What We Need to Do Right Now

My short recipe for lower oil prices, a stabilized dollar, and lower inflation:

1. raise rates

2. balance the budget (requires non-sissy voters)

3. we all start being energy smart

Now remember, we can’t slow down the voracious demand for natural resources coming from the developing world, particularly China, but also Southeast Asia, India and Brazil – all building roads, increasing infrastructure, and increasingly automobile-using.

There is an underlying increase in the prices of natural resources because of all this – in my opinion, this won’t reverse. However, we can slow down the increase in prices that we, as Americans pay. Increasing inflation, which is partly caused by higher oil prices, and the falling dollar are intricately related.

Let’s recap again (I’ve done this in a few articles here): by lowering rates, the Fed transmitted to the world that inflation is not their major concern – and forget what they have been saying recently (they = various Fed officials). Their major concern is that they don’t want to be at the helm when the economy goes down the toilet, so they will do anything to avoid being that guy – they are not interested in going down with the ship – they think they can save the economy with monetary stimulus – but that rabbit has already been yanked out of the hat, as has his wife, and 3 kids. there are no more rabbits in the hat. So they are “hoping” that this will work. And remember, as I mentioned in THIS PAST ARTICLE, hope is poor investment thesis.

Check out this post by “Mr. Mortgage” on how inflation caused retail sales numbers to show year over year growth, and how the market took this as a good sign – my image of the genius of people on Wall Street was blown years ago, but just how dumb they are, never ceases to amaze me.

The Fed must raise rates – by raising rates, our government bonds will be more attractive to foreign investors – the downside though is that our government will have higher interest obligations – which is why it is URGENTLY NECESSARY TO BALANCE THE DARN BUDGET! By balancing the budget, and beginning to pay off debt, we show the world greater stability. Therefore, by being more stable, and attracting more foreign buyers for our bonds, and the dollars they need to buy them, we can slow down inflation.

Long term, personal energy independence is key – not just energy independence. What do I mean? Well, politicians don’t look past the end of their current term, for the most part (this is why we get bridges to nowhere). YOU MUST MAKE THE DECISION TO BE PERSONALLY ENERGY INDEPENDENT.

I am researching some ideas to help my clients do just this. On how to take the risk of rising utility costs out of the hands of government officials and the utility monopolies (that are simply extensions of the government themselves). After I have done some work, I will report back on what I find.

Chris Grande

6.12.08

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