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by Sageman from Orlando

Last Post 77 days, 17 hours Ago


Why Oil is Causing our Recession.
May 27, 2008 | 9:36 PM
Category: News
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I read the article where George Soros made some comments that oil prices were ,in large part, due to speculators driving up the prices. In my opinion, he's absolutely right. Though I noted he didn't mention that a lot of hedge funds and college investment funds are buying oil up and stashing it away. This is also causing the demand for oil to rise which in turn gives the speculators even more reason to raise the price of oil. Whats this mean over all though? This is what I predict for the future.

I agree that with what George Soros said when he commented that only when we are in a recession will we see the price of oil drop. Yet with that said I still don't see a serious recession for two maybe three years, by that time the price may have risen to $350.00 per barrel. If it does drop the price will be close to $266.00 per barrel. With this in mind, you will see an average of $8.00 a gallon and that's being optimistic.

Let me also state that the situations affecting our economy right now, rising food prices and the housing slump, are all tied directly into oil prices. Because of oil prices being so high, farmers are making crops for ethanol rather than food, as a result food prices are rising. Funny thing is though, the rise in food price is not due to a shortage at all, but rather what people are seeing as a shortage in the near future. So prices are being dictated by a demand in the foreseeable future, rather than an actual one, with regards to food prices. The food prices will fall back to the norm in the next year and a half maybe two years in my opinion. Demand will force more farmers to switch back to farming food products rather than alternative fuel products. You will also see people buying different foods as staples, that they haven't in the past. I think oat's, wheat and soy products will supplant corn as the main staple on American tables, thus reducing costs over all for Americans. Corn will continue to be put into ethanol and as feed for farm animals most likely, with a minute portion going towards food products. All this again will be due to rising oil prices.

With a slumping housing market and soaring oil prices, people are correctly linking the two, "hand in hand," with our economy. As a result, people are not buying homes, leaving our already beleaguered housing market in a steady slump. I don't see the housing market getting any better for a long time. Though housing prices are not going to fall any time soon, they certainly wont rise to what they were during the recent housing bubble we experienced. The only increases or drops we will see are going to be, "hand in hand," with inflation.

We are also going to see the biggest slump in unemployment this country has seen in a 100 years. Those Americans in the service industry are going to be the hardest hit due to the looming recession. This is because when people have to make cuts and choices on where they spend their money, they do so at the mall, entertainment centers and restaurants. They also take fewer vacations and if they do take them they are close to home. This unfortunately means that Orlando will be hit tremendously hard by any recession in the near future. In 3 years we will have one that will make the 1970's and the great depression look pale in comparison. Unemployment is going to rise to at least 30% as a national average in the United States within the next 4 to 5 years. So save up your money, watch what your investing in and get yourself a good cushion built, because in the near future you're going to need it.

Oh yeah! For the record I predicted the housing slump 4 years ago due to the housing bubble and the fact that adjustable rate mortgages were being fixed with rates that exceeded cost of living increases. As a result the subprime rates exceeded what people were able to afford and any sane person would see the result in that. People were getting houses that in the long run they could not afford. Also, the simple truth is that, prices for houses far exceeded their actual worth and that in part also caused the Bubble and eventually all bubbles burst. This one burst with a bunch of people having homes and mortgages they could not realistically afford.

Of course I had pointed this out to multiple people, including a girlfriend who was in real estate, selling (over priced) condos and she thought I was insane. I think it just comes back to the fact that people don't really want to hear bad news and as a result they assume people are exaggerating.

I thought I would do this in red, it seemed appropriate, since oil is bleeding everyone dry.
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PegasusWing read my blog view my photos
May 28, 2008 | 5:17 AM

Right. When the cost of housing rises significantly faster than the cost of living, it is a bubble and it will burst.
However, poor judgement of lenders and buyers and flex rates contributed to the problem.
Laws need to be changed, especially abolishing the flex rate and interest only loans.
Really, if people can not afford to buy at the current set rate, they can not afford to gamble on a flex rate.

What do you know about the price of rice?
I heard that Asians in the states were buying rice, in anticipation of the increase in the cost of rice.
That didn't make sense to me.
Then I read that costs of rice elsewhere has risen 4x's.
It hit UN food subsidies to the poor so that the appropriated budget for relief is no longer near adequate.
Is there something besides ethanol that is causing food shortages?
Since rice is not grown with farm machinery, even the cost of oil shouldn't affect the production costs as it would every other item of produce.

