This Presidential Election will not have a winner. Whoever is chosen will have a challenge never before seen by this country. There is a high probability that the standard of living of all Americans will decline substantially during this presidency. The country has been living on borrowed time, literally. Over consumption by all income levels has produced deficits on all fronts. The airlines complain about the speculators of oil and they want their customers to pressure Congress to do something about speculation of oil. However, Southwest Airlines speculated on oil for the last two years and bet correctly. They continued to make money when other airlines were going out of business. Airlines want cheap oil but don’t think they have any obligation or responsibility to provide any customer service. Their frequent flier programs have deteriorated and now have limited value. It’s all about the bottom line (and executive bonuses). The airlines have been in denial for years. When Southwest Airlines changed the paradigm, for the most part others did not follow. Paradigm shifts are the overriding issue. There has been plenty of books written about peak oil. The Europeans have been paying substantially more for gasoline for years. Their higher taxes helped fund the public transportation system that is spectacular. You generally don’t need a rental car in Europe. Here in the U.S., unless you are in one of a handful of cities, a rental car is a necessity. Our leadership assumed cheap energy was forever.
The credit bubble which has lasted for 30 years, is bursting. Easy credit is being replaced with historic credit analysis focusing on the 3 C’S- credit, cash, and character. Recent lending practices required none of those. The top two mortgage companies, Fannie Mae and Freddie Mac, are being reported as insolvent. They have guaranteed some $4 trillion in mortgages. It does not take many foreclosures as a percentage of that total to erode their capital structure. The mortgage crisis has not yet peaked. The derivative crisis has not yet peaked. The oil price has not yet peaked. Why would anyone want to be president now?
Inflation will be with us for some time. Wages typically lag price inflation. Wholesale distributors will make inflation-based profits. Price inflation increases profits for companies with inventories. The Fed will be unable to fight inflation without taking the banking system down. They will not sacrifice the banks. Instead, the consumer will be sacrificed and the President will take the heat. I expect the next president will serve only a four year term before the population ousts him and his party’s legislators. The golden era of American dominance may be coming to a close. Global food prices will continue to rise due to energy costs AND population growth towards affluence. More and more Chinese are wanting protein in their diets.
Iran and Pakistan will provide leaders with serious challenges. Nuclear arsenals in those countries threaten global stability. Pakistan is probably the most dangerous place on the earth now. The country is unstable and has a nuclear arsenal. Border skirmishes continue with India. Israel is promoting war between the U.S. and Iran. They are doing a great marketing job to have the U.S. do their work for them.
What is the solution? Love!