36 Comments

• 1. Arctic Fox  |  March 28th, 2008 at 12:53 pm

  It’s actually pretty much what some of us “lefties” have predicted. Income may rise, but people are being much more careful how they spend it, given the rising gas and food prices. This on its own isn’t enough to tip the economy into recession, but neither is it enough to rescue the economy from recession if it’s either on the edge (as you’d like to claim) or already in recession (as seems apparent).

  I find this a very good indicator of what’s going to happen to the tax rebates Bush is handing back this year, and that’s going to be the really crucial thing. If people don’t spend them increasing economic activity, but instead spend them on debt repayment or save them, that’s when the economy is going to really be in trouble, because there’s no “plan B” if it fails to stimulate economic growth.

  But we’ll just have to see.

• 2. SteaM  |  March 28th, 2008 at 1:38 pm

  “a big-spending, liberal Democrat who is entirely owned by trial lawyers and the culture of death…”

  *shakes head*

  Mark, you are a child.

• 3. SteaM  |  March 28th, 2008 at 1:47 pm

  Mark, are you suggesting that every thing is fine regarding the economy in this country? My girlfriend and I are cutting back all over the place because of rising fuel costs and rising food costs. What do you call that?

• 4. Diana Powe  |  March 28th, 2008 at 1:51 pm

  It would be terrific, because it would avoid financial hardship for people, if the economy did not go into recession. Unfortunately, the problem with the economy is not this or that blip on consumer spending but the fundamental lack of confidence in our financial system caused by the money thrown at the various novel and arcanely-structured investment vehicles based on bundled sub-prime mortgages. People who make decisions regarding investments of billions of dollars are just as susceptible to “irrational exuberance” (in the words of Alan Greenspan) as anyone else and the last few years have seen more and more dollars bet on numbers that are now turning out to be wishful thinking. That’s why you have the Federal Reserve engaging in “socialized compensation” for the big investment houses to try to keep the whole set of schemes up in the air a little longer.

• 5. Mark Noonan  |  March 28th, 2008 at 2:02 pm

  SteaM,

  I call that weird…I don’t think I’ve even considered the costs of food and fuel in my decisions…and the Mrs and I are just regular, middle class folks. Of course, it help to realise that adjusted for inflation my income is nearly 100% higher than it was back in 1987, while the inflation adjusted price of a gallon of gas is less than 90% higher, so the actual bite out of the income is less than it was when I was 23.

• 6. SteaM  |  March 28th, 2008 at 2:15 pm

  Mark,

  Since most people purchase food that is shipped from far away, sometimes from overseas, and the fuel needed to ship these products is getting more expensive then food costs will keep going up. Maybe its not affecting you right now but if the costs of fuel and food continue to increase do you think it will affect you? Or do you think that fuel costs will come down?

• 7. Mark Noonan  |  March 28th, 2008 at 2:29 pm

  SteaM,

  Heck, we know that here in Vegas - not a lot grows in Clark County, so most or our food is shipped in from California and elsewhere. But I’m just not feeling the pinch which is allegedly out there…

  Take, for instance, my car payment…when I purchased my first car, I paid $179.00 per month…that is equivalent to $309.00 per month in 2007. In 2007, I was paying $250.00 a month for a much better car. In other words, a smaller amount of real money is coming out of a much higher real income.

• 8. Diana Powe  |  March 28th, 2008 at 2:41 pm

  Bush’s job approval rating has slipped to 28%, the lowest of his presidency. In addition, just 22% express satisfaction with the way things are going in the country. This, too, is about as negative an evaluation of the course of the nation as measured in nearly 20 years of Pew surveys.
  _____

  Americans have grown steadily more negative about the national economy over the past three months. Just 11% of the public rates the economy as excellent or good, down from 17% in early February, and 26% in January. Judgments about the national economy are now as negative as they were during the recession of the early 1990s. In August 1993, 10% of Americans rated the economy as excellent or good in a Gallup survey.

  However, deepening concern about the national economy has so far not translated into more dour assessments of personal finances. As has been the case for some time, Americans are roughly divided between those who rate their personal finances as only fair or poor (51%) and those who say they are excellent or good (47%). In December 1993, just 39% rated their personal finances positively, while 60% viewed them negatively.
  __________
  Source: http://people-press.org/reports/display.php3?ReportID=407

  This neatly captures the viewpoints expressed here just this morning. Meanwhile, President Bush continues to work on the question of whether he will be the least-liked President in the history of public opinion polling.

