Monday, October 29, 2007

Recession - Inflation

What concerns me is not "if" there will be a recession in 2008, because I believe that there will be, but what can we expect the impact to be on senior citizens on a fixed income.

For openers, the Bush Administration is engaged on a deficit spending spree similar to a drunk sailor on shore leave for the first time in two months.

The US federal debt exceeds $8 trillion; the value of our entire national output of goods and services (GDP) in 2004 was only $12 trillion. The debt is growing due to deficit spending, which has reached record levels under this administration. And we are paying in excess of $400 billion in interest payments annually on this debt. Hmm-m-m-m. NASA has a $15 Billion budget. The U.S. Department of Transportation has a $56 billion budget and the Education Department has a $61 billion budget. I think the national debt and the interest on it are out of control.

But the public doesn't see the deficits because the media doesn't connect the dots vis-a-vis the 'off-budget' supplemental appropriations to support Bush's adventureism in Iraq and Afghanistan.

The U.S. taxpayer is not being asked to finance this phony war, I mean we couldn't raise taxes could we ? So China is financing it by lending the money to the U.S.

Now, the price of crude oil, worldwide, is always in U.S. dollars. As the value of the dollar erodes, the price of oil goes up. Granted the $90 plus cost per barrel of oil is the cost on the 'spot' market, which is impacted by current events, and does not have an immediate effect on consumer energy prices. Why, you ask? That's because all the big time users of petroleum products have forward priced the next six to twelve months expected use of oil.

But the price the consumer pays will go up by next Spring. And as everything that uses any form of petroleum goes up (home heating oil, cost of transportation, most plastics) so will inflation. The consumer will have less discretionary money to spend. That along with the effects on employment caused by the drastic reduction in housing starts, will have a strong negative impact on the economic health of the U.S.A. and of the world.

And all of that will impact various groups in what way? And can we expect any help from the Bush Administration? I'll answer the second question first. Like Hoover did in 1930. Like Bush did after Katrina.

My guess that the single parent/single income families will be impacted the greatest. These are the folks that are living paycheck-to-paycheck and are never able to save for a rainy day.

A lot of college educated skilled workers will probably find themselves in dire economic straits. Companies that supply the home building industry will scale back operations and other companies will move operations to lower cost areas outside the United States.

Bur Seniors are my concern. Because I am retired and on a fixed income. I don't think old models will work because I don't feel that President Bush will do anything to alleviate suffering during the upcoming recession. So here are some of the thoughts going through my head:

Do I pay off as much debt as possible between now and whenever the gov't acknowledges that we are in a recession (like they refuse to admit there is a civil war in Iraq).
Will I be better off to pay down debt?
Will I be better off putting excess money back for emergencies?
Will the gov't reduce Social Security and my Navy Retirement incomes in the face of the recession.

As I have no job to lose, will the recession negatively impact me at all?

As I said above, this is uncharted territory. We have not had an administration that cared less about the American people since Herbert Hoover was president (1929 - 33). So I am open to and actively soliciting any thoughts and/or suggestions on the subject of preparing for the coming recession.


Kathy said...

Wow, great post, Chief.

Chief said...

Thank you :-)