Thanks to Dana Perino yesterday, we now know that President Bush acknowledges that there are limits on his Presidential power. Yes, believe it or not there are some things even President Bush doesn’t believe he can do anything about. Can you guess what that might be? Well, I can tell you this, it wasn’t about his inability to attack Iran without congressional approval. That after all is part of his Commander in Chief power with which no stinking Congress has any right to interfere in a time of war! No, sadly, President Bush can go to war whenever he chooses, but he is helpless to do anything regarding the pain the American people’s people feel each time they fill up their automobiles at the gas pump:
Presidential spokeswoman Dana Perino said Tuesday on Air Force One that “there are some things we cannot do.” Her comments came as oil prices rose above $109 a barrel for the first time. They are up from $87 a barrel in January.
She said that the White House is concerned about the impact on consumers and small businesses. But she said, “It would be wrong of the president to provide false hope to people to think that we are going to be able to have an immediate impact to reduce gas prices. This is something that we’re all going to have to work through.”
Thank you Dana, for acknowledging that the President of the United States can’t or won’t do anything to help consumers and small businesses when it comes to high gas prices. Nice to know there are some realities even the Bush administration won’t try to create. But hey, that doesn’t mean they aren’t concerned about it. The President is a compassionate conservative after all:
“The price of crude oil, and therefore the price of gasoline, is very high and we know it’s impacting America’s consumers and small businesses especially. And we are very concerned about it,” White House spokeswoman Dana Perino told reporters traveling with President George W. Bush to Tennessee.
I’ll be sure to remember the President’s concern the next time I pay $4.00 a gallon for my gasoline. Which by my calculations should be sometime in the next few months, if not weeks. Because the summer driving season is just around the corner. By the way, if you’ve been wondering why oil prices are spiking so high at the moment, all the evidence suggests that the meltdown in the financial industry and the falling value of the dollar just might have something to do with it:
“Oil is being purchased because of how it looks compared to other asset classes, not because of its fundamentals,” said Antoine Halff, head of energy research at New York-based Newedge USA. “The fall of the dollar has been a very strong driver of the commodity rally this year.”
Oil in New York surged 87 percent over the past year as the Standard & Poor’s 500 Index dropped 7 percent and the Dow Jones Industrial Average declined 1.7 percent.
Of course, one step we could take would be to reinstitute the regulatory scheme for financial institutions which Republicans and their DLC Democratic allies (hint: think Bill Clinton) have dismantled over the last 20 years. The regulations that used to keep banks and securities firms from doing really stupid shit, like issuing trillions of dollars of weird ass financial instruments whose value has little or no basis in reality.
But that’s probably something else President Bush is powerless to affect. Because that would be interfering with the free market, and we all know that the free market solves all our problems if we just get out of its way, right?
Well, not exactly, as these excerpts from the FDIC Summer 2006 Outlook (caution: pdf file) so presciently made clear by citing examples from ancient and US history regarding what happens when banks get to do whatever the hell they want without any “interference” from “Big Guvmint.”
(cont.)
The U.S. residential mortgage market continues to reinvent itself. While government involvement remains extensive, private asset-backed issuers have doubled their share of the market in just the past two years. Meanwhile, the structure of U.S. mortgage loans has undergone dramatic changes—the consequences of which remain unclear. Despite strong loan performance at present, there are concerns about increased risk taking on the part of lenders and homeowners. […]
Since ancient times, credit markets have undergone
periodic booms and busts. In 594 BC, for example, the Greek state of Attica found itself under severe economic stress because of the massive debt incurred by many of its citizens. The ensuing civil disorder resulted in a handover of power to Solon, one of the “seven wise men” of Greece. Solon took radical steps to restore balance to the economy, such as canceling debts, freeing those enslaved for failing to repay their loans, and devaluing the currency by 25 percent.
Although times have changed, the credit cycle and its dynamics of credit extension and retrenchment continue to affect the course and health of the economy and the banking sector.Simply put, credit cycles are fluctuations in loan quality and quantity. […]
Credit cycles may not be just a contemporaneous response to economic conditions. They can reflect reductions in underwriting standards and other ex-ante measures of loan quality motivated by times of overoptimism, heightened competition, or narrowing net
interest margins. Underwriting standards wax and wane,
and banks sometimes take on more risk than they ordinarily would for a given level of compensation. […]A great deal of blame for these financial panics was placed on banks contracting credit, as “the banks were … accused of aggravating the panic [of 1857] by their policy of calling in loans both precipitately and indiscriminately.” The Great Depression, wrote a contemporary economist, was precipitated by excessive credit creation, particularly by selling goods on installment plans, a popular financial innovation of the time. […]
Interest in the credit cycle fell off dramatically during the middle of the 20th century. Economists turned their attention to building mathematical models that contained perfectly rational, profit-maximizing borrowers and lenders. Meanwhile, the U.S. financial system was heavily regulated, with legislative prohibitions effectively acting to dampen the pace of financial activity. During this time, conservatively underwritten bank loans dominated both corporate and consumer financing options; it was the era of 20 percent down payments on houses and a free toaster with every new savings account. […]
Toward the end of the century, however, the financial
services market was substantially deregulated, leading to a wealth of new products and dramatically increased
competition. The savings and loan crisis and localized
banking problems during the 1980s and early 1990s were
the first wide-scale disruptions in the financial sector since the Great Depression, although they might have looked familiar in some respects to people who lived in the 19th century. The international financial system experienced another near-crisis in 1997 and 1998 with the successive financial collapses of several East Asian countries, a massive Russian debt default, and the abrupt demise of the large hedge fund Long-Term Capital Management. In some respects, these events resembled an old-fashioned financial panic as investors rushed to the safest, most liquid instruments available, culminating in a severe credit disruption.[Ed.: All footnotes deleted in excerpt above for convenience.]