• 9. SteaM  |  March 28th, 2008 at 2:46 pm

  Ok, Mark, you are getting a good deal on your car payments. Congrats. I just paid mine off after paying $200 a month for 5 years.

  But you didn’t address my question. Do you think that fuel costs (which affect the cost of food) will come down?

• 10. SteaM  |  March 28th, 2008 at 2:53 pm

  Also, you speak of “real money” and “real income”. That’s fine if you have real money and a good amount of incme tp urchase everyday items like food and fuel along with extras like a 45″ plasma HDtv.

  But aren’t most people spending money they don’t have? Credit cards? Home equity loans? Isn’t that the problem?

• 11. SteaM  |  March 28th, 2008 at 2:56 pm

  It’s no secret anymore that the consumer binge of the last eight years wasn’t done via increased income for most Americans, it was all done with the hot checks of easy credit. Why pay taxable interest on a loan for that fifty grand SUV when you can borrow on your house? Why just replace the countertops and the floor when you can take out a loan for seventy-five grand and gut the whole damn thing? Why just take an ordinary mortgage when you can get a couple of piggyback loans, knock the thing down, and build a big ugly box out of particle board and vinyl that extends to within 8′ of the property line and blocks the sun from your neighbor’s house but has a bigass chandelier overhanging the “bridal staircase”?

  When I was a kid, my parents used to talk about the dream of going from a $25,000 house to a $30,000 house, the latter of which maybe had an extra bath and a pool in the backyard. They knew that such things were probably just a dream, out of financial range for people like them. People like my family drove Dodge Darts and Ford Falcons, while only rich people drove Cadillacs and Mercedes and BMWs.

  Then the 1980’s came along, and people watched Lifestyles of the Rich and Famous on television and got this idea in their heads that they could have everything that rich people had, even if they had to go into hock up to their eyeballs to get it. You could drive a luxury car by leasing it. You could have that extra bathroom by taking out an equity loan. You could have the trappings of the rich — the bigass entry foyer with the chandelier, and the luxury cars and the multiple garages and the vacations in St. Barths — and the fact that the rich could buy this stuff out of ready cash while ordinary Americans had to go into hock to do it never occurred to people.

  And so the debt culture was born. Creative forms of debt allowed ordinary Americans to kid themselves that they were gaining entry into “the club” — and now they too could look down on the poor and the “welfare queens”, because those above them on the economic ladder were opening the doors and saying, “Come on in! The free lobster buffet is straight ahead on the right.” Except that there was no free lobster buffet, and the debt culture was designed not to enrich the lives of the middle class, but to anesthetize it to what was really going on — a massive transfer of real wealth to the richest Americans, hidden by the debt being made available to the middle class.

  And now the bills are coming due and Americans are only now realizing that the free lobster buffet is off limits to them. But instead of blaming the people who made the debt available and helped them get in over their heads, they’re still pointing their fingers down the economic ladder and preparing to elect another Republican president who will continue to screw them over seven ways to Sunday until there’s no more blood that can be wrung from the dry stone that used to be middle class life in America.

  Source

• 12. FoolYouTwice  |  March 28th, 2008 at 3:02 pm

  Mark,

  But I’m just not feeling the pinch which is allegedly out there…

  Ok, and that is an indicator of what? Your one lone experience is what you are using to determine the nature of our economy.

  If you never take into account the cost of fuel or food costs, then you are hardly a regular middle class American.

  Of course, it help to realise that adjusted for inflation my income is nearly 100% higher than it was back in 1987, while the inflation adjusted price of a gallon of gas is less than 90% higher, so the actual bite out of the income is less than it was when I was 23.

  This is entirely pointless. What is so special about 1987 for looking at our current economic situation? I certainly hope you make a great deal more money in your 40s than you did at 23, but none of this says nothing about the current state of our economy. It is actually quite misleading as most people will make a much higher salary in their 40s than their young 20s when they may still be in school or just getting out of school.

  While I know you normally like to avoid questions asked of you maybe this time you could be oh so kind and actually answer SteaM’s questions (your car payment is not relevant):

  Maybe its not affecting you right now but if the costs of fuel and food continue to increase do you think it will affect you? Or do you think that fuel costs will come down?

