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Friday, November 7, 2008

Dumb Luck Investing: Commentary

The oil price bubble cost consumers, and many large and small businesses, every spare dime that they had available, and then drove (pun intended) them into unfathomable dept. Not only is all discretionary cash gone, discretionary credit lines (mainly credit cards for consumers and many small businesses) are also gone. All of that credit card debt will take a vast amount of time to pay off at the current usury rates. Gone are the days, at least for now, when consumers and small business could tap home equity to provide needed relief. The housing market crash, the derivatives crash, and the credit market freeze are all big issues, but fuel-costs broke the back of the camel.

This unsophisticated armchair economist would suggest that our government, current or pending, might wish to:

A) Henceforth, do whatever is in the power of government to stabilize fuel and energy prices. If they want to see a total economic disaster, worse than in 2008, let gasoline and diesel again surge past $4.25 per gallon during 2009. Our economy runs on oil, like it or not. Airlines cannot fly jets on solar energy. Oil at $140 per barrel was speculative nonsense; some still suspect criminal manipulation.

B) Insist that the lending institutions that are being “bailed out” with OUR tax dollars in turn “bail out” the consumers buried in credit card debt. Yes, I mean force the lenders to lower the damn credit card interest rates and kill the onerous penalty fees.

For the economy to recover, consumers and businesses need to get out of debt. Nobody can buy without having cash or credit, and if nobody is buying, this economy is going nowhere but down. Stimulus packages that give us all a touch of cash are fine, but relief from credit card interest rates would go much further.

Lest someone think I am looking for a break, I carry NO credit card debt from month to month, and my finances are sound. Being a conservative, I despise rewarding bad-behavior, but if our government is going to bail out the big lenders with our tax-dollars, the least government can do is force the big lenders into helping those taxpayers who “screwed up” and those taxpayers victimized by the big lenders. That’s not socialism, that’s justice. Our largely unregulated finance industry makes the Mafia look benevolent.

Barack Obama and the Democrats soon will have near total charge of a ship run aground. Wish them well, help them make their changes, and hope that they make changes that count.

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