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Poverty Ahead

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Do The Math – US Economic Disaster Looms

By James Donahue

Anyone who has studied economics knows that it is a science of complexities that sometimes can boggle the mind. But it doesn’t take a genius to see that a few major factors . . . the rapid rise in the price of oil, the heavy flooding of farms throughout the Midwest corn and wheat belt, and rising unemployment . . . are a recipe for big trouble.

The monster storms that have ravaged the Midwest have been big news because of the tornadoes, the heavy floods, and the many people killed, injured and left homeless. While awestruck by such disaster news that appears to be slamming at us on an almost daily basis, news reporters are not mentioning what the heavy rains are doing to the farming industry.

These are the states where most of the nation’s corn and wheat is produced. Fields standing under water during the months of May and June are either unplanted, or fresh seedlings are drowned. These two crops are among the most important foods produced in the country. The wheat goes into all of the breads and baked goods, cereals, crackers, and pasta consumed. The corn is used in producing a variety of food for humans and animals, and has been in heavy demand for the production of Ethanol as an alternative fuel for cars.

Even before the storms raked the corn belt, the world demand for corn was forcing the price of this commodity through the roof and driving the price of food up there with it. Most food products that do not contain wheat are made or in some way produced from corn.

At the same time this is going on, the nation’s unemployment rate is rising, the cost of medical care and just about everything else is skyrocketing and people are losing their homes to bank foreclosures or inability to keep up with high rent payments.

Truckers are feeling the pinch from high fuel costs not only in the United States but all over the world. Truckers went on strike in South Korea, France Germany, Spain and recently threatened a shut-down in the U.S. They say they can’t operate their rigs for profit if they have to pay the rising cost of diesel fuel.

Airlines are cutting services in a frantic effort to keep some of their carriers in the sky. Automobile dealers are crying the blues because nobody is buying those big gas-guzzling cars and SUV’s that were so popular until only a few months ago. People now are shelling out so much money for gasoline that they no longer drive much farther than getting to and from their jobs. Vacation and pleasure trips appear to be a thing of the past.

Imagine how this is going to affect the tourist industry.

We have seen this coming for several years. We were warned at least two years ago that the world hit peak oil levels and that there was a crying need to find alternative energy sources. We had our first warning back in the 1970s when the U.S. was swept with an early gas shortage that drove the price of fuel to over a dollar a gallon. Who would have dreamed then that it would be over four dollars today, and still climbing?

The problem has been that the U.S. economy is based on cheap oil. This appears to have been one of the reasons the Bush Administration launched a military campaign against Iraq. It was an attempt to gain control of that oil-rich region of the world. Our failure to accomplish that mission, and the looming threat of yet another attack on neighboring Iran, is believed to be a major reason for the big increase in the price of crude.

We are reeling today with crude oil priced at $136 a barrel. But Alexei Miller, head of Russia’s state-owned energy agency Gazprom suggested that the price could still rise as high as $250 before this is over. Can America survive that?

Indeed, the Brazil government took the 1970s event seriously and began research and development of bio-fuel technologies. That nation now grows acres and acres of sugar cane used in the production of much of the fuel it needs to operate its cars, trucks and aircraft. Brazil is now independent of foreign oil imports.

Auto producers in Japan, Europe, India and China are manufacturing small, extremely fuel-efficient cars that meet the needs of motorists. But U.S. automakers were asleep at the switch. They are only now stepping up plans to produce small and alternative energy vehicles. The best of these new vehicles aren’t expected to be on the market until 2010, and the demand for them is here today.

Europeans enjoy a vast and well-designed mass-transit system that allows people to move freely about, getting to and from their jobs and anyplace else they wish to go, without depending on driving cars at all. In the United States, we are still shutting down rail services and up until a few years ago, were tearing up track. Bus service is still available, at least between major cities, but people who use it complain that it is inconvenient, cumbersome and not always dependable.

In the long run, the sudden spike in the price of oil will be a good thing because it is going to force America to overhaul its transportation system, start using vehicles that operate not only fuel efficiently but on alternative green fuels, and stop being a consuming, throw-away society. It is time that we learn how to utilize the things we have and reduce our waste to a bare minimum.

It is also time that Americans take stock of its place in the world. It appears that we are heading for some hard times, when a lot of people are going to be not only out of work, out on the street, but standing in soup lines for what little food they can get.

Maybe then, having lost our materialism and forced to live under the umbrella of humility and suffering, we can rediscover the things in life that really count. It will be a hard lesson but if we can survive it, one that might make us a kinder, more caring people.