The old FDR adage, "There's nothing to fear but fear itself" doesn't cover the ground.
When people are unemployed, they can not spend money.
When they anticipate hard times, they try to cut back and save, if the income allows.
Employment is the key.
One solution is for the government to start bringing industry home now before the situation is desperate.
Another is to reduce the consumption of oil.
We have the technology to do so, but special interests have prevented it thus far.
FDR had a lot of public works programs to increase employment.
Actually the military is government employment.
Neither of the cu
PegasusWing read my blog view my photos
May 28, 2008 | 5:18 AM

Neither of the current candidates claim to be a financial genius, but either could consult with a group of financial genii to figure out solutions.
Sageman read my blog
May 28, 2008 | 6:31 AM

If I remember there isn't a shortage on rice but they are expect one with the monsoons season thus the prices are rising. Again it's people guessing at the future and making decisions based on those guesses. Just like we can never say which year is going to be a good hurricane season they can't tell which years are good monsoon seasons. Thus it's again all speculation leading to rising prices.
Abunai read my blog view my photos
May 28, 2008 | 7:22 AM

The fact that you would even read something from George Soros says alot towards your political position.

Notice in the article that you could EASILY have switched the word Oil for Global Warming?

Its NOT oil that is the culprit here...its the lack of it as an effect. The cause is hysterical non-scientific census of the global warming THEORY! Yes.. theory, because in order for it to be validated, you have to defend it much like any other disertation against argument from the opposite side of the spectrum. That has not been allowed yet.

Our recession is because we now force production of products overseas away from enviromental regulations. Its NOT simply cheaper labor. The folks that tote the "cheap labor" claim are in denial of any other aspect of commerce and forces of capitalism as to do so would implicate the enviromental movement in America and its impact.
Abunai read my blog view my photos
May 28, 2008 | 7:32 AM

PegasusWing.. You keep repeating the same talking points everywhere!

So tell me..WHO is unemployed. What is the current unemployment figure?

I like the idea that candidates admit to where they are short on knowlege on a topic! Thats better than pretending to know and screwing things up more! Johnson for example thought he could run the Vietnam war from his office INSTEAD of letting the Generals do it.

Liberals make the fatal mistake of thinking they can just force business and industry to "come back home" and thats not true. You can't tax them to death and force them to take the beating, thats denial of reality.

Maxine Waters illustrated it with her mentality of Socialism in front of the CEO of Shell Oil, and embaressed herself! Tried to make the CEO guarentee prices to fall if drilling in the states was allowed, and his response.. Guarentee that if no drilling is allowed that gas prices will continue to rise!

IOWs. Maxine... Capitalism runs this country... NOT YOU! Until Liberals get it... all will suffer.
Sageman read my blog
May 28, 2008 | 2:10 PM

Abunai - My political leanings have nothing to do with me reading George Soros comments, the fact that he is regarded as one of, if not the most successful investors of our time does. He is recognized for his insight when it comes to matters of finance and economics regardless of his political leanings.

As for your oil comments, I think what republicans are doing is using stop gap methods to resolve the issue. Drilling will be allowed because oil lobyist's have pumped millions and millions of dollars into the pockets of republicans and democrats to ensure that it does happen. Don't fool yourself into thinking that Oil Companies have your best interest at heart. I worked for one for a while and I will tell you that they are anything but philanthropic. They are as close to evil as any corporation can get. They are as powerful today as they are because they have put so many influential politicians in their pocket over time. Hence go through and see the politicians and then see how many of them are tied into oil companies. When you get the figures I'm sure there will be no surprises there. Either way it's only one facet of our problem.

Unemployment rates were at 5% (7.6 million people) for the month of April up from 4.5% (6.8 million people) last year according to the U.S. Department of Labor and the figure is a national average. Economists are saying it will rise at .4% a month with a peak of .6% in October of this year. Expect it in the double figures by January 2009 if current economic trends hold true.

As for Socialism I am not going to argue it anymore. I still sa
Sageman read my blog
May 28, 2008 | 2:11 PM

As for Socialism I am not going to argue it anymore. I still say that if oil was managed as a national resource and not given to the highest bidder then the issue with oil we are dealing with right now would be moot.

