Wednesday, November 19, 2008

Gassin’ My Head with Sub-Prime Talk

The traffic over by the mall was crazy… just like in the old days. Skibo Road had taken on ghost town qualities since the middle of the summer. I was confused about it for awhile, sitting there trying to get to my daughter’s daycare in a reasonable time. Then I saw the sign for gas at the station one block up the street. One dollar and ninety-eight cents!!! I realized then what all the traffic was about… people were going shopping. It had been so long since I had seen “shopping traffic” that I was caught off guard. Then my thoughts went back to that morning when I got my gas… $39.00 to overfill my tank. This compared to the max of $80.00 that I paid around the first of September. I remember doing the simple math standing at the pump. A $41.00 difference is $164.00 a month…

…$164.00 a month... that’s a lot of money. At least for me it is. That is the cost of my phone, internet, cable, and water bill each month, with enough left over for a pack of Pampers (I go as cheap as possible with local cable, Vonage, etc.). As a commuter, I’ve had a $300.00 per month gas budget for the past five months, but I suddenly find myself with a surplus of $160.000. I just happen to now own a new, blue, long-overdue, $160 suit… not directly related, but the timing is perfect. Of course, clothes for me are not important; this money means I have a slight cushion for monthly expenses, so things like car repairs won’t cripple the family finances like they did last summer. It’s amazing when you think about it, how big an effect gas prices can have on a family. Then when you think a little more about it… it’s not amazing, it’s frightening…

I know I make a pretty good salary. Along with the wife’s salary, things are tight, but we don’t miss any meals. It really makes this whole thing with the sub-prime mortgage crises take on greater meaning. We are just a few bank closings away from a complete financial collapse, and everyone is pointing the finger of blame at folks who bought houses that they “knew they couldn’t afford”! Talk about infuriating… One thing we know we can do well as a country is blame the victim and protect the system. I remember when I bought my first house. I was 33 years old with a 10-month old baby, and one on the way. I had just started my first job as a “Director”, and I was in graduate school. I was way too busy to learn the housing business, and really had no interest. I just wanted to buy a house for my family. I got a real estate agent, a lawyer, and a loan company, and I expected them to do the job I paid them to do. It was the first house closing for my lawyer, but he was a college buddy so I knew he would do his best not to let me get screwed.

In the same way that people trust me to provide the best educational environment for their kids, I trusted the people whose job it was to help me purchase a home for my family. The phrase, “predatory lender” had not yet made it’s way into our national conversation, but if they wanted to screw me over there was no way that I could have known. So I can sympathize with those folks who did get screwed with these crazy mortgages in the last five or six years. To expect them to know about prime lending rates is idiotic… and I think anyone who feels that way is a pompous, insensitive @sshole… with all due respect. Those same folks would scream bloody murder if a refrigerator repairman, plumber, or car technician screwed them. No one is expected to know enough about refrigeration or plumbing to keep from getting screwed, you expect the person you hire to be reputable. And even though there are “predatory plumbers”, there are unions that keep that kind of behavior in check. Well, we didn’t have that kind of thing with predatory lenders, because all checks and balances were deregulated. People who went for those mortgages were considered “prey”, i.e., creatures that another creature sought to attack, subdue, and feed off of. Owls prey on Rabbits. When a rabbit gets caught and eaten, it’s not the rabbit’s fault. Rabbits are victims of the system. That same owl will not attack a puma cause he knows he can’t win. Predators pick on people based on their inability to defend themselves. There were people who believed that they were blessed from God because “someone who was in the housing business” said they could get them approved for a home loan. There was no way to know that person was actually working for the devil. Professional criminals are professionals… whether lending agencies or pick-pockets. There is no such thing as a professional victim. Victimizers always have the advantage. Don’t blame the victim.

Anyway, I can imagine what would happen to me if gas went to $6.00 a gallon. I would have to give up my phone, internet, and baby cable. Then I would have to choose which bill not to pay, or what part of what bills not to pay. I would be on a slow financial decline that would eventually find me car-less, then jobless, and finally homeless. For folks that make half my salary, with the change in gas prices from $2.20 when they bought, their homes to $4.10 last September, that is exactly what happened. Many would have found ways to cut corners if there was just a rise in interest rates. But coupled with a rise in gas prices, which affects their ability to get to work and pay their bills, etc., they were completely undermined.

Now gas prices are dropping… rapidly. And the one thing that is being passed over in our post-presidential election euphoria is… why? There were a bunch of reasons given for why prices kept rising: the war in Iraq, China blocking the ports in the Middle East, hurricanes hitting the US, etc. But none for why gas prices are falling so fast? The Dwane T. theory is because the people who artificially/arbitrarily inflated the prices know it was the basis of our economic collapse, so they are cutting back on the profits in the short term to keep making money in the long term. The traffic over at the mall proves it. People who have jobs are shopping again… and what do you know, just in time for Christmas. A healthy shopping season will save many of our struggling businesses… particularly the chain stores. Gas prices going down is, economically, like getting a pay raise… for those who still have jobs.

Dropping gas prices will also help the oil companies get both Congress and the public off their backs for awhile. They will show a dramatic decrease in forth quarter profits, making it look like they were affected by the recession as well. Then, if they want to sabotage Obama’s first year in office, they can slowly inch prices back up through the second quarter of next year. Whatever economic plan Obama introduces will be sabotaged because rising gas prices will steal any benefits his plans have. Back in the day, we used to say that if someone was trying to convince you that something unlikely or ridiculous was actually true (for their personal benefit), we said “stop gassin’ my head up, son” (although brothers gassin’ girls heads up was the most popular use of the term).
Well, Bush and the other oil millionaires/billionaires who run this country have been gassin’ our heads up about why we are in a recession, but in this case the truth is… in the gas.


Kofi Bofah said...

The commodities boom is over.

Gasoline demand falling, China slowdown, and worldwide recession, are part of the reason.

Also a strengthening dollar.

Oil is priced and dollars, and weak U.S. currency aids in propping up the price. Foreigners must charge higher rates to compensate for the deteriorating value of the greenback.

The dollar has strengthened recently as foreigners purchase U.S. assets that are perceived to be less risky in this global economic debacle.

That sums it up my friend.

Kofi Bofah said...

Every asset class has been routed.

Not just oil.

Mista Jaycee said...

Very nice post!
Just stopping by

mo.stoneskin said...

Are rabbits really victims of the system? I've always suspected that rabbits are far more sinister and evil than they let on, and that owls provide a form of natural justice...

Seriously though, can never believe the price you pay for oil over there, rises aside. We consider filling up for 50 quid (90 dollars?) cheap these days.

Walt Bennett said...

My take on the rapid - head-spinning - drop in the price of oil is at once simple and disturbing: rapidly falling demand.

Speculators bet on the future price, based on their assessment of future demand. The furious downward spiral in the price of oil futures tells me one thing: speculators are betting on a deep, deep recession.

We already see the signs from China, which was "fueling" the rise in the first place. Demand was scraping up against physical capacity, because there are only so many refineries in the world.

Was this increase "artificial"? Only in the sense that the bubble had to burst sometime.

Just like housing and other speculative sectors, there was a mad rush to get in the game on the way up, and a bunch of wiped-out losers on the way down.

Just another splendid example of this "best we can do" system known as capitalism. said...