• 13. Just Another Taxpayer  |  March 28th, 2008 at 3:47 pm

  No, Mark, we don’t need a big spending secular liberal whose owned by the trial lawyers.
  We need a big spending religous liberal whose owned by the defense contractors.
  You mentioned, Hoovervilles, the product of another famous republican administration. Is that how far we have to get before your willing to admit that there’s a big problem?
  Do you think Bush and the Fed would’ve approved the injecting of nearly a trillion taxpayer (Nearly 7% of our GDP) dollars to fix a sound economy when he never even proposed doing such before if the economy were sound?
  We are, when adjusted for inflation paying as much for oil gas etc. as we ever have. Trying to get around that by citing some statistic that says we are paying less of a percentage of our income for it does not change that, just as having a higher income does not ease the pain of foreclosure on ones home, or the cost of paying for expensive medical procedures.
  People are hurting, Mark, in a place Bush was never supposed to hurt them. Their pocketbooks.

• 14. Diana Powe  |  March 28th, 2008 at 3:53 pm

  Deleted - off topic (congratulations, Diana, you’re the first person to get dinged for off topic since the “comments” thread).

• 15. Mark Noonan  |  March 28th, 2008 at 3:56 pm

  SteaM,

  Fuel costs are bound to come down because the price of oil is right now being driven by a speculative bubble which will suffer a rather spectacular collapse. We can say a lot of things about the oil industry, but the one thing we can’t say is that they are keeping product off the market, or that there is a shortage of oil…we’re awash in oil, and more and more is coming on to the market as the price has gone all out of proportion to the cost of extracting it and getting it to market.

  The speculators have pumped money into the oil futures market - and, remember, when a person buys an oil futures contract at $107.00 a barrel for May delivery, he’s actually betting that when May comes, he’ll sell that barrel he spent $107 on for more than $107. Eventually it will come to pass that the market for oil will say, “no”, I won’t pay more than “X” for a barrel…and then the people who bought futures on a bet will be forced to sell for whatever they can get, and that will start a wave of selling, pushing the price down to a more reasonable $30-j$40 a barrel with a resultant drop in the price of gallon of gas.

  When will that happen? Soon - probably in the next six months…and the longer the price stays high, the worse the collapse in oil prices will be.

• 16. Diana Powe  |  March 28th, 2008 at 4:03 pm

  Deleted - off topic.

• 17. Mark Noonan  |  March 28th, 2008 at 4:08 pm

  Fool,

  What is so special about 1987? It was the year I got out of the Navy and started to work in the civil economy…that is my economic base line, and I’m just pointing out that I’m doing better than I was when I started, so the doom-and-gloom stories just aren’t making much sense to me…and, I’ll bet, don’t actually make much sense to most people…save in the general sense of negativity about the economy out there.

• 18. Just Another Taxpayer  |  March 28th, 2008 at 4:11 pm

  But, Mark, what about the devaluation of the dollar due to overvaluation of real estate, and the feds response to the sub prime crisis by reducing the cost of borrowing from 4.5 % in January to half that now?
  Investors are dumping dollars, and moving into commodities because dollars are rapidly losing value. Oil is holding steady at $107 a barrel. It’s highest price ever.
  No way will any member of OPEC, or Russia(our 10th largest supplier) ever again accept 30 or 40 dollars a barrel. It was trading for between 60 and 70 dollars a barrel in 2005 when the US economy was booming.
  The Saudis are already talking about pegging the price of oil not on dollars but on Euros or some other STRONGER! currency.
  The dollar ain’t almighty anymore, and that’s dangerous to any economy, no matter how big, that places 70% of its strength on the consumer.

• 19. Diana Powe  |  March 28th, 2008 at 4:12 pm

  Which, of course, the “general sense of negativity” is part-and-parcel of how the economy will perform in the long run.

• 20. Just Another Taxpayer  |  March 28th, 2008 at 4:20 pm

  My mistake. $ 112 a barrel was the highest price ever reached week before last. However, $107 is well above the highest inflation adjusted price of $103.76 per barrel.

