The Big Secret Behind the Economic Crisis

I can’t tell you how many times I have heard a statement like this as the root cause of the economic depression.

“”“The BLAME is on the people and businesses that LOANED or BORROWED TRILLIONS. The blame lies with people who lived WAY WAY WAY beyond thier means. This happened ACROSS THE PLANET.”“”

So the people in every single country across the planet, with exception of OPEC countries, all borrowed too much money over the same years and they all happened to crumble at the exact same time. This is called liberal economics which only comes out of the mouth of those who don’t know what they are talking about.

This is a claim that the leftist media gives and those sheep who follow them baaaaleeeeevigng that they know what they are talking about. As if the liberal media “television personalities” are economic experts while they are doing nothing more than parroting the government media complex and telling a preconceived logical story that they want the world to know.

Leftist’s philosophy and economics do not go hand and hand. Saying the word liberal and economics in the same sentence is quite comical and the liberal media is not a wise selection for your economic truths.

Now lets get to the real root cause of the economic meltdown, which is the increase in the cost of a barrel of oil. You say, how could oil have anything to do with the banking crisis or the mortgage meltdown or the automotive industry collapse, etc. Stop, don’t leave me here. Lets look at this from a standpoint of reason and logic, which is missing in the leftist distorted form of economics.

There are certain things that man today cannot go without. They include water, food, gasoline, shelter, and energy in that order. If you break a person down to a dire financial situation the number one priority is water and food for survival. Man will inherently do what it takes to survive and if all options are exhausted he will pick water and food over shelter, gasoline and standard energy.

So you may say why does gasoline come before shelter. One must get to work to buy the food that is needed for survival. Worst-case scenario a person could live in a tent or in their car. Sure the pride is smacked around a little in this situation but coworkers don’t necessarily need to know your living situation. Imagine the punch to your pride from showing up to work on a bus in a small city where mass transit is not a standard way of transportation as it is in NYC. Or spending an extra couple of hours each day waiting around for the bus and modifying your work schedule based on the bus schedule.

How about those who do not have bus transportation to work? We live in a society today that most people could not easily walk or ride a bike to work.

Here is another statement from the liberal media taking a different turn.

“””It is now fairly established that the recent crisis in US sub-prime housing market is the primary reason behind the global economic melt-down.”””

Now lets get back to the rising costs of gasoline and it’s effects on the US sub-prime housing market. The decision of the Organization of Petroleum Exporting Countries (OPEC) was to increase the cost of oil similar to what they did during the Oil Embargo of 1973-74. Oil is used in everything from planes, cars, tanks, fertilizer, drugs, plastics, etc, etc, etc. It is also used in the method of transportation to get food and all other products to stores. Increase the price of oil and you increase the costs of all goods.

Currently OPEC consists of Algeria, Indonesia, Iran, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. Basically a bunch of countries that have faired pretty well through this economic crisis until just recently when oil prices started to fall. This is why OPEC got back together a couple of weeks ago to decide if they are ready for another cash pump into their economies. Other non OPEC producers are countries like Mexico, Norway and Russia which often go by OPEC’s position of the day.

A little history. In 1973 on the Jewish holy day of Yom Kippur, Israel was surrounded. Egypt attacked from one side at the same time Syrians surprise attacked from the other. With help of the western states, Israli troops quickly outflanked them all and later a cease-fire was established. But on October 17th, OPEC struck back by imposing an Oil Embargo on the US and all other westerners that supported Israel.

The exact same thing has happened today with our war that the Muslims feel is a war on Islam.

Here’s the answer to “the speculators created the crisis” statement. You are probably thinking, how did Wall Street respond during the embargo? The exact same way they responded today. Speculators (investors) bought oil contributing to the crisis but they did not create the crisis. Just as the banks gave risky loans that contributed to the crisis but did not create the crisis. The 1973-74 Oil Embargo ended up being the middle of the great bear market that would see the Dow go from it’s high of 1051 in 1973 to 577 by the end of 1974 or a whopping 45% decline in almost 2 years! That’s right, the economy collapsed due to the Oil Embargo.

