Kona Kohala Blog

The Consumer Price Index (CPI) rose 0.6% in the first quarter of 2010, good news.  This means people are spending more and since consumer spending makes up 70% of the Gross Domestic Product (GDP) things are looking up . . . or are they?

Take home pay only went up 0.3% so where did the spending money come from?  Savings accounts or credit cards or college savings, hmm?  People were saving more so there may have been money in savings to withdraw.  Hopefully, people have realized the dangers of using credit cards and if one of their kids is the next Facebook designer or You Tube creator, maybe they won't have to worry about money, or not.

The indomitable American spirit used to refer to us getting down to business, rolling up our sleeves and turning to, getting busy and producing.  Today that spirit means putting on our Manolo Blahnik's or Christian Louboutin's and slipping into an Armani Collezioni or Emilio Pucci and going shopping.  We have become more consumer than producer and sometimes that means dipping into our savings accounts, after all, how long can we be expected to be frugal?

So while this may look good to certain liberal spinmasters a conservative perspective says this can't be good.  We are once again living beyond our means.  At least when people were socking their money away in savings accounts we could pretend they were saving for a new home or retirement.

Real estate prices continue to decline in West Hawaii even though sales activity is still rising.  My guess is that the declining prices will continue while the sales activity will begin to decline, soon.  The pool of buyers we're looking at is finite, it's a group that was created in the past, those wise enough to live within their means and save their money, maybe even pay off their homes.  They're on the side lines watching the market and jumping in when what they want hits the price they're willing to pay.

There are so many foreclosures and short sales on the horizon that even once the government reports a slow down in monthly numbers among these groups, the back log will take a couple of years to dwindle down to normal market numbers.

We need to see the CPI and the take home pay reverse their relative positions, more take home and less spending.  We need to see the unemployment figures turn around, we can't have a sustained jobless recovery.

The biggest improvement in the employment figures are in the public sector, out pacing the private sector by two to one.  The last thing we need right now is a bigger federal government, more people feeding at the public trough being fed by fewer and fewer tax payers.  Please Mr. Obama, if you won't follow Ronald Reagan's example, read Atlas Shrugged by Ayn Rand or The Richest Man in Babylon by George Samuel Clason.  Either one will maybe, just maybe open your eyes to the reality of what you're doing to this country and our economy.

At least those of you smart enough to work hard and save, those of you interested in investing in real estate, you have a bright future.  With prices still dropping and interest rates being held artificially low for the foreseeable future you can capitalize on some great deals, even here in paradise.  I don't see any change coming at the top, at least not until November, but even then I think we're too entrenched in the direction we're headed.  It's going to take until 2012 since it doesn't seem that any amount of outside influence is going to change our head long plunge into debt and social dischord.  It's going to be a tough road back to where we were but at least it will give us something to do for the next 30 or so years.