Of course, the FDIC document then proceeded to pooh-pooh the negative effects of the deregulation of the financial industry, claiming that these days the market is so efficient we don’t need government regulation, as any good Bush era agency would have been required to do. Still, the point had been made by the historical references to past credit meltdowns and financial panics, which somehow managed to slip through into the final edit.
And now we are seeing the consequences of the failure to learn from the economic lessons of our own past. Seduced by conservative and libertarian economic theorists and their models of “perfectly rational, profit-maximizing borrowers and lenders,” we forgot that bankers and financiers are prone to doing stupid and very risky deals whenever they are given the opportunity, especially when we live in a business climate that is concerned only with the short term, one which seeks to maximize the value of assets included in each quarter’s balance sheet. This means financial managers of banks, insurance companies and securities firms (and these days they are often one and the same due to consolidation), more often than not overlook or ignore the risk of investments which appear to add asset value, and increase stated profits, without regard for the potential pitfalls that might arise in the future. In essence, they all drank the economic theorists’ Kool Aid, believing themselves immune from both credit and business cycles, being so much more clever and so much more knowledgeable than than their historical predecessors.
I saw the same mindset back during the Savings and Loan crisis when I was a workout specialist at my law firm. But that financial collapse brought on by the deregulation of the Savings and Loan industry by Ronald Reagan was small potatoes compared to the financial meltdown we are witnessing today, one that has even touched such stalwarts as Bear Stearns, Citi Corp, many other well known Wall Street firms and, believe it or not, the Carlyle Group itself, the depositary of the Bush family’s wealth, where creditors have seized the assets of it’s publicly traded affiliate, Carlyle Capital.
I don’t envy the next President. Disaster Capitalism is slowly working its way to its inevitable end, and all of us will suffer the consequences. Higher gas prices, the collapse of the housing market, a dramatic rise in mortgage foreclosures, and talk of multiple bank insolvencies are merely the first symptoms. Trust me, it will have worldwide implications and it will only get uglier.
I just paid $3.87 for gas on Sat. Thankfully, I’m not filling up my tank every week like I used too. Our clients now, balk at having to pay mileage. Even though we had made it clear that we were only waiving the mileage fee because of bulk orders. Now, they can’t even pay us on time and no one wants to pay milegage. Yet, they have no problem asking me turnaround an order 200 miles away in a day.
Meanwhile, we’re getting dinged with higher paper and ink costs, higher delivery fees and now the hourly rate is falling drastically even with less work figured in.
Small businesses like ours are being devastated. I have two clients who still owe us almost $3k each from ’06 and ’07 work. They ignore my emails and phone calls, promise payments next month and nothing comes. We’re broker than broke right now and I’m sitting here watching huge corporations make profits.
The party that the Republicans threw for themselves and Big Business is over, and the rest of us are getting the bill.
Bill Clinton has never called himself a Republican, so far as I know, at least not publicly. A rose by any other name is still a…you know what.
exactly. I work with local and ocean rates. At first we saw surcharges for fuel (the optimistic ones who thought this was temporary) the we saw base rates that used to adjust 2x a year move to every month, now everything is by phone quote good for 1 week.
Dana’s remark that will ring for me for a long time is her tie in of ‘Bush with fALSE HOPE’ False hope may ring as his legacy as we’re all waiting for him to make just one good decision, still.
We have our base rate, that we’ve negotiated with our clients. Now, things are more expensive, yet they want more work and want us to reduce our rates. Keep in mind that what we charge today is pretty much the same thing my husband charged 10 years ago.
Meanwhile, some of our older clients who have consistently pulled in $10K – $40K a month are just shocked, shocked I tell ya! that we don’t make any money. They say, “You guys should charge more.” while telling us that they can’t use us because their company wants us to pay $200- $400 less than our already discounted estimates.
We used to charge the Federal Mileage rate for all jobs, then we changed that to jobs 50 miles away, then 100 miles away. Then we altered it to no mileage charge if we get so many sites in the month, regardless of location.