The federal government is fully aware of this. They are not stupid. They have intentionally created “stories” based on what seems to be “logical” reasons for the crisis via their “economic experts”. They feed these “stories” to the nonfunctional mass media that parrot these “stories” for the crisis as a means to not tell the world and the Middle East that the oil producing countries in all actuality are in complete control of our economy. Would you tell OPEC that they have you by the family jewels and there is nothing that you can do about it?

Now how does that have anything to do with the US sub-prime housing market? By it’s own definition, sub-prime loans are loans given to borrowers who would not ordinarily qualify for credit if customary underwriting standards were applied. In trade for the risk comes a higher interest rate.

The banks for the most part lent money to people who could afford to repay their debt. But they could BARELY repay it. They were risky to lend to. They were paycheck to paycheck after a loan. But they had been determined to be able to pay the debt. Just not to have anything left over.

Now add the radical jump in the cost of gasoline and an additional $300 in costs of gas per month to someone who is paycheck to paycheck. Now add the increase in the costs of goods and food adding another $200 dollars to their monthly budget and what does the scenario look like. So what comes first for survival? Food or mortgage? Gas or Mortgage? Gas or Food? Human instincts made the logical decision. You have to eat and that is a number one priority. And you have to get to work so you will be able to eat.

Those who were not sub-prime were not affected to the same degree, as there was a margin of error built in. But as crisis continues it’s ripple effect spreads throughout all income levels, businesses and the rest of the world. But the United States crisis was not entirely the direct result of other countries economic crisis. Oil was. The domino effect. The increase of the cost of gas and everything else related to it, knocked the legs right out from the world economy.

Now we have the automotive industry crash. The auto industry works within some very tight constraints when it comes to their return on investment. Contributing factors include poor investment decisions by the executives and the crushing force of the unions.

How could a company survive when they have to pay their workers 123% more in wages than the average manufacturing worker? Compare their salary to state college professors. What exactly is so special about assembly line work? Most of them have nothing more than a high school degree.

$75 is the average cost per hour of an autoworker. That is based on a 40 hour work week - with overtime this figure gets even more ridiculous.

$1,500 to $2,000 of every car goes to pay the health care costs and benefits of UAW employees.

GM pays $17 Million dollars a year for Viagra

Quite simply put, how can a guy who makes $15 dollars an hour pay for a car that is made by a guy who makes $75 dollars an hour? Especially when he was paycheck to paycheck prior to the economic meltdown which created a dire eat or pay your mortgage situation for him.

So the question now is, how exactly has Bush’s multi billion and Obama’s multi trillion dollar bailouts helped eliminate our dependence on foreign oil? How much went to useless social programs? How much paid for the Band-aids to cover the wound but not actually fix it? I would be willing to bet that almost all of it did. And, If we spent every penny of the trillions taken from the American tax payer on developing energy solutions would we have been able to completely eliminate our dependence on oil imports?

Hooch,

You make some very good points. I am from Northern Ohio and have several family members in the automobile industry. Two years ago one of my cousins who works in the purchasing department for Ford mentioned that the price of oil was having an affect on so many things that the general public was not aware of. Things such as plastics; which use oil in the manufacturing process were skyrocketing in price because of the rise in oil prices. The general public only thinks of oil in terms of automobiles most of the time, but oil has a direct influence on our daily lives in so many other ways than just our cars and transportation. I truly believe that the greatest threat to our national security is dependence on foreign oil. Imagine what would happen if OPEC decided to shutdown production for even a short period of time. You are talking about total chaos.

I am talking about armed citizens going crazy. The transportation industry would shut down, the trucking industry would shut down. Power outages across the country. It would have a much larger effect than two planes flying into skyscrapers. Not that I am lessing the loss of the people that died on 9/11 but the scale of chaos would be on a much larger scale.

You are totally right. They have got us in a strangle-hold and it doesn’t seem that we are doing anything about it more than taping up the wounds.

