Sunday, December 07, 2008

Some Thoughts on the Economy

From the perspective of southwest Florida in particular, the outlook for the economic health of the country looks grim. There are thousands of houses and condos for sale here, there is no housing construction seen anywhere, and very little of any other construction is under way. I recently rented a condo for my daughter for about ½ of what I would have expected to pay a couple of years ago. People who have lost their homes and their jobs are living in their cars or in tents in the woods, while others are arming themselves for protection against desperate people (and to anticipate anti-gun measures by Obama). Except for the fact that Norma and I do not want a mortgage at our age, we would probably be looking to buy a nicer condo for ourselves. The problem is, what do you do with what you have if no-one is buying.

As the president and as the man in charge, President Bush cannot escape the blame for this, although the real culprits are $145.00 oil and the collapse of the housing bubble due to sub-prime mortgages and excessive greed. To keep this in perspective, take another look at this campaign video for McCain, which lays out pretty well the story behind the housing collapse. When rules of conduct are ridiculed, as the rules that used to govern the granting of mortgages were, it’s very hard to swim against the tide. Banking and lending executives who were cautious were denounced by analysts and share-holders, and many were fined for not giving mortgages to deadbeats.

I don’t know why people are so critical of our automobile company CEO’s. They are building quality cars now, and have some of the most fuel-efficient models available. Their problems arise out of the enormous benefits prior management negotiated with the unions, and their inability to make a profit on small cars because of these contracts and because of incredibly stupid Congressional mandates. How could anyone predict what the price of gasoline was going to be in a few years, given the rise and fall we have witnessed recently? For the good of the country and of our national security the big three have to stay in business, but these union contracts have to be voided. If the unions will not cooperate, these companies should go into bankruptcy and restructure under Chapter 11.

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