Monday, February 2, 2009

Well I have been entirely too busy. I've been getting my ass kicked at work, I'm just glad I'm in a (mostly) recession-proof job. Saturday, I had to help a friend move two rooms of furniture around so they can sell their house. Sunday I had to help my Mum and brother move furniture, and work on a clients computer. At least I got $40 I can put towards preps from working on that computer.

I have been slacking off a little last week on posts, and for that I apologize. Work has me going 90mph so last thing I want to do once I get done with working from home after dinner is to work on the computer, even for something as enjoyable as this blog.

Today's post is about the economy. BHO shoved that 800T bailout through congress with the help of Frau Pelosi. Many bloggers have gone over the pork in the bill, and I ranted and raved about it while swearing up a storm trying to move a 300# bureau around. I just don't have the energy right now to get good and pissed off again. I have been watching a number of interesting items, trying to get a picture of what I have for a time window to get prepared.

I did some reading at and found this gem.
Some brilliant bean counter figured out that if you factor in inflation the DJIA only gains 1.64% per year. That's the red line in the graph above. The blue line is the inflation-adjusted numbers for the DOW. So hitting 11,000 in '94 is not the same as hitting 11,000 in '04. The article goes into good detail, and links the original source. So our current DOW of 7905 is really a lot worse than that.

The next thing I'd like to talk about is the BDI or Baltic Dry Index. This measures how much overseas freight is shipping.
The items measured are bulk items like coal, grains, crude oil, ore, building materials, etc. Notice all shipping has plummeted. Current BDI index is equal to what it was in '02, just before the housing boom exploded. This is alarming because if nothing is shipping, then nothing is being built. Construction companies and other goods manufactures depend on the goods represented by this index to build their product. With nothing to build, they close up shop, flooding the unemployment market.

This quote is from the Wikipedia article on the BDI.

On 20 May 2008 the index reached its record high level since its introduction in 1985, reaching 11,793 points. Half a year later, on 5 December 2008, the index had dropped by 94%, to 663 points, the lowest since 1986.These low rates move dangerously close to the combined operating costs of vessels, fuel, and crews.
By the end of 2008, shipping times had been already increased by reduced speeds to save fuel consumption, but lack of credit meant the reduction of letters of credit, historically required to load cargoes for departure at ports. Debt load of future ship construction was also a problem for shipping companies, with several major bankruptcies and implications for shipyards.This, combined with the collapsing price of raw commodities created a perfect storm for the world's marine commerce.

So things are looking up from a shipping perspective, but it is riding along a razors edge of profitability. If there is no profit to be had, then the world's shippers are not going to ship it from the goodness of their hearts.

One bit of good news is that inflation has dropped significantly. It is still 8% inflation according to the original way it was computed before Regan changed the rules. Then Clinton really changed things and now the official government statistic is as useful as poop in your breakfast cereal.

Chart of U.S. Consumer Inflation (CPI)

One item on this chart that is interesting to me is the plummet has brought the official inflation to zero. What happens once it goes negative? Will the official CPI dropping to negative numbers be the cause for panic, bringing about the deflation they fear that will happen. I love to see lies bite their speakers in the ass, so I figure it's just desserts if the CPI lies cause the economy to freak out.

Another key item is unemployment.

Chart of U.S. Unemployment

We are climbing to almost 20% unemployment. Whoa. One in five people are out of a job and looking for work, or more work. This scares the shit out of me. Once spring comes all these unemployed people will have the time on their hands and be pissed off enough to start breaking into homes for what they feel they are entitled too.

When a disenfranchised population base have nothing to do but get into trouble. In the 60's it was mostly harmless shenanigans, but these days urban youth are a lot more violent than the hippies. Even the 70's punkers kept most of the violence to the mosh pits. With urban hip-hop and rap artists idolizing violence and "thugism" how can the urban youth of any ethnicity do anything but cause massive problems this summer?

Idle hands are the devils workshop, and there will be a large number of youth that will be unable to find work, along with an older population base that will be out of work as well. Compounding this problem is the Baby-Boomers who are not retiring because their nest eggs have withered away. Without these higher-end positions opening up, then the middle-aged don't climb up the corporate ladder, opening entry-level positions for recent graduates.

I also expect racial tensions to rise as whites feel affirmative action keeps them from getting jobs, while well-educated whites are targeted by minorities because those minorities don't have a perceived or actual access to those better-paying jobs. Meanwhile anger and resentment against illegal aliens to rise as they are taking positions from Americans. This is going to be very interesting come summertime.

After all this I still don't have a clue on what will happen and when. But I will prep on anyway. So should you.

1 comment:

Mayberry said...

Great stuff Natog. It helps to see this stuff in chart form, and definitely helps to get it in layman terms! Things are gonna get very interesting indeed. Especially in Californy.....