Southern California is large. I live in east LA. Last year, in two weeks time, I had to drive to the AZ border, almost to NV, up past Bakersfield and down to the Mexican border for the same client, all of them rush jobs. When I tacked on mileage, they rumbled and groaned. Come on! I just put 300 – 400 miles a day on my car and they expected me to eat that cost. That was back when I was paying $3.29/gal. and they were paying me on time. If I got those same jobs now, I’d tell them to forget it.
I hear ya. It’s the rush jobs that eat you alive. It gets to be a real dance of strength vs whining and frankly everybody is getting trapped by the sheer volatility of costs. For some people we started saying ok, we’ll show you our cost invoices and then tack on whatever percentage. That worked for awhile, then they started trying to negotiate the percentages after the fact. I have a feeling these are going to be the good days when we look back.
I remember when Clinton was still in office, with Gore running for president and we had a brief price spike in oil prices. The Republicans threw a faux hissy-fit as they always did about anything. Of course Clinton and Gore both responded to the National Oil Emergency and even offered to tap into the national oil reserve to alleviate the pain that Republican whiners were feeling. If I recall correctly, we actually did tap the reserve briefly because it caused some turbulence in Gore’s campaign.
What was the price of oil that was bound to destroy our economy at the time?
It had just broken $30/barrel.
Remember when Clinton released oil from the Strategic Petroleum reserve? That’s one way to effect change through the market – plus we might as well capitalize on the high prices…
I think the Strategic Petroleum Reserve is now a wholly owned subsidiary of Halliburton.
There’s no solution for the $516 trillions of debt. The feds lost control of the situation last August…a situation to last at least 5 years.
It’s SOS time. Who would have thought you could monetize bankruptcy. Fed actions have not rescued Carlyle. They’ve collapsed. over non-payment of $37 million, pennies in the larger picture.
As I write, Gold is over $1000 per ounce. Don’t look for its price levels to retreat. I see $1,200.
The dollar is burnt and we’re screwed.
I also gotta say that while I too feel pain at the pump, high prices due to speculation will drive conversion to other energy sources just as fast as high prices due to shortage… just without the shortage…
It’s something we dems have to work out for ourselves: do we feel the people’s pain in the short run or the planet’s pain in the long run? Harping on climate change and high gas prices at the same time eventually comes off as a bit self-serving.
If you destroy the world’s economy (as appears to be unfolding before our eyes) then capital for all sorts of ventures dries up as people look for safe havens to preserve their wealth (gold and other commodities). It also means the increased likelihood of using more coal, by far one of the worst carbon emitting fuels and also a producer of sulfuric acid among other pollutants.
Just check out today’s gold prices:
LINK
Yeah, I called my sister a year ago after reading BondDad and told her to go out and buy some gold, tormented her until she did (I, of course, didn’t). She’s crowing this morning that her investment is close to doubling and I’m left with a savings account of American pesos
Careful – Commodities are already way overpriced – those in debt will sell them off big time to pay debts.
I agree with you. We have one car. We could use an extra car, but that seems self-serving. I have a neighbor, a single guy, who has a truck, 2 muscle cars, 2 motorcycles, 2 Toyotas and an Acura. Most of my neighbors have 3 – 7 cars/motorcycles. If we’re not buying a lot of stuff, we walk to the grocery store. I walk to the post office, the bank, the liquor store most of the time.
As a business owner, who has to drive to far flung areas, it hurts. Bad. People who don’t live in LA, sniff at me, “Get rid of your car.” Fine, but how do they propose I get to the high desert to a job site where the closest town is 50 miles away? How do I get up into the mountains to do my job? One of the biggest jokes is how the telecom industry has brought all the east coasters out here. They are the biggest complainers of our mileage charge. One guy from NY emailed me:
I replied back:
That was back when gas was “cheap” at $2+/gallon and the FMR was something like 36.7 cents per mile. I wouldn’t mind the higher gas prices if we received some financial reciprocation. When I see that one of my clients just posted a multi-million dollar profit for a quarter, yet are unwilling to pay me that now 50.5 cents per mile it gets a little hard to take.
We can learn a lot from Europeans about how to adjust to five dollar gasoline.
But, this statement is more ominous:
“…it wasn’t about (Bush’s) inability to attack Iran without congressional approval. That after all is part of his Commander in Chief power with which no stinking Congress has any right to interfere in a time of war!”
Is Cheney really through in his advocacy for Big Oil by attacking Iran? Iran, as we all know, was the logical second step in the Clean Break doctrine, obviously noticed by Big Oil, or was it the other way around? Israel and Big Oil: will they wait in hopes for a McCain presidency?
I think its 50/50 we go to war against Iran this Fall in time to boost McCain’s poll numbers myself.
Beginning to believe that Iran is the Republican’s only ace in the hole left.
McCain is has now morphed into Cheney-Bush and the only way to win at this point is to use the fear card, and what greater fear is there than more gas price increases through the Middle East turmoil that would result from attacking Iran. McCain is confident. He must know something.
we can’t learn anything from the Europeans about how to adjust to the spiraling price of gasoline.
Glad I still have my muscle powered bike.