03.19.08

Should Texas Be Worried About The Economy?

Posted in Around The State, The Economy at 2:15 pm by wcnews

You’ve seen the headlines, or maybe you haven’t. Well if not, here are some of them:

Texas electricity prices up more than 20 percent in 6 weeks.
Think you can get away from high energy prices by keeping the car in the garage and staying home? Not a chance.

Electricity prices have jumped more than 20 percent in the past six weeks, pushed along by rising natural gas prices, analysts say. In Texas’ deregulated electricity market, the price of electricity is driven by the cost of producing power by burning natural gas, so the two tend to move in lockstep
Insurer plans hike in May.
Farmers Insurance plans to hike rates an average of 7.9 percent in May for thousands of its Texas customers.
Record Gas Prices.
Another new high Tuesday for the fuel that gets you down the road. It caps off a four-week streak of record-breaking gas prices in Austin. In Austin, we’re paying an average of $3.17 per gallon. That’s up 25 cents from a month ago, and it’s up 77 cents from a year ago.
Estimates of Iraq War Cost Were Not Close to Ballpark.
Five years in, the Pentagon tags the cost of the Iraq war at roughly $600 billion and counting. Joseph E. Stiglitz, a Nobel Prize-winning economist and critic of the war, pegs the long-term cost at more than $4 trillion. The Congressional Budget Office and other analysts say that $1 trillion to $2 trillion is more realistic, depending on troop levels and on how long the American occupation continues.
Bear bailout can’t save shareholders.
One painful lesson of the Bear Stearns meltdown is that even firms that are deemed too big to fail can leave their shareholders feeling wiped out.
Home sales drop for eighth consecutive month.
Sales of Central Texas homes continued their downward spiral, dropping for the eighth consecutive month in February.

Home sales declined 10 percent in February from a year earlier, according to the most recent figures provided by the Austin Board of Realtors.
Employment Falls for Second Month.
In a report that was far worse than most analysts had expected, the Labor Department estimated that the nation had lost 63,000 jobs in February. It was the second consecutive monthly decline, and third straight drop for private-sector jobs.

This news does not paint a pretty picture. Not mentioned are the millions without health care, and those that do have premiums, co-pays, and deductibles rising, or stagnant wages. This week Harvey Kronberg in his News 8 column does his best to remind us that Texas (is) not immune to economic shakeups. While Texas has been relatively untouched by much of the current tragic economic news, we’re all paying more for everything. And it’s never good when there’s a “run on a bank”.

What started as a rumor turned into a near panic as investors pulled funds from Bear Stearns, fearful that the last one to the window would be unable to get their money.

Bear Stearns may have been fully liquid on Monday, but was clearly on its knees days later when the Fed stepped in. So far, we have been blessed in Texas. The economy has been strong.

Although foreclosures are increasing dramatically, our home values are not crashing and burning as they are in California and Florida — at least not yet.

Employment has been stable.

Economists think Texas may miss the worst. But when you hear that there has been a run on a major bank, all bets are off.

As simple as it may sound, our entire economy is based on trust between financial institutions and big money players.

That trust is now so badly damaged that the credit markets are frozen up and Texas is not immune.

This week, the big banks and investment houses will start issuing their quarterly reports. Some will have to report major write-downs and losses further eroding confidence in their solvency.

Will the fed have to step in to stop another run on a major bank? Who knows?

An unpopular war and a shaky economy have all put wind at the back of national Democrats this presidential year.

While Democrats may make some gains in the Lone Star state, no one expects a seismic shift. But if bank runs continue rippling through the economy, all bets are off.

That trust does appear to be damaged, U.S. Consumer confidence resumes fall. It would seem that our state leaders would planning for the worst, while hoping for the best. Instead of what appears to be a policy of believing that Texas will be immune to any economic downturn that may happen in our country. As if Texas is some sort of untouchable island of economic tranquility island in a stormy sea.

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