The Winds of Change - Episode I

Wind is the result of pressure. Differences in air pressure result in air movement. Air movements can be mild, moderate, strong and severe. The greater the pressure; the greater the movement. Add in some heat and circulation and the air movement can get rather rambunctious. We would like to use this meteorological metaphor to discuss the winds of change that are occurring in our political, economic and financial environments. We think that these changes are going to be on our minds and affecting our pocketbooks for some time to come. We think that these changes, much as air movements, will come in variations of mild, moderate, strong and severe events. And, we think that much like weather, man would like to be in control but isn’t. We think that much unlike weather man can control his/her political, economic and financial conditions but will, instead, allow the building pressures to create the levels of movement.

To document the levels of movement, we are creating a new category of electronic links to facilitate our following these events; these changes. We have creatively decided to call the category, “Winds of Change.” It is located in the left margin and already contains a few articles that may be of reading interest. These winds will result from pressures - electoral pressures; joblessness pressures; excessive taxation pressures; debt pressures; voter dissatisfaction pressures; who knows, there may even be an example or two of prudent actions made to avert worst case scenarios but the early returns do not create optimism for this likelihood. Do not expect great first steps. Do not expect even medium first steps. At first, the steps will be political cover and more of the “time buying” pronouncements that we have grown to know and despise from our weak political leaders. Regardless, we will document the change in this new category.

If you are a faithful reader and contributor to TheFundamentals, you know that our main purpose is the reversion to fiscal sensibility and sound financial management. We wish to play a role in bringing about the end of the deficits = debt = destruction path that our governments at all levels have embraced. We suggest the simple remedial path of sacrifice and frugality. We make specific recommendations for our political leaders to follow. We really want these recommendations to be used by voters as criteria in examining candidates and deciding who to support. Our recommendations are tried, tested and true. That doesn’t mean that they will be so received. We know/hope that we will get to financial soundness and saneness and we know that a constant education process is needed to maintain focus on the process and the final destination.

Prior to the housing bubble bursting, the pressure build up was phenomenal – prices way in excess of affordability with a terrific boost from high credit pressure bolstered by the silly antics of politicians taking credit for rising home ownership and silly bureaucrats spiking the punch bowl late into the night and opportunistic fat cats pouncing with glee on the willing prey – the rest of us. The process of correction is underway. The bubble correction has been painful but necessary. There are three remaining bubbles that will not correct easily. These are:

• Government spending and its burdensome intrusion on the free enterprise economic system. This bubble has greatly expanded in the last 16 months. Is there a showdown coming? Not according to the 10 year budget projections of the new, current administration.

• Education costs and results. This bubble is massive and, mostly local. It is not going to burst without pain and suffering. It is entrenched and the powerful unions and political forces behind it are well supported at the ballot box. But, a few shingles are blowing off the roof as the winds of change rustle (click on “Documentary Takes on NJ Teachers Union)

• Health care costs. The costs in the US are at least double compared with anywhere in the developed world. The entrenched non competitive factors of bought off congress people, strong lobbyists, huge vote providing powerful unions/associations and very corrupt private interests dominate health care. Will the competitive and business environment factors that have driven most good US manufacturing jobs to foreign countries affect health care? Or, will costs just keep rising?

In our next episode on the “Winds of Change” we will look at a local example involving government intrusion, bloated costs and politicians and peer into the tent where our new president learned his union supporting ways with rather bad consequences for the business community. Stay tuned.