Define An Economic Crisis

It looks like the price of a barrel of oil is coming back down. There were several factors which drove the price of a barrel of oil up to nearly $150 a barrel. Fear and the fear of a dislocation in the movement of oil along with the financial crisis taking place in the United States on not just Wall Street, but on Main Street. A crisis comes and goes. A crisis by definition does not hang around forever, because if it did, would it be a crisis?

The housing and mortgage crisis are still with us, and it will take some time before those misadventures work themselves out. I tired to write my Congressman Steve Chabot about my suggestion to extend fixed rate mortgages to 40 years from 30 years, but just received the standard canned letter so many of us receive from our representatives. With car loans now running longer and people living longer, I thought it was worth a try to suggest a 40 year fixed rate mortgage to give the housing market a chance to get its bearings. The length of the average mortgage is between 7 and 8 years as the vast majority of fixed rate mortgages get paid off before they are due because people buy a new house or need to relocate. The critical factor, as I see it, is time. Time for people to regain their confidence in the housing market. As I stated, a crisis is not a crisis if it lasts forever.

Our economy will make the necessary adjustments and we will all deal with the higher price of gas. Articles about how other countries pay more for gas per gallon, and how they have had to adjust to the rapid increase in the price of gas as well, show us what a sudden spike in price can do to any economy. It is the sudden change in price of gas that has created the problem for so many. Had there been a national energy policy in place that would have taxed gas to discourage it usage, and caused many people to reevaluate their options, we may have been paying a higher price for gas all along. But since there was no crisis after the 1973 oil embargo the idea of energy independence melted away. Now 35 years later, our dependency on foreign oil has grown and little if any thought at the national level was given to the economic implications of a similar type oil embargo. The spike in the price of gas is not without end. As inelastic as the price of gas was, the continuous price increases have shown that even gas has a point of price elasticity.

It looks like government will do more to shore up the financial markets than they will to deal with the price of gas. I guess if we had a choice, most would agree that without a sound financial system, everything else would come apart. Each individual can make their decision about how much they can afford to drive, or where they need to cut back. Unfortunately, the banking system is not that simple. But, because it is not that simple is reason enough for the Congress to take a hard look at better and more comprehensive regulation. Do not let the old line of its costing the banks profits deter you from the necessary regulation and oversight. We, the tax payers of this country, are tired of bailing out the smart ass bankers.

Stay tuned.