Also some areas of socialism benefit society as is evident in the fact that many of the top 10 Country's economically also fall within the top 10 happiest populations and all have socialist governments with (successful) open free market economies.

The problem in the U.S. is that we hear socialism we think communism, yet they are two different things. I think democratic socialist governments based on the same framework as Canada, Sweden, Norway and Switzerland's work. Those based on Communist governments like China, Cuba and even Venezuela's are doomed to failure. Socialist economy's will always fail because they are counter productive to a successful business structure. We'll see in the next few years whether Europe is affected with a recession as badly as we are, since the majority of governments there are Socialist based with a free market economy.
Sageman read my blog
May 28, 2008 | 2:19 PM

Pegasus - I do agree with bringing our manufacturing industry back to the U.S. and giving tax breaks and incentives to manufacturers who produce their product in the U.S. Harsh penalties need to be put into place for those that send jobs over seas.

The old argument that manufacturing overseas benefits the economy here has worn thin! Now that you see that the areas that will be hit hardest by the upcoming recession will be service industries, it makes bringing our jobs home even that more relevant.

I still can't see how patriotic Americans keep promoting shipping our manufacturing job's over seas? I know the arguments in the past and they just haven't held up to the test of time. With the average wage of Americans dropping yearly for the past 10 years you would think it would have woken people up. Yet all we have seen is the country's elite get richer by astronomical amounts while the working class has systematically lost income or worse stagnated with little hope for earning increases in their fields.
Abunai read my blog view my photos
May 28, 2008 | 2:36 PM

LOL! Capitalism is our nature! You can't punish a company for going overseas unless you are a Socialist, Marxist, or Communist nation!

As to oil and drilling here: Not so fast! When suddenly Exxon stations are cheaper than the rest, people will go there. When a single company starts the price wars of gas, then others will have to follow!

We ended the monopoly of At&T, we ended Microsoft monopoly, and as soon as we begin to allow for domestic operations of Oil and Gas then the first company to bring the lower price will make the money!!

PROVEN in our history of capitalism!

If the govt. wants involved, then they can stop investigating Baseball and Football and bring the Global Warming issue to the microphone! BOTH sides!

If they don't do it, then its up to the people to DEMAND it.

As for Socialism: What you didn't say was that we already tried it during our early settler days. Socialism works only for a while, but then it stagnates as it does not allow for open commerce, or anyone to reach beyond, and will suck the life out of any ambition.

Socialism is being challenged EVERYWHERE it is today because it is being left behind! Canada has made a huge shift in the last decade!
Sageman read my blog
May 28, 2008 | 3:57 PM

It's evolving into a democratic socialism rather than the traditional Marxist socialism.

AT&T is once again the monopoly it once was it just reclaimed all it's assets quietly. Microsoft is also still a Monopoly in the industry and they are still arguing the point in court in Europe. As for gas wars, well you know the oil companies drive around and check out the prices of their competitors, then they try to mark their prices with in a few cents of them. Their will never be price war because even though federal laws were passed to keep oil companies from calling each other to discuss pricing they still fix it by never challenging each others prices. It's still price fixing only now it's a mute process.

I agree that both sides need to come to the mic and discuss global warming but at the same time both sides need to agree that a solution must be had. Even if it is a natural process it's still going to end up devastating the world. So either way something needs to be done.

I'm going to reiterate that oil companies exemplify all that is wrong with Capitalism and I love Capitalism. They abuse the system and fix prices to take advantage of a consumer with no power over the whole process. Even the threat of Nationalizing oil would put the fear of god into oil companies if they thought it was a valid enough fear. Nothing less would ever cause them to change their industry practices.
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Sageman

I have been an actor, writer, and journalist, among other things. Currently I am getting ready to go back to school. I think that news, as clichè as it sounds, is one day away from being history. I enjoy reading, writing, running, biking and swimming. Ironically I hate the Triathlon. Yet I believe exercise is the key to a happy life! Politically I'm a Moderate Democrat and I listen to anyone's views, the only thing that really irks me is people who insult others for having different views. Which often makes me insult them in turn. I guess that makes me a Hypocrite... At least I won't be lonely.

Member Since: 3/19/2008


 

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