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Thursday, February 17, 2011

Simple Questions; Simple Answers

Economics and Global Finance is complicated and intricate.  It shouldn't be, but it is.  The complex language, technical terminology,etc. are all designed to keep the vast majority of people in the dark.  It is very much akin to a secret 'language' which allows others can 'communicate' openly while not concerned others will truly understand what was spoken.

So in this posting, here's simple questions and simple answers so that you the reader can fully understand what's going on in the world....

Q:  Why is unemployment so high after 26 months since the 2008 crash?

A: No incentive to hire.  Temp workers and part timers working harder and longer for less.  This allows companies to maximize profits.  Many businesses will not even look at resumes of individuals who are unemployed.

Q:  Why doesn't government do something to boost employment?

A:  No incentive to.  The banks, Wall St and investors 'squeaked'- they got the grease.  Americans have mostly been passive and timid to express anger.  Government doesn't feel any pressure to respond.

Q:  Is there any fields which are good for employment spikes in future?

A:  Anything health care related is good, especially elderly care.  Alternative energy/Green energy is an advancing field.  Security guards- jails are always being built, Soldier- you won't get paid much but there's always a war somewhere, and Banking/finance until the next crash.

Q:  Why is the price of gas going up?

A:  Oil is a  publicly traded commodity.  Commodities are dollar-based.  When Fed Chair Ben Bernanke prints more money via Quantitative Easing 1 & 2, the dollar weakens.  Allows businesses to export cheaper but Americans have to pay more for goods and services. The weaker the dollar, the more you will pay for gas.

Q:  Why is the price of food going up?

A:  Same reason.. Wheat, corn, soy, orange juice, wheat, etc...  commodities

Q:  Why does the Market keep going up?

A:  Free money spike from the Fed since Mar. 09.. now in the trillions.

Q:  So the market keeps rising in spite of high unemployment and bad housing?

A:  Yes- if things were better, the Fed would stop giving free money. This is why businesses have no incentive to hire.  The worse the unemployment stats, the longer the Fed will give businesses free money.

Q:  Does the Dow represent where America is presently?

A:  Nope. Its as accurate as a 72deg thermometer on a snowy cold day

Q: Why are interest rates on saving So low?

A:  Two reasons- low interest encourages people to borrow more which is supposed to stimulate economy while putting people into greater debt.  Also, it is a means to steer people dependent on their savings interest to survive, into the stock market.

Q:  Why are people protesting/rioting in Tunisia, Egypt, Bahrain, Algeria and other places in the Arab world?

A:  Two factors-  youth have no jobs and people can't afford the increasing food prices.   No job means no future- no hope.  No money for food means hunger, irritability and desire to eat. Third world nations feeling those factors more dramatically than western world.

Q:  Why don't Americans protest/riot?

A:  People afraid of losing handouts- Soc. Sec, welfare, 1 in 6 on food stamps... Most young people oblivious to how bad their situation is- 25.7 unemployment, student loan debts for life...  A distorted belief its their fault- an economic 'Stockholm syndrome', rationalizing and defending banks and Wall St. while 'blaming the victim'- themselves and their peers for the meltdown.

Q:  What will it take to fix the housing crisis?

A:  Prices of homes need to go way down and/or jobs with good wages become available.  Only other option is to lower standards for giving a mortgage to early-mid 2000 levels and create a second housing 'bubble'

Q:  Why is it so hard to get a mortgage?

A:  No incentive for banks to lend.  People are risky and banks already get free money from Fed via Quantitative Easing.  Fed overpays to buy toxic assets (back door bailout) then pays banks 0.75% to allow the Fed the hold the money for them instead of lending it out.

Q:  How can I tell economy is Sincerely recovering?

A:  Unemployment goes down in concert with increase in good paying jobs, housing prices stabilize, a manufacturing base returns in some form

Q: Why doesn't mainstream media tell me any of this?

A:  No incentive.  Its corporate owned- has agenda.  Also, if coverage is too negative, you will tune off.  Advertisers will be unhappy.

Q: Why has Obama the President seemed so different than him as a candidate?

A:  Immediately after winning election in '08, he fired his progressively liberal economic team.  Then hired Wall St. insiders and pro-corporate former Clinton administration appointees.

Q:  Why has Obama made so many overtures to appease Wall St?

A:  You don't get elected or re-elected without money. Lots of money.  That means donors.. corporate donors.  Lots of them.

Q:  What can I do to ride out this economic storm, now in the third year?

A:  Be smart and sensible with your money.  Budget.  Don't buy things you don't really need.  Keep some cash handy for emergencies and the unexpected like bank holidays (when the government closes the bank after a panic so no one can get access to their money), Plan and prepare for all contingencies.

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