Little Guy Rant #2: Deer in the Headlights

By: Jill Kerr

So the Fed decided to leave interest rates where they are this month. Can you say ‘deer in the headlights’?

Bernanke is truly between a rock and hard place….he can’t raise rates as he should be doing, because of the imploding housing prices (which is like watching a slow-motion train wreck) – nor can he lower rates because inflation is undeniably rising, regardless of what those outrageous CPI figures state (and who believes them anyway? Does the government really think it’s fooling anybody with a pulse? Let’s be honest here: they’re caught between a rock and hard place with respect to honest reporting of the CPI as well – they can’t state what it really is or they’ll go broke faster paying out more in Social Security benefits.)

I don’t know about Dr. Ben, but for my family, inflation is readily apparent, even shocking. As vegetarians, we were accustomed to food bills that were considerably less than comparable meat-eating families….until a few months ago. Suddenly our food bills have skyrocketed….even though we eat a lot of cheaper protein meals including tofu, tempeh (and my partner makes a lentil loaf to die for), the cost of produce is killing us. The price of tomatoes alone is enough to cause sticker shock. What do you substitute for tomatoes? Ketchup? Even the price of that has gone up.

I travel periodically to Bermuda for my work, and as such have become accustomed to higher prices for food and gas – Bermudians are currently paying over $8 a gallon for gas, and over $9 a gallon for diesel – after which returning to US prices for food and gas still seems very reasonable. And certainly Canadians are accustomed to paying much, much more for gas. I have to say, I don’t think people outside the US really care much about Americans having to pay more for gas; in fact, some seem kind of pleased that at least we are experiencing some pain at the pumps. We really should stop whining about it….oil is a non-renewable resource, after all. It should be precious! Why shouldn’t we pay through the nose for something so valuable? We apparently have to experience a certain level of pain before we get off our keisters and start seriously looking at alternatives. Let’s put some of the American know-how to work at finding a solution to this problem. Or have our brains atrophied too much from our entitled ‘lifestyles’?

So it seems Toyota is about to pass Detroit as the leader in auto sales in the US. I say, well it should – Toyota deserves it for being farsighted enough to make those energy efficient cars. And Detroit automakers deserve their fate for not seeing the obvious. We pay a lot for those cars and SUVs Detroit has been spitting out for years – isn’t it part of an automaker’s mandate to project into the future, anticipate their customer’s future needs? Did they really have so poor a grasp of our economy’s dependency on oil and how vulnerable we are in North America to an oil price rise? Why haven’t they taken the lead in designing smaller, more energy efficient vehicles long before this? They deserve to lose their role as leaders in the auto industry. You’d think they would have learned from the 1970’s energy crisis….but no, apparently they didn’t. Got greedy with the higher margins on all those gas-guzzling SUVs and trucks. Shame on them!

The only people who are going to be relatively safe in the upcoming months and years are those who have no debt (including being mortgage- and car-loan-free), either do not have to drive very far each day or have a vehicle that’s really good on gas, and have some money squirreled away, preferably in a currency that is hedged against the US dollar (i.e. gold or silver). Everyone else – all those stupid people who went into outrageous debt to buy an impressive lifestyle, either because they were greedy or starved for self-esteem – is about to learn the hard way that ultimately, living BENEATH your means is the only true way to lasting wealth.

Certainly those who were farsighted enough to understand that saving = wealth, and too much debt = disaster, should not be punished for being smart. I personally don’t give a rat’s you-know-what for people who are so stupid they can’t understand that you never get something for nothing. And I certainly have no intention of sitting here quietly while the government (all of whom still have wonderful pensions to look forward to, at least for the time being) passes laws to bail out these idiots. Not unless renters and responsible homeowners also get equal breaks.

I hear many banks are trying to find ways to get more money to lend. You know what? I’d be happy to lend them some….but not at 3% interest. Just jack those rates to where they should be – i.e. 10-12% - and you’ll find yourself overflowing with incoming cash, boys!

Right now, I’m a deer in the headlights too – don’t want to commit any of my small amount of hard-earned (and saved) cash to a long term deposit because they will probably have to raise rates sometime soon….and I’ll be the first to take advantage of that. Meanwhile, all I can see are those headlights bearing down on me, getting closer every day. Wonder if that’s how Dr. Ben is feeling right now?