Sunday, July 20, 2008
Should I be worried?
The S.F. Chronicle published the analysis of a banking industry expert on what banks are at risk now that the government has taken over the IndyMac bank. The guy had two methods of measuring risk, and my bank Washington Mutual was at the bottom of the "troubled" category by one measurement and just inside the "at risk" threshold by the other measurement.
Speaking selfishly, my money should be fine, since I don't have anywhere near $10,000 in assets at the bank and the feds insure up to that point. The expert said that things aren't nearly as bad as the S&L disaster of the late 80s. You know, that's when John McCain took a campaign bribe and tried to stop regulators from looking into the criminal acts of Charles Keating.
What the bank expert said is true, we have seen things worse than this. That's true with many parts of the economy. There are very few numbers at record highs or lows. The main one is the price of crude oil and with it the price of gas. Crude fell this week to back under $130 a barrel, off from the highs of over $145 earlier this month. That's encouraging, though it is still up 30% since New Year's. Watching the U.S. dollar index USD, the markets have decided for the last four months that the dollar has finally found its level, trading in a range from 71.5 to 73.5. The level is lower than at any time this decade before 2008, but stability at a previously bad number is better than a new low record every month or every week.
No one thing on its own, no one measurement of our economy spells disaster. What we have is a lot of little leaks. In 2006, the most recent year for which I could find data, U.S. median income finally rose after sinking for most of Bush's term, climbing to 4% over the highest previous value seen in 1999. The combined inflation rate for the intervening years was about 18.8%, and this is using the gamed numbers the government presents on statistics. In other words, working people are falling behind, sometimes quickly, sometimes slowly, but rarely are we really playing catch up.
I have said this before but it bears repeating. The Republican Party in its current configuration is all about thievery, Robin Hoods in reverse, taking from people who have less and giving generously to people who have more. The Democrats are little better. The laws on campaign financing and rules restricting lobbyists are like changes in the tax code. Before the ink is dry that signs the bill into law, someone has found the new loophole and the system continues on as before. People not wealthy enough to afford lobbyists of their own are screwed. That's almost everybody. The few watchdogs the government employs are overwhelmed, and the Republicans treat regulatory agencies like leper colonies, blights to be eradicated for the good of all concerned.
As citizens, we need to vote for change and to keep our representatives' feet to the fire. As consumers, we need to change our spending habits and driving habits and a thousand little things we have done forever because they won't make sense financially anymore. This latest fallback of crude oil may be like the fallback shown by gold and silver and several foreign currencies that happen in mid March, a discovery of a new level price for a time. But that new level is very different from the previous levels, and we will feel the pinch for some time to come.