The interesting thing about the whole drill here concept is that it is OK for EVERYONE ELSE to drill on their lands and offshore, but not us…

My question is WHY? Our technology is better, so why not take advantage of it… Gas has just about DOUBLED over the last couple of months… this doesn’t make sense… I thought it was BUSH’s fault… :rolleyes

The Dem’s are KEEPING us from being energy independant… Americans overwhelmingly favor of drilling…

From a report I saw the other day, only about 1- 1 1/2% of the cars that were sold were hybrids… I am not against hybrids, but they absolutely cost too much to justify…

The other factor is that they keep pushing electric cars, which require more maintenance, and then want to add Cap and Trade TAX to boot, which will INCREASE electricity costs for EVERYONE… and this doesn’t include the new tax they want on these cars…

How is paying MORE for electric cars, and MORE money in a Cap and Trade TAX on electricity BOOSTING government revenue, going to make us energy indpendant?..

The elites that live in the washington bubble have no clue on how to make an economy work,why would they?only a small handful of them have ever ran anything,muchless a business.And should’nt it be a law that you have to be a governor of a state before being able to run for president?That seems like a really minor thing to qualify to me.I’m with you on the USA being energy independent…then it would take opec about 5mins before begging us to buy thier oil.We really need to start flexing muscle financially and military.Talk is cheap,recited speeches are really worthless…!!

You are right Positive and Sellnbama, the dems are doing every single thing they can to stand in front of our becoming energy independent. They are now like they always have been a my way or no way party. The republicans for too long have been compromising with them. It’s time to start a hardline divide with the dems like the Sunnis and Shiite have. Taking back this country will require force. Look at all major leadership changes in the world. Every single time that I can think of it has been done by force.

We need to create technology so good and make it so cheap that the middle eastern oil will be completely worthless. Then they will have two useless natural resources, oil and sand.

It would seem that at this time with unemployment almost 10% and climbing that the govt would pull this together for all our sake; dems and repubs,indep,everyone…,does’nt the country just need jobs and the money flowing again?Its really not hard to figure out what we have to do to fix this…unless you’re too concerned making the muslims happy,what about america!!!You knnow the country you’re supposed to be running and representing our best intrest,can you hear us mr president??Maybe if your nose was’nt so high in the air you could see whats goin on around you!!!

P.S. why be concerned with a religion right now??Again,what is his agenda,how does the muslim speech help your economy?!

Couldn’t agree more! These autoworkers made and still make more than teachers and engineers, well guess how sustainable that is.

You have picked the correct time frame but the wrong cause.

That is precisely the problem. During the 1970s and 1980s we decided that we were not going to manufacture anymore. We were going to let manufacturing occur in the lowest labor country and we were going to be a “service economy” The service economy creates a whole lot of jobs but they are $15/hour jobs and not good manufacturing jobs paying $75/hour. Henry Ford said the people that assembled his cars needed to be able to afford the cars they are building. That works as long as we still make stuff. If we all made $75/hour then gas would not be too high. As I said before when you shoot a deer through the heart he runs off and can run up to mile before he falls but he is dead already. All the parts of your body don’t die at the same time but just as that deer is dead as soon as the bullet pierced his heart the USA was dead when we let manufacturing go to the lowest labor country in this race to the bottom.

The problem is how do we get manufacturing jobs back. And if we did form a Social Tariff as Ross Perot suggested years ago, that helps our manufacturing plants compete locally but not globally as even our $15 an hour people get paid too much to be strong in this area on a world level.

If we were going to let go of low tech manufacturing we should have pumped money into high tech fields allowing for new products to be developed on a technological level that is much higher than the rest of the world. And to hold manufacturing secrets of these products close to not let them simply step into the game.

The way to get manufacturing back to the USA is just like we did in the 1940s. We picked a fight with all the other countries (WWII). You tear up all the manufacturing in all the other countries and we are the only ones left with capacity.

That is why North Korea is playing into our hands. We can willow down the work force and a war with North Korea can easily bleed over the other manufacturers, South Korea, Japan and China.

This is a good idea for getting our manufacturing back. We will need to attack China after they step in to protect N. Korea. Russia will join China along with Syria, Egypt, the Palestinians, Venezuela, Cuba and Iran.

Japan and South Korea will side with the United States as we are protecting both of them from N. Korea. The history of hate between N. Korea vs S. Korea and Japan is too long and too deep for them to team up together against America.