Killer Combo of High Gas, Food Prices at Key Tipping Point. … The combination of rising gasoline prices and the steepest increase in the cost of food in a generation is threatening to push the US economy into a recession, according to Craig Johnson, president of Customer Growth Partners. Johnson looks at the percentage of income consumers are spending on gasoline and food as a way of gauging how consumers will fare when energy prices spike. With gas prices now standing at about $3.90 a gallon, energy costs have now passed 6 percent of spending – a level that Johnson says is a "tipping point" for consumers. – CNBC
Dominant Social Theme: Trouble's a-coming. How'd it get to this? Who knows? But batten down the hatches!
Free-Market Analysis: Craig Johnson, as quoted by CNBC in this article posted last week, has a doleful tale to tell. He seems certain the US is headed for a double-dip recession. And his remarks are not so different than many being quoted in the mainstream today. The litany is always the same – higher this and higher that and a weaker dollar as well. It's a dominant social theme of the power elite: The economy is terrible, price inflation is moving up and there is nothing to be done.
While this litany of woes, presented this way, seems logical, we want to review in this article some of the underlying causes for what is going on in America and in the West. It's been our contention that the concatenation of economic woes (all coming at once as they are) are not an act of God as mainstream newscasters and economists present it, but something more calculated and deliberate. Craig Johnson makes our job easy because he has been tracking the trends and the direction in which they lead.
"Energy is not quite as essential as food and water, but is a necessity in today's economy, and when gasoline costs more than bottled water – like now – then it takes a huge bite out of disposable spending." And Johnson has some more damning factoids. Of the six US recessions since 1970, he informs CNBC, all but the 9-11 year/2001 recession have been linked to – if not triggered by – energy prices that crossed the 6 percent of personal consumption expenditures.
An aggravating factor, according to Johnson, is that food prices have moved up quickly as well. Previous recessions saw food costs around 7.5 percent to 8 percent of spending but in the last year alone, food has shot up some 6.5 percent. The damages of food and oil prices moving higher are certainly helping with the economy's "tipping point." Here's some more from the article:
Johnson estimates that food and energy eat up about 15 percent of consumer spending at today's prices, compared with about 12.7 percent two years ago. Of course, at lower income levels, these percentages are much higher. One sign of the stress some consumers are already feeling is that some AAA offices have already seen an increase in out-of-gas service calls, as motorists try to put off filling their tanks or drive around trying to seek out the gas station with the least expensive price.
Also some regions are being hit harder than others. Gas prices in Hawaii continue to set new highs, according to AAA data. The average price on Wednesday was $4.51, topping the prior record of $4.50 for a gallon of regular unleaded set in July 2008.
The point we would like to make about all the above gloomy talk is that analysts like Johnson seem (to us) to have a strange approach to the problems they discuss. One can see it in this CNBC report. Never once does Johnson discuss causes. Maybe he does it elsewhere (we doubt it) but in this article, obviously based on a research report, the troubles the American economy faces are treated as intrinsic, not extrinsic.
Of course, we beg to differ. The elements of another recession-in-the-making that Johnson recites are not merely faceless and implacable catastrophes. Each of them has its roots in human actions and taken all together in our view they represent a series of serious miscalculations. Take them one at a time to see what we mean.
Higher oil: This is undoubtedly the strangest of price movements. The US has been at war in Iraq and Afghanistan for a decade and now has begun destabilizing other countries in the region as well. The youth movements that the US and its allies have sponsored in countries such as Tunisia, Egypt and Syria have been a further destabilizing factor. These wars, whatever one thinks of them, are not acts of nature. And war is one guaranteed way to raise the price of commodities generally.
One can argue that the destabilization in the Middle East is not only calculated, it can be seen in other Western decisions as well. Chief among these decisions is the lack of aggression when it comes to chasing Somalia pirates that are making shipping around the Horn of Africa a great deal more expensive and difficult. One reads numerous articles about this scourge of piracy along with suggestions that nothing can be done about it.
We find this curious to say the least. The US, when it wishes to, will pursue its enemies to the veritable ends-of-the-earth and spare no expense in doing so. India has launched numerous attacks on the Somalia pirates – but not the US and its allies, who have often let pirates go rather than prosecute them. The impression is left behind that the powers-that-be are perfectly willing to continue to let the Somalia pirates destabilize shipping lanes in the area, which further contributes to supply and price instability.
Price swings in oil are also being laid at the feet of "speculators" that have by themselves driven up the price of oil. This same sort of speculation can be seen at work regarding the price of food, according to knowledgeable reports in the press.
The US dollar: From our point of view, the dollar has been under sustained attack for nearly a decade, but those who are doing the attacking are the Anglo-American elites themselves. The Bush administration was extremely effective at destabilizing the dollar. By not vetoing profligate spending bills and by pursuing two major wars for nearly eight years, Bush eventfully undermined the remaining pegs of support for the fiat dollar, sending it down hard. Obama's reckless spending continues to aggravate the problem further.
Food prices: This is absolutely baffling unless one accepts that a good deal of the current instability in food prices comes from speculation. Where the speculation comes from, and why, is another question entirely.
Price inflation: This is yet another outcome of the weakness of the US, a deliberately encouraged weakness in our opinion.
The world did not simply arrive at this place by accident. The central banking economies of the West – themselves deliberately put into place – caused the great economic meltdown of 2008, with which the world still struggles. But additional policies having to do with unnecessary warfare and irresponsible spending have aggravated the crisis and made it so much worse that whatever "recovery" was to be had has likely gone a glimmering.
Even the West's various reinflation programs – which one can argue have revived stock markets – are at fault when it comes to the larger employment malaise. By not allowing the banking and industrial sector to unwind itself through bankruptcy, the Westerns powers-that-be have made it impossible for many investors and entrepreneurs to know what companies are healthy and what companies are not. This has been a terrific drag on the economy.
Again, none of the economic issues that the West is suffering from have taken place in a vacuum. All of them, in fact are deliberate policies put in place deliberately. If there is a "double dip," there will surely be a clamor for blame, and yet we are certain that clamor shall just as surely be met by a chorus of voices from the power-elite-controlled mainstream media rejecting it.
The argument shall be that the choices were taken in good faith and the outcomes were unforeseeable. We find this a fairly indefensible position. The serial warring, ruinous central banking policies, endless Keynesian pump priming, these are deliberate policies with deliberate and known outcomes. One would either have to be a fool or incredibly reckless not to recognize that sooner or later such policies would combine into a kind of perfect economic storm. One thing is certain: Today's monetary and fiscal environment is no accident and as Henry Kissinger is fond of saying, "This moment of crisis is also one of great opportunity." To watch a video clip with Kissinger that promotes elite intentions to utilize the current manufactued crisis to advance plans for global governance, click here.
One can recite the litany of failures without laying blame, but to us that is a futile occupation. There is blame enough to go around and it ought to be apportioned. When it is, other factor and patterns emerge that make current events a great deal clearer. And with clarity, finally, can come comprehension and even enlightenment.