Roiling economy will bring political 'change'
Pub Date: 11/1/2008
When Great Falls licensee Tom Heisler says, "I've never seen anything like this," maybe we all better be sure We're heads-up.
One of the first things we were told about Heisler when we started covering the business 13 years ago is that Tom doesn't say much, but that when he does have something to say, you'd better be listening.
Heisler talked to Montana Tavern Times writer Paul Vang for a story Paul wrote on the effects of the recent economic turmoil on Montana's hospitality businesses.
It seems the economy and especially the financial sector is in the midst of a "perfect storm." Housing foreclosures are at unprecedented levels and housing starts have virtually stopped, interest rates are higher than they've been for awhile, the nation's biggest banks are wobbly or failing, credit is frozen, and major industries including and especially automotive manufacturing and retail are seeing shocking declines in sales volumes.
Layoffs are starting to become widespread, the stock markets are fluctuating wildly but mostly downward. Gasoline prices hit $4.50 a gallon back in July and oil was at $147 a barrel'; today gasoline is $2.89 and oil is $70. Folks are fearful if they'll be able to afford heat in their homes this winter, or weather they'll be able to retire, or whether their retirement nest-eggs will be fully depleted.
Wheat went to $12 a bushel and has fallen back to $4, but equipment, fertilizer, chemical and tire prices remain high. Beef prices are falling, too. The minimum wage jumped to $6.25 last year, then went to $6.35, then $6.55 and will go to $6.90 January 1 a major shock to hospitality business payrolls even while owners are battered by rising food and transportation costs.
To compound matters, the Federal Government is planning to inject $1 trillion that's 1,000 billion!'; that's one million million! into the economy, money it doesn't have and will have to print or borrow with potentially disastrous consequences. Already the national debt has increased in eight years from about $4 trillion to over $9 trillion.
We write this about four days from press time and about eight days before most readers will see it. The economy is so unstable We're uncertain what the situation will be by then. Getting this right eight days before it reaches readers is like trying to hit a bull elk at full run from 450 yards. It is a moving target, to be sure.
But in hindsight, a couple of observations are warranted.
We recall Montana Governor Brian Schweizter's words to the 2007 Montana Tavern Association convention, in effect: "Set some money aside because Montana's history is one characterized by boom-and-bust cycles'; things are booming but you can't count on that to continue."
There were signs on the wall 14 months ago and the Governor was picking up on them.
We also note that 14 months ago we wrote that media references to a "housing crisis" were overstated and premature. We were wrong on both counts.
And we are all to blame for the mess, to one extent or another: foolish borrowers who took out dangerous loans on homes they couldn't afford on the premise that the home would be worth 30 percent more in three years'; unscrupulous lenders and real estate brokers who convinced home buyers to make foolish decisions based on faulty logic and over-optimism'; banks who made the "sub-prime" loans, then sold them to other banks who sold them to investors after they were fraudulently rated "AAA" quality'; banks and investors who failed to practice due diligence for owners and investors in acquiring and selling "toxic assets"'; regulators who looked the other way as the unsound practices took hold'; politicians who gutted the regulations and regulatory apparatus and encouraged demanded? what remained to look the other way'; voters who elected the politicians while believing all the promises and lies because it was easier than doing hard homework.
So far Montana has been fairing better than most states. We may have a state budget surplus, estimated at $1 billion 30 days ago, but now being heavily hedged.
Most local Montana housing markets were not caught up in the "irrational exuberance" that infected California, Nevada, Arizona and Florida, though a few Gallatin, Ravalli, Flathead and, to some extent, Missoula counties may be pockets of trouble.
Billings will probably be okay, as will Helena, though they may see some deflation in housing prices. The Butte and Great Falls markets missed out on the heady appreciation in home values and consequently will likely escape most depreciation. But in Great Falls people nervously watch ag commodity prices slide while in Butte they warily keep track of the price of copper, which has fallen 40 percent in recent weeks.
Our Montana banks are thought to be sound, though Washington Mutual had numerous branches in Montana and it succumbed. Some businesses that rely on big out-of-state wealth are feeling the pinch and shutting down or reducing scale.
Altogether, for Montana it could be worse.
Perhaps most incredibly, all this is occurring as we are just a couple of weeks from a presidential election, not to mention for all seats in the U.S. House and one-third of the U.S. Senate seats.
Here, we have an election for Governor, Attorney General, State Auditor, Secretary of State and Public Service Commission. Half the state Senate seats are up and all of the state House seats are in play. Important local elections are also on the ballot.
We don't consider ourselves political prognosticators or pundits, but we sense that the economic upheavals will bring political upheavals with them. We sense at this uncertain time the voters will opt for what they perceive to be change , yet even the potential for real change is uncertain at best.
In the words of Tom Heisler, "we've never seen anything like this."
How it shakes out will certainly be fascinating.
Get to the polls, then hang on for what appears to be a bumpy ride.
Source: The Montana Tavern Times, November, 2008, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.