economy

It has been quite a year. As I reflect upon 2008, I noticed that the things around me and the things I’m thinking about have been oddly in the news lately.

Tough Times Think Happy Thoughts

30 Years, Las Vegas
I’ve been wanting to go Vegas to relax in the last few months.  And I read in the news that on the Las Vegas Strip (where I usually can’t breathe in 105 degree desert weather) it actually snowed.  It was the first snow fall on the strip in 30 years (Link).  But I’ve been too busy to go.

80 and 10 Years, Our Poor Jobs
I’ve been busy because of my job.  Oddly enough it has been the worst economy in the last 80 years since the Great Depression (Link).  And I’m sure you can relate because nothing seems to escape the wrath of the US economy these days.  Even my birth state of Oregon has the highest 8.1% unemployment rate (Link) since 1990.

20 Years, Oregon
And speaking of Oregon and the economy, it also had the biggest snowfall in Portland Oregon since 1980 (Link).  Brrrr, it’s just cold everywhere on the mainland.  But one of the shocking things is that the economy has impacted the car industry so much.

70 Years, Toyota
I just replaced my beloved 2008 Toyota Prius (that was totaled in an accident where the other driver ran a red light) with a 2009 Prius where it as hit and run 10 days later parked outside the house.  *Sigh* Oh, where was I?  Oh yes, Toyota.  Even though I didn’t get as much a discount with the new car, I just found out that it has been Toyota’s first operating loss in 70 years.  I would think they would want to lower the cost on their cars to sell more but I thought wrong.

Think Good Thoughts
Well, so much for the downbeat news!  2008 has already ended.  So I’ll be positive to combat the negative, as I read on my friend’s blog.  Good thoughts, good thoughts.  My car will be fixed soon, my job is safe, and with all this snow I hope I’ll be on the slopes soon.  I am grateful and thankful!  To a great 2009 and God Bless.

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On October 29th, the Fed lowered their target interest rate to 1% in light of the current turmoil and economic recession.

But what doesn’t make sense is that you don’t notice the interest charged on your credit card statement any lower?  Why is that?

Well, the Fed uses what is known as a Central Bank of the government to control the nations supply of money (which is how many dollars are in the hands of the people, companies and other countries used to buy things.)  And mostly that Central Bank controls the supply of money through the increasing or decreasing of lending to the nations banking institutions (heard of BofA? Wells Fargo? Wamu (Oh wait a minute, they are now JPM, hmmm)?)

Anyways, the Fed lowers interest rates by increasing the amount of loans the give out to the banks and with a larger supply of loans and money, the cost (interest) to the banks go down, i.e., lowering the interest rate.  But the reason you don’t see your interest directly impacted, is because banks are getting greedier than they were before.  They’ve lost money in the sub-prime fall out.  They don’t have that much money in their reserves (which means if all of us went to withdraw our money from the banks, they wouldn’t have enough money to give each and every one of us).  So to make back all the losses they continue to charge credit card users and businesses high rates of interest (some even over 35%).

So while the Fed is essentially subsidizing the banks profits, we “the people” aren’t getting very much of the help.  So my question to you is, “If the free market ideology got us into this mess in the first place, then how is government policy and regulation, like the Fed lowering interest rates, supposed to help us?”

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gas prices

I’m an avid reader of cnn.com and wsj.com, and amongst all the news about the world coming to an end because a few big banks made some bad bets, I also noticed that the price of crude oil has also plummeted from $140+ per barrel to now around $70 per barrel.  Hmmmmm, that’s about 50%.

I live in L.A., and I drive a Prius, so I care about gas prices.  Also, this is important to me as I need to be sure the furniture I sell on visiondecor.com can be shipped out at a controlled cost.  I remember paying at the highest about $4.35 per gallon (87 octane).  And now I see it around $3.29 per gallon.  Hmmmm, that’s about a 24% drop.

That’s nice that it dropped, we are all saving money.  But that is no where near 50%!  It’d be nice if we all can save a few hundred bucks a month if it dropped 50%, or my company can ship you the furniture you by at 50% off costs.

But let me get this straight.  When oil went from $80 per barrel to $140 per barrel which is less than double, gas prices went from under $2 per gallon almost $4.5 per gallon.  80% increase in cost, and we get our prices jacked up over 110%, and now that cost has fallen by half, we get a measly 24% price cut?

Something is wrong here.

This is not to mention that the DEMAND for gas has gone down.  For the first time in many years, the American public has drove less.  So falling demand, falling costs won’t bring back the prices we’d love to see?

Well, we can wait a bit longer to see if gas prices come down before the people start rioting that the economy is falling apart, people are losing their jobs, but they still need to pay an arm and a leg for gas?

Let me set it straight.  Oil companies just lied.  They lied when they said they needed to raise gas prices because the cost of oil went up.  But that wasn’t the entire reason.  Because the average consumer doesn’t realize that gas needs to be refined from oil.  It’s the fact that refinerie capacity in the US has peaked.  Even if we brought in all the oil in the world to the US as $10 per barrel, we would not be able to turn it from oil to gas fast enough for the gas prices to go down because of our still high demand on gas compared to the supply the refineries can churn out the gas.  So to put some reason behind the nonsense, is that Oil companies lied and used whatever reason that made sense to raise gas prices on your daily driving life, but now is in a pickle because it is hard explain away the reason they used to raise prices doesn’t apply when their cost has gone down.

So the lesson is be truthful and upfront to your customers.  This applies to all businesses, large and small.  Maybe if customers and investors really knew what was going on, we wouldn’t be angry at the oil companies and the banks that failed causing this panic in the markets.

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