OT: Completely OT: Inflation

[John Esak]

Why is this hard for people (even smart people) to understand?

We are closing our fiscal year. Just did the closing inventory, all the
accounting is buttoning up and so forth. With all the news and cost
increases due to oil and natural disasters like Katrina hitting us (and
everyone so hard), we are planning for the upcoming year. Want to hear some
doom and gloom?  Here goes.

We will be cutting back on everything, trying to economize everywhere and
keep costs down. We just sent out an increase letter announcing that most of
our basic prices are going up by 24 cents a pound!  Believe me that is a
HUGE number, GIGANTIC. Increases are usually is pennies, if that, and often
they may even be decreases, that is sometimes they actually go down based on
industry-wide resin prices. Every plastic company is in the same boat as us,
and must do essentially the same as us, responding to varying costs almost
minute by minute. You can bet every company our size just sent out the very
same increase letter to their customers.

My question is this. How is it that people (economists, pundits, everyone
seemingly - except me) feels that there won't be immediate HUGE inflation
everywhere. With gas at the pumps moving in the $3/$4 dollar range and
companies like us having to raise manufactured goods costs (petroleum and
natural gas based as plastic resin is) up by so much to stay in business...
How in the world will other companies who buy this stuff from us survive
without raising their prices as well? Do you see where this is going?
Doesn't everyone SEE it?  What is wrong with this picture. To hear the stock
market analysts on all four networks (and the cable channels) saying over
and over again "rising oil prices will not hurt the stock market"... I stay
in a state of appalled disbelief. It's like these guys (and gals) have
absolutely zero connection with the real world. Exactly where do they live?
On what planet? Are they fooling their network owners, too? Is that what the
media moguls *want* to hear? Is that why we are hearing it?

Based on what is happening to us, I would suggest that everyone hold on
tight. The bottom is about to fall out after all. It's going to be a rough
ride, and who knows what will shake out and who will be around after it all
comes crashing down.

Ballooned prices and unrealistic valuations can exist in the real estate
market and have for decades... but that is only because there is only one
source of "supply". The house or building is where it is, and you want it or
not based on that, period. With goods (such as we all manufacture here in
America at unbelievably inflated costs) the paradigm of supply and demand
breaks down. The same goods can be made with virtually zero (or at least 10
cent an hour labor) costs in China. So different is their economy that even
*with* the enormous increase in petroleum and natural gas raw materials
(like resin), they can produce the same goods (though not usually to our
high quality standards) and ship them over here to sell in our economy at
prices lower than we can!  America's buying power is being forced to look in
that direction. If the short-sighted executives of our companies give in and
move exclusively to buying from that source, the infra-structure of our
economy WILL die. It happened with steel and it will happen with everything
else, too. Unless we join our economy with the various other world-wide
economies in such a way that makes sense, the entire house of cards will
come down. If something doesn't bring down the cost of oil, and if the
economists of the world don't make it a level playing field for all... very
soon, there is not going to be much left to do other than watch the world
sink into utter devastation.

In regards to oil, all we can hope is that George Bush's historic move into
the Middle East to bring the sanity of civilization and human rights to the
only region of the world that hasn't been able to develop these ideas on
their own for thousands of years, will eventually, sooner than later, put
the natural resources of that area under a system and society that will
steward them for the entire planet as a sacred trust. This, rather than the
chaos that now exists there at the major wellheads of the world... which
does nothing but pour money into the pockets of a few rich families and
individuals. At some point in future history, we will look back on these
times as barbaric and savage.

As regards to the economies of all nations, a little more engineering and
development of ideas at these worldwide summits rather than recriminations
and fighting... not too mention fewer or no bombings, might do the trick.
The thing about money and its transfer is that it CAN be worked out amicably
and equitably... always has been this way... always will be this way. When
there is a win win attitudes, things work and stay working. Unfairness
fosters discontent and problems.

There is not much time left. We all better get a plan... a world-wide
plan... based on developing a new source of energy... not just for
ourselves, but for everyone. The tenet and overall view for this work must
be dedicated toward the belief that our Spaceship Earth is the closed system
that it is. Otherwise, can anyone out there see things getting better?

--
John Esak
The Valar Group
(570) 384-2444

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