Podcast 298

Heavy Stories. In the first of two podcasts for the weekend of January 23rd, 2015…the heavy stories. Lots of talk about the State of The Union, whether or not a Republican Congress can govern, factions forming in the House, and all the other static. These stories have obscured for the time being, discussions of the effects of the price of oil. The low price of gas is almost always celebrated by the media as a ‘good thing’ since ‘reductions in the price of gas, act like a tax cut on the economy’. While it is a pleasurable to experience to fill up your tank for less than thirty dollars, throw in a car wash and come away with change from your fifty, we still have a long way to go before the ‘tax cut’ experience kicks in. Suddenly though, the story line has changed. Media outlets and pundits who enthusiastically endorsed lower oil prices as ‘acting like a tax cut’ are suddenly decrying ‘deflation’ in the economy, and writing stories about how deflation can only lead to ruin, and ‘something’ must be done. Meanwhile, the price of beef, milk, cheese, rice and other staples at any store, whether it is a Walmart or a ‘Whole Paycheck’ aren’t ‘deflating’ very quickly. And since wages have not kept pace with even moderate inflation, Americans will need to see further reductions in the rate of inflation (Disinflation) before the celebration begins. And what about those media outlets? Why they have found a new story line … horrible and giant oil companies that are suddenly laying of noble workers in North Dakota and Texas. What will happen when companies start laying people off, due to reduced pricing power? (Editor’s Note: They don’t mention that energy price inputs for companies are also getting cheaper.) Why is the specter of deflation terrifying? Because as money becomes worth more (lower prices mean you can buy more) if you are in debt, it makes paying back the debt that much more difficult. And, the world’s central banks are carrying a lot of debt. So are companies and individuals, and your good old Uncle Sam. Moreover, this nonsense about the United States being economically decoupled from the rest of the world is being exposed. If the rest of the world slips into recession because of bad economic policy and bad monetary policy, and bad political leadership, why would the United States escape the pain, since our policy and political leadership is just as bad as say, Europe, if not worse. This — and many other issues — will also be discussed this weekend at the SD-61 Chili Dinner AND CONTEST in South Minneapolis. Come on out! Sponsored by Mycompletebasement.com.  (Editor’s Note: 06:38 Hours: Well, I just google mapped Midland Texas and characterizing it as in the Dallas metro, is a bit of a stretch, in fact it’s more like the splits. Midland is west of Fort Worth, close to Odessa so it really isn’t as to Dallas as Plymouth, Minnesota is to Minneapolis. I seem to remember a trip to Dallas, seeing an exit for Midland and it seemed a lot closer than it looks on the map.)

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The Bob Davis Podcast

Podcast 268

Not 1995! Lots of stories in the news about real estate and consumer culture, and the state of retail. Its starting to feel like the business models that have propelled us from the 90’s aren’t working so well anymore. Now analysts wonder why millennials aren’t buying homes. Zillow theorizes that people are trapped in a high rent situation that prevents them from saving for a home down payment. There’s a greater question though. While we have been subjected to one rosy scenario after another about housing’s comeback — which really hasn’t materialized —  when repairs, taxes, assessments, interest and other costs of home loans over thirty years are considered, do you think owning really that much economical? With millennials burdened by student loans, the specter of higher lifetime social security costs and poor quality employment, is anyone really that surprised they’re not in the home buying mood? Then, when you consider higher spending and debt levels, and the pension commitments for state and local governments, would you say you think taxes will be going down, or up? Potential buyers are also factoring this in, and the cost of the urban utopia created by subsidies, federal spending and higher taxation. Finally, have you priced homes in these urban utopias millennials supposedly want to live in? By the way, a new survey says the one thing people ‘blow’ their budget on these days is eating out, all the more expensive in the ‘urban utopia’, ruled by broke hipsters. When millennials finally do start families, they’ll be looking in the suburbs for housing because its more affordable. Then there’s the retail question. This week congress decided not to tax purchases made on the Internet, much to the chagrin of retailers that have been manhandling their legislators to push for a tax to ‘even the playing field’. More and more there are examples of how retailers want to use law and licensing to fence off competition. Meanwhile their business models suck. Poor service, high prices, snooty attitudes; It’s no wonder people want to buy things on line. Uber’s fight to get into Portland and New York City are just two examples; There taxi drivers try to fence off competition by selling ‘licenses’ rather than providing a service people want. We’re on the cusp of big changes when it comes to consumer culture in America, and it’s a good thing. Sponsored by Ryan Plumbing and Heating of Saint Paul and by Depotstar. 

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Podcast 252

The Gathering Storm. Business and Economic News. The latest headlines include a Mayor who throws alleged gang signals to curry favor with unsavory characters, a video of an MIT Obama Care ‘architect’ who says the law was poorly written to fool ‘stupid’ voters (what a surprise!), and the mainstream media election 2014 chatter is increasingly vapid. Time to turn to an issue no one seems to be paying attention to, save for the financial and market watchers. As commodity and housing prices decline the mainstream media tells us deflation is bad, because falling prices mean people will ‘wait’ to make purchases. Never mind we have had deflation (dropping prices) for things like flat screen TV’s and tech for years, and people keep buying. The real problem with deflation is that governments need inflation to pay off their debts. Inflation is how governments have robbed Americans of purchasing power and hidden the ill effects of profligate spending for decades. Central Banks and governments all over the world are trying, and failing, to create inflation. Now they are terrified that slow, or no economic growth may finally be creating a deflation, which means debts will become more difficult to repay. What the mainstream media isn’t telling you about lower oil prices is, major economies all over the world are stalling, lowering demand for energy and everything else. The EU, Japan, China, Russia, India, Brazil, even the US have anemic economic growth, or they are contracting. Housing is not cooperating with efforts to stimulate. Half the people in this country make less than $28,000 a year, the average college graduate has at least 26,000 dollars in debt, making some wonder what the millennials will be buying houses with. Years of anemic economic growth is taking its toll in people out of the labor force, stagnant wages and substandard job creation. The statistics look good, but don’t tell the real economic story in the United States and the rest of the world; Things aren’t going so well. The gathering storm isn’t deflation, it’s the political reaction to it. Bill Gross said recently, stimulative efforts by governments and central banks aren’t ‘working as well as they used to’. The cure? More of the same! What about the idea that what they’re doing just isn’t working? Politicians aren’t addressing this issue at all, whether they be democrat or republican. Does this mean a disaster is brewing? Democrats want to double down on failed economic policy  (basically print and borrow more money) and Republicans don’t seem to have an agenda which will lead to the growth we need. Add to this, chaos in the world as the US withdraws … a confused foreign policy … and you have a recipe for disaster; A gathering storm. Sponsored by Ryan Plumbing and Heating of Saint Paul and by Depotstar. 

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