Steve Skojec

Out of Iowa today comes a story about truckers, some of whom are planning to go on strike on April 1st. What they intend to accomplish by the strike is unclear. They appear to stand more to lose than to gain. But as one trucker put it, “In no way, shape or form do truckers want to hurt this country. My whole deal on this thing is that I’m shutting down on April 1. Call it a strike, a shutdown or just flat-ass going broke.”

If you don’t know why they’re striking, the answer is simple: rising fuel costs and insurance premiums are causing them to lose money on every load. Diesel has, according to this story, climbed above $4 a gallon in 17 states. A truck that does long haul runs can have tanks that reach capacities of up to 200 gallons of fuel. Imagine that - one fillup costs around 800 dollars, and by at least one account I’ve heard, that lasts for only a day-and-a-half.

Many truck drivers are owner-operators. Their rigs are their bread and butter, but making a profit with them has never been an easy living. With these additional costs, many are going out of business entirely. Some are taking out mortgages on their homes in order to subsidize their costs - and this in a market where equity is leaking like a sieve.

If the truckers have to stop, what happens to you? Think about it - just about everything you eat, wear, or use is shipped across the country, if not the world. I live in Virginia. I ate some strawberries this morning on my cereal that came from Florida. The tea in my desk drawer came from China, as did my shoes, and my phone is from Taiwan. The magazine that I have in my inbox was published in Detroit. My pen comes from Japan. My notepad, Brazil. My tissues, New York.

You know this already, but I wanted to paint the picture. Very little of what we consume and use and take for granted on a daily basis gets to us without truckers. This is yet another reason why at my house, we’re stocking up on food a little bit. Why we’re looking forward to the return of the farmer’s market in a couple weeks. Why we’re growing a garden, baking our own bread, trying to find local suppliers of meat and dairy and flour. This summer, we’ll be learning how to make cheese and beer at home.

Local economies need to be re-established, I think, or things or going to get really tough. The bright side of this is that jobs can be created out of necessity, not government programs, farmers can make a living, small businesses can flourish, and the price of oil can affect us all just a little bit less. We’ll never do away with our globalized economy, but we’re entirely too addicted to it. It’s time to be proactive about having a backup plan.

The truckers are the canary in a big, scary commerce coal mine.

With the dollar plummeting to record lows, adding to the complications that are bringing up the cost of food, oil, and just about everything else, Gold is soaring.

It’s hovering near $1,000 an ounce. 

I’d love to buy some, but my dollar never wen’t far enough BEFORE it started the downward descent into worthless monopoly money. The question that I often find myself asking when I see financial advisors telling people to buy gold (aside from the obvious “with what money?”) is how much? At one point do you have a sufficient quantity of that asset? How much of your total savings should it comprise? How long should it last you when they start running on the banks and rioting in the street?

Which reminds me…I need to get my garden planted here soon.

The Associated Press is reporting this morning that the U.S. Economy slowed in the fourth quarter of 2007 to a virtual standstill.

Recession talk grows louder, the housing market continues to decline, the dollar fell again this week as inflation went up after the Fed cut the interest rate and oil prices are setting records like an Olympic prodigy.

I don’t know if it’s better to be rich or poor when this happens. If you’re rich, you weather the storm better, but if you’re poor, you have a lot less to lose.

That’s what Professor Nouriel Roubini of New York University’s Stern School of Business thinks we’re facing, according to a story in yesterday’s Financial Times:

Recently, Professor Roubini’s scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006*. At that time, his view was extremely controversial. It is so no longer. Now he states that there is “a rising probability of a ‘catastrophic’ financial and economic outcome”**. The characteristics of this scenario are, he argues: “A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe.”

The piece is too long to do justice to in excerpts, but it’s a perspective worth reading. As dire as the predictions contained in it seem to be, what they don’t take into sufficient account is the level of debt and future obligations this country has, to the tune of $53 trillion dollars. Professor Roubini does mention the significance of America being a debtor rather than a creditor nation: “[The United States] must keep the trust of foreigners. Should it fail to do so, the inflationary solution becomes probable. This is quite enough to explain why gold costs $920 an ounce.”

What the consequences of losing the trust of foreigners will be is not specified. David Walker, U.S. Comptroller General and head of the Government Accountability Office - who will resign his long-standing position next month to be able to have the political freedom to take a more proactive role to save our economy - does talk about some of the consequences of foreign-owned U.S. debt.

I can’t embed this video here, but I urge you to watch it in its entirety. If you live in this country, this affects you profoundly. We can’t ignore it anymore.

The tax rebates are coming, the tax rebates are coming!

The big question is: “From where?”

The big answer is: “Probably from China.”

 Why? China has a huge trade surplus with the United States. A $1.6 trillon surplus. Since I’m no economist, I rely on other sources to help me figure out this stuff. And according to some sources, China is keeping this money largely in the U.S. by buying treasury notes. Since treasury notes are what we sell to finance our debt, this means that China is buying our debt, and lots of it.

So to create a $150-billion-plus economic “stimulus package”, our government - already in debt by the trillions - is having to borrow more money. If I’m understanding this correctly, that will mean more treasury notes will be sold to places like China. Now remember that China - already lending us the money we’re burning like tinder - is getting it all back in that huge trade surplus since just about everything in this country is made in - you guessed it - China.

