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Business & Tech

Recoveries Often Ruined By Lack Of 'Ingredients'

What, where you spend can fill in the 'recipe.'

The recipe for a worldwide economic recovery can be likened to accumulating all the cookbooks around the world and then referring to all of them to make a scrumptious chicken dish that will be accepted by every ethnicity. It is doubtful everyone will agree on taste, texture, degree of doneness, color, and spiciness. One point of concurrence rings true: if the cook or consumer cannot afford the chicken, it makes no difference about the seasonings, temperature settings or revered cooking recipes.

I just read that Germany is coming through the recession less scathed than most of the members of the European Union. In a Feb. 25 article in Time magazine, Michael Schuman writes that Germany’s unemployment rate is around 6.9 percent (down from 8.6 percent in 2008), their exports are rising by 18.5 percent, and the attitude within the country is quite positive. True, their exports are taking sales from other countries, but that comes with the territory in international trade.

The United States has shown some recent positive trends, as well. We all have been reading that unemployment claims are lessening and there seems to be more hiring, though our ranks of the unemployed are still in the 9 percent range (yes, this is still too high). Inventories are being reduced so there is a need to for the wholesalers and retailers to restock. In addition, employers are increasing paid work hours and adding staff. The attitudes of many Americans have become much less negative which bodes well towards a spending resurgence and resultant economic recovery. The weak dollar has been helping with U.S. exports, as well.

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Unfortunately, the United States, and for that matter the entire world, is seeing their "chicken" fly the coop—so to speak. This "fowl odor" is the cumulative dollars that are being spent on petrol. With the ever-escalating prices changing right before our eyes, we are losing the huge and ever-present ingredients (cash, credit, debits and checks) that should go towards fueling our hard-fought recovery.

According to a government Website, www.eia.doe.gov, our cost to buy gasoline has escalated massively. On Feb. 21, Chicago was paying, on average, $3.26 for gasoline. This week we are being plucked to pay $3.69 or more most everywhere. A year ago that gallon of gas cost around $2.79.

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What really is of a concern is that we were paying on average $3.79 on August 18, 2008, and now we will have retrogressed to that price-point, two a half years later. 2008 was when the current recovery was choking, the attitude of the consumer was very depressed, and there was upheaval in the financial markets. Is this déjà vu?

According to a March 15, 2008 article in the Boston Globe, written by Todd Wallack, Martin Feldstein was quoted as saying, "The United States has already slipped into a deep recession that could be the most serious since World War II." He noted that surging oil prices, new worries about home foreclosures, and a near collapse within the investment banking industry were all impacting the economy. He felt that the recession they were in (which we are still in) could "last longer and be deeper than the last two recessions."

During 2008, a barrel of crude oil was higher than $110 (it was just under $100 a barrel towards the end of February 2011), food prices were rising (the USDA expects food prices in 2011 to rise 2 to 3 percent this year), and gold was graphically appreciating (Reuters noted on Feb. 21 that gold had once again topped $1,400 an ounce).

Odd, isn’t it, how the confiscation of a scale, a slap on a vendor’s face, his inability to earn $14 a day selling vegetables to feed his family members, and finally this martyr’s decision to self-immolate could bring down governments and derail economies. We have not seen the end of the revolutions and changing of the guards. We, too, are definitely going to feel some of their pain—if only in our wallets and living standards. Yes, riots in sub-Saharan Africa directly affect us and the entire world. We live in a world-wide economy.

In months or years there will be less unrest around the world. Oil producers like Libya and the countries of the Middle East will eventually turn the oil taps back on. Saudi Arabia says they will make up for any major shortfall and they probably will. With all this said, just having a lag between filling tankers and delivering crude to U.S. refineries ensures that the price of gasoline will continue to ratchet up at stations in La Grange, Chicago, other suburbs and all across the nation. Since the United States imports around 60 percent of all oil consumed, we are dependent on stability in foreign lands to guarantee a vital ingredient of our country’s economic recovery.

To use my wife and myself as an example, we pump about 25 gallons of fuel each week between our two vehicles to keep them operational. Because of escalating prices, we have roughly $25 less each week—from a year ago—to spend. In a year, that adds up to $1,200. According to the U.S. Census Quick Facts (2009 and before), there are about 106 million households in the United States with an average population of roughly 2.6 people per (these numbers are fluid). Assuming $1,200 per household times the number of households, the United States can expect to see a reduction in our consumption by $127.2 million. Those are dollars that are needed to facilitate our nation’s recovery.

Don’t lose sight of the fact that you are a very important part of the health of our local economy. What you spend and where you spend it is akin to the life blood or "missing ingredient" that determines if there will be a main course at the end of the day. To quote James Boswell, "A dinner lubricates business." Conversely, by spending and working together, we might be the causative agents that ensure that there are chickens in all the merchants’ pots.

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