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Thread: A Bad Moon on the Rise

  1. #1
    Vulture of The Western World Eric's Avatar
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    A Bad Moon on the Rise

    There's a bad moon on the rise - in the form of upward creeping gas prices.

    Unleaded regular is surging toward $4 per gallon again - the same highs that preceded - and triggered - the current economic catatonia. If it happens again, though, the effects are going to be even worse. A man on his feet can usually take a punch. But if he's already on the ground and you kick him in the head, he's done-for.

    $4 per gallon gas is going to do exactly that to the U.S. economy - what's left of it.

    This time, unlike last time, unemployment is already close to 10 percent (closer to 20 percent, if you go by the old way of measuring that includes people who've stopped even trying to find work).

    Rising fuel prices are going to trigger more layoffs as businesses sense their cost of doing business is going up - and their likely profits about to come down.

    People who weathered the first crisis don't have the reserves built up to handle Round Two. Frosting their already precarious balance sheet with another $100 per month - just for gas, not counting higher prices for everything else, too - is going to push many over the edge.

    $4 per gallon gas will mean a lot more than just paying an extra $15 to fill-up the car. It will mean everything is going to get proportionately more expensive, from the food on your plate to the stuff down at the mall. The tag-team of rising fuel costs and increasingly worth-less Federal Reserve Notes could seal the deal this time.

    Expect unemployment to crest 10 percent - "officially" - and possibly 20 percent in the real word.

    This time, unlike last time, our remaining "too big to fail" industries - including the car companies - have already failed once and it's doubtful the government (the Fed) can print more funny money bailout bucks without triggering either a currency devaluation or runaway inflation, maybe both. The Chinese are not stupid - and they're not going to keep on buying our debt because they know we're tapped out and there's no way we'll ever pay it back. American consumers who can't buy Chinese-made stuff at Costco and Wal-Mart on their soon-to-bounce (or disappear) unemployment checks are not going to be buying cars, either.

    Ford is ok right now - and GM at least has a pulse. But neither can survive a repeat of the crisis of 2008, which was sparked by $4 per gallon fuel, which in turn caused millions of people to say sayonara to their V-8 SUVs, formerly the golden calf of the U.S. car industry.

    The industry has come about, ditched SUVs as their profit center and worked feverishly to bring forth new economy cars and also next generation hybrids and even electric cars. But the fly in the pie is that unemployed people - or people fearful of becoming unemployed - do not buy new cars anymore than they buy new houses or new anything. They hunker down. If 10-20 percent of the American public is out of the game already - and the next 10-20 percent is sweating bullets about their financial situation and wondering whether they'll still have a job next month - imagine what that's going to do to new car sales. And what that will do to the car industry.

    And what that will do to the economy - what's left of it.

    Think about the millions of suburban communities with houses whose value has already deflated by 20-30 percent, in part because people stopped buying houses an hour's commute from their jobs. These communities - and 1-hour commutes - were viable when it only cost $30 to fill up. But when your monthly fuel bill becomes a second mortgage and you're also paying 10-20 percent more for everything from food to utilities, a condo in the city seems a lot more appealing.

    Wave goodbye to the 'burbs. To quote Don Corleone: They are going to sleep with the fishes.

    Bottom line - I doubt the country can take another round of $4 gas. It almost dropped the curtain last time - and last time, we had jobs, equity in our homes and 401ks, things to fall back on. Now, we're facing a repeat with our backs already up against the wall.

    There's nowhere to go - and no help in sight.

    If you haven't taken some steps to prepare for what's coming, understand that time is short. We may only have a couple of months left before the SHTF.

    Batten down the hatches. I think it is going to get rough.

  2. #2
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    I've been hearing $5.00 per gallon. I'm already paying more then 3 and a quarter.Drivers want their SUV's too,I hear econo car sales are very weak. I guess if your going to spend lots of time behind the wheel minus well go for creature comforts? Maybe there will be a market for electric cars in the future?

  3. #3
    Vulture of The Western World Eric's Avatar
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    Quote Originally Posted by Adam View Post
    I've been hearing $5.00 per gallon. I'm already paying more then 3 and a quarter.Drivers want their SUV's too,I hear econo car sales are very weak. I guess if your going to spend lots of time behind the wheel minus well go for creature comforts? Maybe there will be a market for electric cars in the future?
    I wonder about that...

    SUVs are - mostly - middle class vehicles, not rich people's cars. At $4 per gallon, you're talking about $80 to fill up the typical 20 gallon tank. That's $320 per month (assuming one fill-up per week) or close to $4,000 annually - just for gas. Over a five year car loan, that's $20,000 - for gas!

    I don't see how that's sustainable for middle class people, especially if they have a mortgage, kids, etc. Even if your income is $100k annually, after taxes, bills, etc. you don't have that much left over.

    As far as electric cars: Until the price becomes cost-competitive with current economy cars, I see no future there.

    The Chevy Volt costs $40,000. Even with a massive federal subsidy, the car is still about as expensive as a BMW 3 series. People who can afford a car in that price range are not the ones sweating $4 gas. Not really. They may not like paying it, but they can pay it.

    What working and middle class people need is a decent $10,000 car that gets 40 MPG or more.

    That's the only thing that makes sense to me in a world of $4-5 gas, and 10-20 percent unemployment...

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