A Thumb-Nail Look at 2007 and the Approaching 2008

New Years Eve, Times Square, New York City

As a weekly feature writer on the Internet, I receive a lot of responses to my columns and opinions. As one would also expect, some responses come with a bit of praise and some are not very nice, (to say the least). I did receive one this week that said; “Well smart-ass, based on your expert opinion, what does your crystal ball see in it for us poor ignorant bastards in 2008?” Unfortunately, the question was not directed at any particular subject such as; with regard to the occupation of Iraq? the overall economy? the ’08 election? the increasing oil prices?........or all of it together? I therefore, wasn't really sure how the questioner was expecting me to respond. However, as we are now at the end of a very difficult year, I am making the assumption that the comment was made in regard to all these areas.

And with that in mind, here’s my view on 2007 and what to expect in 2008. And I’m afraid it's not real pretty.

Recession: Yes or No?

Here is one area that the Bush Administration can take total responsibility for, starting with the debacle of the War and Occupation of Iraq. The conflict in Iraq also started the US dollar’s on-going decline in the international money market. That, combined with Greenspan’s allowing the Federal Reserve’s over supply of US dollars, means that a recession will be difficult to avoid in 2008. Some individuals feel that the dollar’s lower value just makes US goods and exports look that much better for the economy. That may be true for the short term, but since the US is no longer the manufacturing giant it once was, other than the latest aircraft or weapons and military hardware, just what other US manufactured exports are going to look so “good” today? I believe that with the dollar’s continued devaluation, it will be very difficult for the Fed to lower the interest rate much lower than it is today. Even if the Fed does make a big move on the interest rate, it will devalue the dollar that much more and that will cause even higher increases in the price of oil.

And the Occupation in Iraq?

Actually there are too many “if’s” to consider, depending on what the House and Senate do about further financing of the occupation and what the President decides to do about Iran before he leaves office. One would hope the House gets up the nerve to stop the river of US dollars for continuing the occupation. Also, that the latest National Intelligence Estimate (NIE) Report will now take the prospect of an imminent attack on Iran off the table. But with Bush / Cheney and company, anything is possible over the last months of this administration. They may decide to go out with a “big bang” and leave the subsequent mess with the next President. Only time will tell.

I must also add that I am hoping that both Pesident Bush and Vice President Dick Cheney will be required to finally take responsibility for their unlawful actions to date. This could happen either before or after they both leave their respective offices.

What about the Oil?

The majority of world-wide oil purchases today are made with US dollars. Unfortunately, the devalued dollar has helped cause the price of crude oil to continue rising. Many countries are considering changing to the higher valued Euro as the currency of choice for their oil purchases. In 2000, Saddam in Iraq received the OK from OPEC to sell their oil for Euros. Iran has also requested to sell their oil for Euros. Other countries are looking at other very inventive, non-US dollar “bartering” for selling their oil supplies. As an example, Venezuela has stated a desire to sell their oil in exchange for the latest machinery and live cattle. Whatever the case, it is appearing that the US dollar, once the most stable currency in the world and the currency that all other countries were measured against, may be coming to an end. Increases in oil demand from China and the continuing conflict in the Middle East have also increased oil speculation. This situation and fears of further military activity in the region have tended to continue inflating crude oil pricing. As long as the US remains on a military footing in the region, I believe this negative effect on the US economy will continue

The Sub-Prime Mortgage Fiasco?

Probably the single biggest potential for a 2008 recession in the US is the sub-prime mortgage scandal. Those families that took the bait and went for the no-or- low-down-payment / low interest “adjustable rate mortgages” (ARM) are now unable to handle the rising interest rates and they are losing their homes. With a surplus of homes on the market, housing prices have plummeted and whatever equity that an ARM owner may have accrued has disappeared. One economic forecaster now refers to the approaching new year as the “Year of the Auction” for all the foreclosures expected in 2008. This is just one more example of the continued expansion of the gap between the wealthy and what was previously known as the “middle class”. New home owners are continuing to lose their investment and their homes, while the wealthy are then able to acquire that valuable real estate at just a portion of its real value. As they say, “The rich get richer and the poor”……….oh well, you know how it goes.

Secondary Effect of Sub-Prime Issues

Those financial organizations that have been forced to “write down” the debt losses from the mortgage mess have now put on the brakes. They are sitting-out on the large inventories of foreclosed homes while still observing additional lower housing prices. They have fewer buyers due to new credit restrictions and they now pay higher insurance costs.

On top of all this, the construction industry is showing withdrawal symptoms as their workers are starting to be laid-off and their suppliers are going out of business. The economy, though still appearing strong, is starting to show the signs of workers losing their jobs and beginning to stop any real spending. Home furnishing sales have begun to suffer and local governments are beginning to see lower property and sales tax revenues.

Is there any Good News?

A slow down in the economy could actually cool off the price of oil and possibly some other commodities. As more and more people continue to understand how incompetent and dangerous the current administration is and has been (and the oversight that is needed to fix it) a bit of optimism may begin to reappear. However, consumer confidence must first return to the country in order for the economy to begin showing any positive signs of growth.

When the rest of the world starts to trust America again and when there is a return to a more honest US Federal government, perhaps we will see our country getting back to being the envy of the world. Just don’t hold your breath; it won’t happen for a while. But hang in there as I’m fairly optimistic that we can get through this mess…..I think…..I hope….I pray.