Recently Goldman Sachs analysts claimed there are three reasons why you shouldn’t get too excited about the economy. Now you would think those would be Obama, Geithner, and Bernanke, but they weren’t the reasons.
They were banks not lending, rising gas prices, and unseasonably warm winter weather skewing economic data.
Why aren’t banks lending? Dodd Frank has added multiple layers of compliance that has resulted in taking many more man hours to process a mortgage. One head of a mortgage department says the same amount of time is invested to process four applications as it did to process ten before the Leviathan was unleashed on banks.
That is bad enough but changing the lending guidelines to save banks from making loans that government had previously mandated, has now thrown the baby out with the bath water. Too many qualified borrowers are denied because of bureaucratic rules from bureaucrats who know nothing about mortgage loans. Throw in the penalties for making loans that go bad, the recent $26 billion lawsuit settlement, and why would banks be making loans to anyone except the four star applicants?
Rising gas prices. Obama energy policy is like a three hundred pound man sitting on the housing markets escape hatch. The insane rejection of the Keystone XL Pipeline, moratoriums, drilling bans, and intentionally slow permitting process keeps supplies down and gas prices up.
It appears Obama wasn’t satisfied with his newest record, the highest annual average cost per gallon of gas in history in 2011, he’s on track to beat that in 2012. Forecasters are calling for $4 to $5 dollar gas this year. Food has to follow gas prices and were up 11% again in 2011, some of the highest food inflation on record.
There were other records Obama oversaw in 2011, the fewest new homes built on record, and the fewest new home sales on record. EPA and OSHA mandates have driven up the cost to build, foreclosures and short sales have driven down the prices for existing homes making them more attractive to home buyers, and viola existing home sales skyrocketed to only the third worst on record.
It’s really not difficult to figure out why. For Americans lucky enough to have a job, the cost of necessities like gas and food aren’t an inspiration to run out and buy a home. Imagine living in Illinois where residents were hammered with a 67% income tax increase canibalizing their disposable incomes further.
If one looks back to the summer of 2008; what preceded the financial meltdown? Rising gas prices. What preceded the slow down in the economy in the spring of 2011? Rising gas prices. Isn’t there anyone smart enough in the Obama administration to notice this trend?