Thoughts On The Meltdown

MY father used to say: “We can’t all be heroes. Who will stand at the corner and wave at the heroes passing by?” A few years back Wall Street reported record profits and with this the oil price started to climb.

Matter of fact all commodities were rising and everybody was happy, but the old cliché, “What goes up must come down,” comes into play. I think many of the Wall St heroes forgot about this cliché, otherwise the meltdown would not have occurred.They were so busy chasing record profits that they did not bring into their planning a “what-if” situation.They chase the oil price to new record highs.This, according to me, is what started the whole process of the meltdown.Regular families in the USA have at least two motor vehicles per family.Remember that fuel in the USA was very cheap, even during the two Gulf Wars, compared to developing countries and the EU.As we all know petrol costs for us in Namibia makes up quite a significant portion of our budget, especially nowadays.For the USA families it did play a role but not as much when compared to a Namibian family.They also say that the average American travel about 57 miles (91 km) to and from work every day.Now think with what percentage of your budget petrol money will jump when compared to the rise of the oil price.Their pump prices change with the rise per barrel of oil, as it is completely deregulated.You as a family sit with a mortgage loan, car loan and credit card repayments and suddenly your petrol budget starts tripling in the last few months.Therefore you decide to sell one of the cars, or both, and buy something smaller.You and your family realize that you cannot afford your mortgage loan any more and it will be cheaper to rent, because you are a high-risk client, so your interest rate at the bank is higher.Therefore you let go of your mortgage.The only problem is that you are not the only family that this happens to.The USA’s GDP is about U$13 trillion per year.The closest to it is Japan with a GDP of round about U$9 trillion per year.The defaults on mortgage loan are estimated to be U$1.3 trillion, 10% of total GDP.Now OPEC wants to cut production so that the price can stay above U$80 per barrel.Why? Do they like to kick a dog when it’s down? Sometimes they give us a glimpse of their agenda when an OPEC Oil Minister says the following: “A litre of bottled water is more expensive than a litre of oil.”Yes sir, it is true, but water does not have such a severe influence on World Economy as your products do.To come back to my opening statement: When the heroes of Wall St got their big pay-outs during the good times, we waved at you.Now the gravy train has passed you want the common man to be the heroes and help you out of your mess.Will you stand on the street corners and wave for us? Theuns Dreyer Via e-mailI think many of the Wall St heroes forgot about this cliché, otherwise the meltdown would not have occurred.They were so busy chasing record profits that they did not bring into their planning a “what-if” situation.They chase the oil price to new record highs.This, according to me, is what started the whole process of the meltdown.Regular families in the USA have at least two motor vehicles per family.Remember that fuel in the USA was very cheap, even during the two Gulf Wars, compared to developing countries and the EU.As we all know petrol costs for us in Namibia makes up quite a significant portion of our budget, especially nowadays.For the USA families it did play a role but not as much when compared to a Namibian family.They also say that the average American travel about 57 miles (91 km) to and from work every day.Now think with what percentage of your budget petrol money will jump when compared to the rise of the oil price.Their pump prices change with the rise per barrel of oil, as it is completely deregulated.You as a family sit with a mortgage loan, car loan and credit card repayments and suddenly your petrol budget starts tripling in the last few months.Therefore you decide to sell one of the cars, or both, and buy something smaller.You and your family realize that you cannot afford your mortgage loan any more and it will be cheaper to rent, because you are a high-risk client, so your interest rate at the bank is higher.Therefore you let go of your mortgage.The only problem is that you are not the only family that this happens to.The USA’s GDP is about U$13 trillion per year.The closest to it is Japan with a GDP of round about U$9 trillion per year.The defaults on mortgage loan are estimated to be U$1.3 trillion, 10% of total GDP.Now OPEC wants to cut production so that the price can stay above U$80 per barrel.Why? Do they like to kick a dog when it’s down? Sometimes they give us a glimpse of their agenda when an OPEC Oil Minister says the following: “A litre of bottled water is more expensive than a litre of oil.”Yes sir, it is true, but water does not have such a severe influence on World Economy as your products do.To come back to my opening statement: When the heroes of Wall St got their big pay-outs during the good times, we waved at you.Now the gravy train has passed you want the common man to be the heroes and help you out of your mess.Will you stand on the street corners and wave for us? Theuns Dreyer Via e-mail