Wednesday, September 24, 2008

The Meltdown is only beginning

The dominoes keep falling, and no one seems to care, or even notice. We have the government proposing a bailout of the mortgage industry that will cost--best case scenario--$700 billion (roll that number around your heads for a while), though I think that it much more likely that it will go well past the trillion dollar figure. We have a dollar that was in freefall until a couple of months ago, when it finally levelled off. We have a deficit that is already absurd and which, if this bailout plan is finally passed, as seems likely, will reach a level from which it be impossible for us to recover, and I really do mean impossible.

How will this impact all of us? In the following fashion. Our dollar will collapse. Completely: http://www.telegraph.co.uk/global/main.jhtml?view=DETAILS&grid=&xml=/global/2008/09/24/noindex/dollar.xml&source=EMC-exp_24092008. And what will the effect of THAT be? Let me put it in terms to which everyone can relate:

1) Remember those $4/gallon gas prices from just three months ago? Well, keep in mind that oil is purchased and sold in dollars, so a dollar worth a lot less means that it will cost a lot more to buy a lot less of it. That's Economics 101. By the time prices stabilize, we'll likely be looking at gas which will cost $5 a gallon (at a minimum), and more likely $6/gallon, if not more.
2) I have four kids (and those three commando basset hounds). They cost money to feed, clothe, etc. So, that gallon of milk that you have to buy? It's now going to cost you $4. That American cheese you buy for the sandwiches? Get ready for $3+ per pound, as opposed to the current $1.99 a pound you pay on sale currently. The two litre bottle of Coke, the one that used to cost 99 cents a bottle? It'll now set you back $1.50 a bottle or more.
3) We all need clothes, shoes, etc. That pair of Levis, the one you get at BJ's Wholesale Club for $20, will now cost $25. The New Balance tennis shoes will jump up in price by at least 20%, and probably more.

I think that you all get the picture. A Dollar collapse will hit us all, everywhere. It will affect every aspect of our lives, from the way we live to, in some extreme cases, whether we live. Am I being alarmist? Maybe, but it would seem foolish on our part not to at least consider the scenario I have outlined. We can't overcome a problem by ignoring it, though too often that is exactly what our government (which is merely an extension of us) does. Can the collapse of the dollar be avoided? I don't know, but I have to hope so, because the future is frankly to scary to contemplate if it does.

4 comments:

Bookworm said...

Too depressing to contemplate. I'm practicing being an ostrich. I can't control this situation, so I'm just pretending in Panglossian way that everything is for the best in this best of all possible worlds. As long as I keep saying that over and over again, it drowns out other thoughts.

GM Roper said...

Bookworm, don't contemplate the situation, get mad as hell and tell your congress critters to vote NO on the bailout. It will hurt for a while, and then we will be stronger than ever. If mine vote yes, I'll work damn hard for their opponent in this and any subsequent elections.

Elad the Great said...

What is crazy about this situation is that it is hard to really know what solution is the "right" one and what is the "wrong" one. And it seems like our politicians don't know either. Very worrying.
Unfortunately, I think we can only decide between bad and worse measures at the moment.

Regards from Israel,
http://eladthegreat.wordpress.com

Jack said...

It is going to get worse before it gets better.