• 21. SteaM  |  March 28th, 2008 at 4:21 pm

  Mark,

  If in six months (nice <a href=”http://en.wikipedia.org/wiki/Friedman_(unit)” title=”F.U.” by the way) the cost of oil is not down to at least $40 will you apologize?

  And what if it’s actually higher than it is now with gas prices at $4 or higher? Then we will see higher fuel and food costs. Then what? Wait another six months?

• 22. SteaM  |  March 28th, 2008 at 4:22 pm

  oops… my html skillz are awesome! haha

• 23. FoolYouTwice  |  March 28th, 2008 at 4:23 pm

  Mark,

  You have proved my point. 1987 is meaningless except to you. Basing the nature of our nation’s economy on your lone experience is completely pointless.

• 24. SteaM  |  March 28th, 2008 at 4:30 pm

  Mark,

  1. Your personal experience has been that the economy is fine.

  2. Rising food and fuel costs aren’t even something you think about.

  3. You are betting that oil will be $30 to $40 dollars in the next six months.

  What if those things are not realistic? Does that ever occur to you? What if they are not? Does that maybe mean that other views that you have might not be as well?

• 25. Mark Noonan  |  March 28th, 2008 at 4:37 pm

  SteaM,

  Do you really think that $107 is a price for oil based upon supply and demand? If you do, then I’m completely wrong…but if you recognise the speculative nature of that price, then you can see that I’m right. We’ll know soon enough.

  JAT,

  The record price, prior to now, in 2007 dollars was $104 in December of 1979….couple months later, it was $89….about a year later, $80…about a year after that, it was $58…about a year after that, it was $20…the price can come down quite a lot. And I think in this market, the collapse will be much faster, because at least in 1979 there was a genuine shortage of oil.

• 26. SteaM  |  March 28th, 2008 at 4:47 pm

  In 1979 oil went up because of a genuine shortage of oil. Why, Mark, in your opinion, did it go up this time?

• 27. Joe  |  March 28th, 2008 at 4:54 pm

  Hey Mark,
  I hope you are right. I don’t personally see that happening, but I think everyone here hopes you are right.
  In the meantime, forgive me if I don’t hold my breath.

  BTW… remember 1979 didn’t have the demands for oil from China, India and other emerging nations like there is today. Also remember that Iraq is still not fully back to pre-war levels.

  * In April 2003, Cheney predicts Iraqi oil production could rise to between 2.5 million and 3 million barrels per day by the end of 2003 — up from around 2 million barrels per day the year before the war began.

  Five years later, Iraqi oil production has yet to reach the lower end of Cheney’s prediction.

  Baghdad was pumping 2.3 million barrels per day at the start of this year and expects to boost production to between 2.6 million and 2.7 million during 2008, Iraqi Oil Minister Hussain al-Shahristani told Reuters in January.

• 28. FoolYouTwice  |  March 28th, 2008 at 4:59 pm

  but if you recognise the speculative nature of that price, then you can see that I’m right.

  Just like we were supposed to see that you were right leading up to the 06 elections because you know all polls are flawed in the favor of democrats and you know the real political indicators to look for. Famous last words once again huh Noonan? Well, not last I assume. FoolYouTwice is pretty fitting.

• 29. Just Another Taxpayer  |  March 28th, 2008 at 5:04 pm

  Mr. Noonan,

  Thank you for taking time to address my question about the price of oil. However, I would like to know what you think about the devaluing of the dollar being a major part of the current price of oil, and OPEC plans to drop the dollar as
  a peg to value their on.

• 30. southerner  |  March 28th, 2008 at 5:43 pm

  You really have got cherry picking down to a fine art Mark.

• 31. southerner  |  March 28th, 2008 at 5:43 pm

  But then, you’ve had a lot of experience.

• 32. southerner  |  March 28th, 2008 at 6:00 pm

  Mark Noonan - keyboard warrior from Las Vegas, Nevada: “We’re awash in oil”.

  Jeroen van der Veer, chief executive officer of Royal Dutch/Shell from an an e-mail written to his staff in January stating that the world will peak in conventional oil and gas within the decade: “Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand.”

  SOURCE: http://www.salon.com/news/feature/2008/03/28/peak_oil_solutions/

• 33. SteaM  |  March 28th, 2008 at 10:50 pm

  Southerner,

  And if that is true then the price of oil will not go down. The cost of a barrel of oil will increase from where it is today and would probably never go down as far as $40 a barrel. Espeically with the value of the dollar decreasing as much as it is.