Including, depending on how you look at it, this “stimulous package”. Which of course we’ll go on to spend on more Chinese-made goods. (For a quick synthesis on the China angle, see Glenn Beck’s take.)

Because of behavior like this, the untenable welfare/social security/medicare system, an out-of-control foreign policy, etc., the United States is saddled with an astronomical debt. There’s $9.2 trillion on the books, but there’s some tricky accounting going on. The debt we talk about in the U.S. of A. is, as I understand it, our cash debt. We have a cashflow problem, and we owe money to people for things going on today. But what our government doesn’t report in its financial figures is the cost of future liabilites - the promises we’ve made to pay going forward. Think of it as a credit card purchase. Just because you bought that Rolex today and the bill hasn’t come yet doesn’t mean you don’t owe the money.

According to the 2007 U.S. Financial Report, here’s Government Accountability Office’s included memo that tries to give the lowdown on the unaccounted for future liabilities:

Fiscal year 2007 marked the second year in which the Statement of Social Insurance has been presented as a basic financial statement. As noted above, this year, we were able to render an unqualified opinion on the 2007 Statement of Social Insurance. This is a significant accomplishment for the federal government. This statement shows that projected scheduled benefits exceed earmarked revenues by approximately $41 trillion in present value terms for the next 75-year period.

Considering this projected gap in social insurance, in addition to reported liabilities (e.g., debt held by the public and federal employee and veterans benefits payable) and other implicit commitments and contingencies that the federal government has pledged to support, the federal government’s fiscal exposures totaled approximately $53 trillion as of September 30, 2007, up more than $2 trillion from September 30, 2006, and an increase of more than $32 trillion from about $20 trillion as of September 30, 2000.

This translates into a current burden of about $175,000 per American or approximately $455,000 per American household.  (page 33)

This is wildly unsustainable. At some point, this money HAS TO BE PAID BACK. And we, the American people, are the ones holding the bag. Here’s another treat from the 2007 U.S. Financial report:

Unsustainable Debt

As noted earlier, the Government must borrow from the public to finance any gaps between expenditures and revenues. Increased borrowing leads to higher debt service (net interest) which in turn can make it more difficult to balance expenditures and revenues in the future. Chart J shows that by 2030, public debt is projected to rise to 68 percent of GDP, surpassing the non-wartime peak of 49 percent in 1993. By 2040, public debt is projected to be 128 percent of GDP, well above the World War II peak of 109 percent, and by 2080, debt is projected to approach 600 percent of GDP.

At some point before the debt reaches such unprecedented levels, the world’s financial markets would likely cease lending to the United States. Although the precise point at which this would occur is unknown, these projected debt levels cannot be sustained indefinitely. Many economists believe that persistent debt/GDP levels over 100% are unhealthy. The U.S. is projected to surpass that mark within the next 30 years, with the debt/GDP ratio at that point on a continually and dramatically rising trajectory (more than 10 percentage points per decade through 2080). Avoiding the catastrophic consequences of this fiscal path will require action to bring program expenditures in line with available resources. How soon those actions are taken will greatly influence their ultimate impact on the Nation. (page 19)

Did you notice anything off about these two paragraphs? Maybe the idea that we’re fast approaching a debt that’s 600 TIMES THE GROSS DOMESTIC PRODUCT OF THE WEALTHIEST NATION ON EARTH? How about the fact that the financial report itself characterizes the consequences of this trend as “CATASTROPHIC”?

This is why real conservatives can lend an ear to a guy like Ron Paul. Some think he’s crazy, but he’s talking sense about our economic crisis. It’s not made up, it’s just really difficult to understand.

For many (if not most) pro-lifers, economics has always weighed well below the abortion issue on the policy priority list when evaluating Presidential candidates. We are reaching a point, however, where the economic issues facing our nation are becoming a grave moral concern. What happens when we run out of money? When foreign countries dump our currency? When the dollar completely tanks? When unemployment soars?

Ever heard of the Weimar Republic? That period of post World War I Germany where inflation had spiralled so far out of control that the German Mark, which had an exchange rate of 4.2 to the American Dollar in 1914 had reached an unfathomable low of 2 TRILLION marks to the dollar by 1923? People were bringing cash to the store by the wheelbarrow full to buy things like a loaf of bread.  Nearly 1,800 government printing presses were running around the clock just to produce enough cash. (For more on this aspect of Weimar Germany, go here.)

What had precipitated this massive decline? A huge war debt, financed only partially by taxes. The bulk was paid for by loans, the sale of treasury bills, and an increased monetary supply. 

 Sound familiar?

We need to get this country’s spending under control. We are making ourselves vulnerable in so many ways. Economic crisis leads to real suffering - extreme poverty, starvation, loss of life - and the kind of instability that rising foreign powers like China can exploit.

It’s not going to happen in the next four years. This Presidential race - not full of great choices to start with - has left us with three liberals to choose from. They want to spend more, not less. They have no concept of fiscal responsibility. (Neither does Mike Huckabee, for you hangers-on).

We’re in trouble, America. The first step is facing up to the truth. If we can make that happen, we’ll have to hope we can go forward from there -  if there’s still time.