Thursday, February 10, 2011

My View

Random thoughts from your resident curmudgeon...

We recently heard President Obama talk about the "tough" budget cuts that he was proposing as a move toward fiscal discipline for our nation. As citizens, we hear about these tough cuts and think that we as a nation are finally starting to do the right thing from a financial standpoint. Perspective is so important in these discussions, and seeing what is going on is, in my view, often more important than hearing about what is going on. The pie chart above has 3 colors to represent the current 2011 budget (the blue sector); the projected deficit that our nation will have in June, which is the end of our nation's fiscal year (the red sector); and for comparative purposes, the proposed budget cuts by President Obama (the green sector). What's that? There is no green sector? Well, yes there is. Let me magnify the chart above by a factor of 100.

Oh, there is that green sector. And such a cute little thing, don't you think? Here is the point. The budget for our country in 2012 is projected to be roughly $3.8 TRILLION; our projected deficit (or overspending) is projected  to be $1.5 TRILLION in 2012. The "tough" budget cuts are estimated to be $775 MILLION. No joke. The absurdity of this is that we have leaders in Washington from both parties that cannot seem to live in the real world and eliminate wasteful spending and shut down unnecessary programs. They would rather spend your tax dollars on what they believe will get them re-elected, regardless of the financial consequences. It is time for all of us to hold our elected leaders accountable for their profligate and unrealistic spending. Washington, we are ready to see some seriously tough cuts in government spending.

Some people live life in the fast lane. I live in oncoming traffic.

Have you heard of the expression "peak oil"? That is the scenario that says oil production for the entire planet has maxed out and cannot increase, due to finite supply and growing demand. Peak oil has been theorized, and fears of this phenomenon were partly responsible for driving the price of a barrel of crude oil to nearly $150 dollars a barrel two years ago. However, peak oil has has been projected to occur in the far distant future as the world's oil supplies are depleted and the demand for oil continues to rise. One of the factors that has allayed this fear has been the vast oil reserves of our Mideast ally and primary oil supplier, Saudi Arabia. Saudi Arabia has been able to increase the output of crude oil when necessary to stabilize prices, even if other major oil producers had at various times curtailed supply. In fact, our energy policy in this country has been built around, among other factors, the supposition that if necessary, ARAMCO, the Saudi oil monopoly, could produce upwards of 12.5 million barrels of oil per day to meet our demands as well as stabilize world prices. This was premised on the belief that the proven oil reserves of ARAMCO were 750 billion barrels. Guess what? According to cables from the U.S. State Department that were part of the WikiLeaks information dump, Saudi Arabia may have overstated their reserves by 300 billion barrels, or 40%. This is according to an ARAMCO geologist and former head of exploration, Sadad al-Husseini. The problem is that although ARAMCO disputes this information, there is no way to verify the data. Peak oil may not be so far off in the future, and if not, look for oil prices to rise significantly. And all of this points out the fallacy of not developing the sources of oil that lie within the borders of the United States.

Have you noticed that animal rights activists are more adamantly opposed to fur than leather? That's because it's much safer to harass rich white women than motorcycle gangs.

Get ready for even higher food prices. The price of corn has doubled over the past six months, and is expected to go higher. The per bushel price is now $7.00 up from around $3.50 in August. The impact of rising corn prices is felt throughout the food chain. Look for prices of chicken to rise first as the processing cycle for poultry is very short  and the price of corn, the primary feed stock, affects those prices almost immediately. The effect of rising corn prices affects pork after about a year, and beef in about two years. Tyson Foods has projected prices for chicken, beef, and pork, to all rise this year as the cost of corn rises and processors pass along these increases. Additionally, corn price increases affect the price of high fructose corn syrup, used in numerous food products and drinks, and the price of this corn based product has been soaring, leading to increases in other areas of the grocery store. The U.S. Department of Agriculture noted in a year end report that U.S. corn supplies are at their lowest level in 15 years. Global demand, as overseas economies have grown and more people are eating healthier is a major driver of this shortage. Also, our energy policy has diverted 25% of the corn crop into ethanol production. These factors have combined to propel our food costs to levels not seen in many years. It appears as if 2011 will continue that trend.

Most clouds have a silver lining, except mushroom clouds, which have a lining of uranium 238 and strontium 90.

And that, my friends, is my view.

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