  So the only conclusion would be that the cost of fuel and food would continue to increase with no apparent end in sight.

  Then what happens? We starve?

• 34. Almiranta  |  March 29th, 2008 at 10:58 pm

  Let me see if I can connect the dots here:

  We really need more and cheaper oil because transportation costs are so high:

  We absolutely can’t ask Iraq for oil because that would validate the Blood for Oil bleating:

  We can’t drill for oil in ANWR or the Gulf of Mexico because—well, who knows why, the “enviros” just say we can’t:

  We have to not only subsidize but mandate increased ethanol usage due to “Global Warming”, another “enviro” feat, which decreases the amount of feed for animals, which increases the cost of food—while producing ethanol and transporting it consume vast quantities of fuel as well as adding to its cost:

  But we still shouldn’t drill for our own oil supplies?

  Here’s a For Instance: For instance, what if, five years ago, we had not been blocked in efforts to establish new oil fields in ANWR and the Gulf of Mexico, and/or in the building of at least one new modern oil refinery? Is it possible, is it remotely possible, that increasing inventory might result in decreasing price? That’s the basic rule in other areas of commerce—-why not here?

  Yet we have objections to increasing our access to domestic oil reserves. Even the Republican candidate said he didn’t think we should drill in ANWR because “it would take so long to see any oil flowing out of there”.

  Duh. That’s exactly WHY we should start now—-or more to the point, why we should have started five years ago.

  So here are a couple of ideas:

  1. Stop shoving ethanol down our throats and into our vehicles, which is also the same thing as saying stop using food supplies for vehicle fuel.

  2. Start improving our access to domestic oil reserves.

  3. Build at least two new modern refineries.

  Sorry about that—-I know how you radicals hate it when people actually try to brainstorm about how to actually solve problems, instead of just hurling insults.

• 35. SteaM  |  March 30th, 2008 at 1:21 am

  Almirnata,

  Or stop using fossil fuels for energy.

  Nuff said.

• 36. Southerner  |  March 30th, 2008 at 11:27 pm

  Almiranta,
  Thanks for another fact-free rant blaming all of the US’s problems on some sort of liberal/enviro conspiracy (this despite the fact that republicans have controlled congress and the executive for 6 of the last 7 years).

  Regarding ANWR, multiple studies conducted by independent authorities have concluded that bringing Alaska’s oil on board would not affect the global price of a barrel of oil more than a couple of cents. It would also only supply (at best) less than 5% of America’s daily oil requirements. Big deal.
  Regarding the Gulf of Mexico, you clearly know nothing about drilling for oil there. We simply don’t have the technology developed to drill there, why don’t you research your topic before going on a little rant? The chairman of Chevron has said that it would take at least 10 years to get the oil out, and that would only happen if we manage to successfully develop some of those as-yet non-existant technologies.

  And guess what? They don’t even know how much oil is down there. It could be an absolutely meaningless amount and that’s why none of the large oil companies are currently lobbying to drill there. But again, these inconvenient facts shouldn’t dissuade you from going off on another little tirade Almiranta.

  Let me ask you a question, why didn’t Bush impose minimum mileage requirements on American vehicles (as just about every other western country has) when the dangers of depending on foreign energy sources became apparent in 2001? Better efficiency would shave a good 10% off our import requirements at a stroke. But no-o-o, Bush is not about standing up to his corporate pals in Detroit, so that one went straight out the window.

  Also, if you want cheaper oil, it might not be a good idea to base you macro-economic policies around weakening the dollar. A dollar that is less than half the value that it was when Bush came in to office means imported oil is more than twice as expensive. In what sense is that the result of liberal environmentalist wackos?

  Finally, Bush has not encouraged the development of alternative fuels and energy sources in any meaningful way (this requires a vision and a funding level similar to a modern day Manhattan project). Since Bush has not had the foresight to do this we are a good 8 years behind where we ought to be in terms of the development of alternatives. Don’t worry thouogh, Europe and Japan are busy developing and patenting such technologies, maybe they’ll let us borrow some of their toys (at the cost of a hefty fee) in time for us to avoid the prospect of not being able to heat American homes through the winter.

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