'Splain it To Me Lucy

For those of you too young to have watched Lucile Ball & Ricky Ricardo in "I Love Lucy", this was the cry from Ricky each time Lucy and her sidekick Ethel got into some wild scheme. It was all pretty tame because of the censorship in the early days of TV, but it was in re-runs daily for years. Our economy is in a wild scheme and the Federal Government is making moves they think will correct it. I liken it to the famous chocolate factory job Lucy has where she started stuffing candy bon-bons down the front of her blouse.

Now, let me see if I can 'Splain the Feds moves. I am winging this so if I get somewhere off the beam, I apologize in advance. A while back, some banks and lending institutions started aggressively loaning money to people buying houses. They would make a loan and then turn the debt into stock in rapidly expanding finance companies or sell bonds to cover the debt as the baby boomers were looking for ways to build their retirement funds. Yes, as the market caught fire because of the expanding money for housing loans the prices of housing went way up. There is a terrible disparity in the housing market. What can be bought for $100,000 here in the Heartland is worth almost a million in New York or Southern California. Add this to the expanded Student Loans and you can see that there is a lot of debt out there built on a house of cards. For the purpose of this discussion I won't even start to explain the crushing credit card debt out there at 18% or more. How people can do that to themselves almost defies logic. Not even The Feds have a good answer.

While the Citizens of the good ole' USA have been sheltered from the truth or have an inability to read the truth, the World Banks can sense the problem and have devalued the dollar. That is the biggest reason for the price increase in Gasoline. When the value of the dollar fell against the Canadian, Euro and the Chinese Yen, gasoline costs more in terms of the US dollar. This increase in cost was not based on much else. The rising cost in goods from the stores is a lot based on increased transportation costs (Diesel is over $4.00 a gallon).

Under Alan Greenspan, when the economy started to falter, the Fed under his leadership would cut the interest rate and all would be well. Well, boys and girls times are changing and the prime interest rate is now 2% (That cut is due today or tomorrow) and the Government is going to start mailing out checks this week to get us to spend the economy back into prosperity.

The question of the week is, "Will all this manipulation work or will we find ourselves in a deepening spiral?" I think I can explain it, I just don't have the expertise to prognosticate the million dollar answer.

My fear is that all the problems will lead to inflation as the house of cards starts to fall apart. The candidates for the Presidency are talking about a lot of things but expansion of the Government and its programs (focus on health care for everyone) will put more pressure on the demand for the dollar. Sometime in the next year or so, the demand will drive up the cost or continue the devaluation of the dollar. In the 70's, this led to interest rates to raise to 13-17% for housing loans. It will be great for those building a nest egg for retirement, but the increased costs will erode what they have saved.

If you don't think the rising cost of real estate is a local problem, all you have to do is look at Idaho. The people in California as they retire are moving to Idaho in droves. This has increased the housing costs there to record levels. The traditional Republican's are being out voted by Democrats moving in and they now are a change in progress in the face of their Government. A house that sells for a million can be replaced in Idaho for a couple of hundred thousand. The extra money goes into the money investment pit and the ride continues.

Where the wheel stops no one knows. The impact in the long term will be a tough ride for some. I hope you have a book of tickets and can hold on. The real problem is that not enough people even know what the problem is. Where in the reading of this did your eyes glaze over and you lost interest?

Oh well, What the Hell, What the Heck do I care?



  1. Anonymous12:31 PM

    My eyes never glazed over and I never lost interest. Of course, I am married to an accountant though.

    I think you did a good job of laying it down. People do not realize where our money comes from in the U.S. or what an incredible shell game it all is. The house of cards will eventually come down.

  2. DH has been predicting this for years. The simple truth is that the Feds have been spending (and printing) money at an expanding rate. This devalues the dollars in our pockets ( aka inflation ). Unless or Until the government quits trying to buy votes, our economy is in extreme peril. I don't see that happening. The government is now spending more than it is taking in (aka deficit spending). That means we borrow from other countries like China, then pay interest on it (with the devalued dollars that are printed). Look up hyper-inflation. That is where we are heading at an exponential rate. The people in power know this and DON'T CARE. Gas prices are high because the value of the US dollar is dropping not because Oil companies are greedy. That's my two bits which now isn't worth a plug nickel.

    MUD - you've got the perfect survival transportation. Happy Riding..

  3. I think you got it right. And another larger problem is, we have NO LEADERS who will take over and STOP the spending.