’t turn out this way. I really don’t look good in assless chaps.

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Comments

1. geoff - February 24, 2011

IUC data looked good today (post at my site), continuing a 7-month trend of improvement. They indicate that in about 4 months, the unemployment situation will start looking up. Most business fundamentals are up. Improving business means an eventual easing of the budget pressures on the states and a reduction in the federal deficit.

Real estate is still a negative (though existing home sales were up recently) – more foreclosures and price drops to come. But those had to happen: the real estate market bubble was enormous, so it’s comforting that the market correction is with 10 – 15% of being complete (of course there’s always a prospect for over-correction).

A weak financial sector goes hand-in-hand with the real estate market: closures continue at an alarming rate. But their stabilization and recovery will likely follow the real estate market, so once we’ve taken our drubbing there, things should normalize.

Which leaves us with federal, state, county, and municipal debt, which is a major problem, and could lead to the rampant inflation we all fear. Many of the states are doing a great job of handling their own debt, though, as Monty tells us daily, there are some with huge problems who appear to be waiting for the feds to save them. I think I’ll make a post on the subject of the states’ financial health in the next day or so.

The federal budget is a flipping disaster. I ran some numbers and concluded that it would take 10 years with a 35% cut in federal spending to get the debt reduced to 2007 levels. Impossible, meaning they’re going to have to print money, with all its attendant dangers. But there’s a middle ground between sane fiscal policy and hyperinflation. Malaise, for example.

You are in a particularly troubled state (highest unemployment and 2nd-highest foreclosure rates in the country), so your experience is much worse than the nation as a whole. Not to say that the situation can’t go south, but if we can rein in Obama’s budgets, there’s a better than decent chance of keeping a lid on things (to mix my metaphors).

2. Mitchell - February 24, 2011

*Pauses picking out assless chaps*

Hmmm. 35% cut in federal spending huh? Has there ever been any cut in federal spending even near that?

*Hands Geoff a pair of assless chaps*
I think you would look good with a mohawk.

I need to start working out again. These things are REALLY unflattering on me.

3. geoff - February 24, 2011

Hmmm. 35% cut in federal spending huh? Has there ever been any cut in federal spending even near that?

That’s why I said that it’s impossible.

If you look at all the budget-cutting proposals, none of them really make a dent in the problem – they all rely on cutting enough to keep the deficit low, and pray that GDP growth outstrips inflation (if they bother calculating inflation). Even Ryan’s.

The first ten years of all these proposals do pretty much nothing. These guys aren’t talking about making a dent in the debt until 25 years from now.

But the proposals are better than Obama’s plan.

4. Mitchell - February 24, 2011

Isn’t it sad that even just returning to ridiculous spending levels of 2007 is “impossible”?

Here’s to hoping for Malaise!

*Starts checking into motorcycle prices*

5. geoff - February 24, 2011

Isn’t it sad that even just returning to ridiculous spending levels of 2007 is “impossible”?

Yup. That’s why they’re going to have to print money and inflate the debt away at the same time. Because the GDP won’t grow fast enough to do the job.

6. veeshir - February 24, 2011

It’s funny, I’ve never really been a “Doom, doom” sort of guy, but I’m pretty sure we’re all in big trouble. Too many people who make important decisions believe things that just aren’t so, like socialism and global warmmongering.

The worst part is that it’s going to go to total crapstorm in the blink of an eye.

Something will happen, like a protest or strike or something, that doesn’t look too bad and it will suddenly spiral out of control, spread and suddenly it’ll be all the worst parts of the Bible.

Everybody will be all surprised.
As they’re cooking their neighbors.

7. Mitchell - February 24, 2011

It’s funny, I’ve never really been a “Doom, doom” sort of guy, but I’m pretty sure we’re all in big trouble.

Yeah, me too. I don’t like thinking along these lines, but I look at what is going on and I can’t help it.

8. Nicole - February 25, 2011

Also:

“This business will get out of control. It will get out of control and we’ll be lucky to live through it. “

9. cmblake6 - February 27, 2011

Have a little sunshine, my brother.


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