Effects of "pass through" to consumers of expenses

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It seems like the costs of y2k "compliancy" are increasing geometrically. Has anyone thought about how these will be passed on to the consumer? How might this effect the economy?

I know with the recent increase in gasoline prices, I have been unable to afford my usual 60 minute commute to work every day (justified on salary) and am working more at home. There is also the issue of reliance on "cheap imports." With the global economy effected, will America turn to more expensive "homemade" products? Do we still have the manufacturing capacity and infrastructure for some of these products? (e.g. textiles, foundaries, etc.) Will this cause a greater schism between the wealthy and the poor? Will welfare roles increase as wages fail to keep up with the cost of living? Will cottage industries become a thing of the future if fuel is difficult to obtain?

(Geez - without rails and power to worry about, I have to shift my focus - lol.)

-- marsh (armstrng@sisqtel.net), April 12, 1999


Consumers always pay the cost of whatever dynamic has occurred. Air bags make your car cost more (and the deactivating switches that followed); government mandated product labeling makes cigarettes and foodstuffs more expensive; EPA fines against industries are passed along in the form of higher prices. Find an area of modern economic life in the United States and you will find evidence of higher prices resulting from some action or inaction, much of it instigated by the federal government.

-- Vic (Roadrunner@compliant.com), April 12, 1999.

Marsh -

You must live in SoCal. Nice little sudden 60% jump in travel costs, eh? I'm currently working with the Powers That Be to get my telecommuting set up, for just the reasons you state.

Two CA refineries go off-line and gas jumps 50 cents/gal. Gosh, wonder what the effect might be if Venezuela can't ship because it's behind on Y2K fixes...

-- Mac (sneak@lurk.hid), April 12, 1999.

Mac - close - northern CA.

I think the gas hike illustrates the problem on the microcosmic scale. The sudden astronomical increase cannot be easily absorbed by many with other previously committed obligations for their income. (Because of the pass through of costs, I can no longer afford another "new" car in my lifetime, either.) With high y2k remediation expenses passed through, there will be a large number of people who drop out of the consumer pool for many items. More products will become "luxuries." Income will be reallocated to the increased expense of covering basics like power, food, fuel and clothing. Salaries won't keep up, as unemployment will increase with lower production.

Amplifying this will be the "cheap import" factor. I know textile mills closed in the south as business moved off-shore. I have heard that the United States no longer has the large foundry capacity to manufacture the large gun turrets on battleships. I know that in CA alone, 60 lumber mills have met their demise from environmental restrictions. We have lost several in our county. The latest was a family owned mill that had existed for almost half a century. Much of our timber milled in the west now comes from South America, Canada and New Zealand.

Ag imports have climbed and, currently, small farmers are folding at a record pace. They cannot complete in a depressed interntaional marketplace under the current tough US regulatory climate. Giant agribusiness is gobbling them up like monopolistic Pac Men. (For instance, did you know there are now only three major meat packers in the entire United States?)

Interesting years ahead with unsettling dynamics. Very unsettling.

-- marsh (armstrng@sisqtel.net), April 12, 1999.

You can bet the cost of remediation will be passed onto the comsumer in many ways; higher prices, lower wages, more ordinary items touted as luxuries so the "status seeking" crowd will buy them even if they have to do without necessities. My plan for the future is to do everything I can to get off the corporate goods tit. Self-sufficiency is our goal. Countryside magazine is our guide.

I was already far less involved in the "shop 'til you drop" mania than most people I know, except maybe Old Git and Rosana, but it has taken on a new dimension since Y2K awareness, which means doing my bit to not buy into the corporate brain washing plan. Buy a new car? No, I will not buy one. I'm retired, so the commute to work is no longer a problem, but I've cut my driving (we live 6 miles from town) to one tank of gas every 3 weeks.

If everyone did their best to live by the old verse, "Use it up, Wear it out, Make do, or Do without," we wouldn't be living in a world of overflowing landfills, toxic waste and pollution which is killing us and the planet.

-- gilda jessie (jess@listbot.com), April 13, 1999.

Well marsh...Here's the bad news and the good news. Your gasoline prices rose, but you still pay well below what the rest of the world pays for gasoline. Have you been outside the U.S.?

The rise in the price gasoline in your area had nothing to do with refineries in some far off place. The retail price of gasoline did not generally rise in the world. The same total amount of product was available from production at other refineries. The price rose because the retailers in you area simply decided to increase the price...knowing most people would accept the flimsy reasoning that an explosion at a nearby refinery would cause the price of gasoline to rise.

America manufactures very little. The best exercise I can tell Americans to do is to count the products in their home, driveway and office that were manufactured, assembled or use parts made by foreign companies. Compare the value of those items to the total value of all your possessions and see what the percentage is. I think you'll be surprised.

Anything with a printed circuit board in it gets tallied in the foreign cataegory...and that includes your American-made car.

Many "middle-income" Americans are actually living on the edge of financial disaster. The U.S. savings rate has now become a negative in the last few months. Americans, on average, are depleting their savings. One reason Japan is still afloat is because of the enormous amount of personal savings. The average Japanese family has savings of approximately $150.000. How much is the savings of the average American family? How would America fare in an 8 year recesssion with paltry savings and the value of their stocks cut in half. The U.S. stock market is now a true "bubble" market, in my opinion. All bubble markets burst...usually with a loud pop.

There is nothing to stop the stock market from losing 50% of it's value in a matter of days. It hashappened in other parts of the world, and America has not been vaccinated against such events.

The proliferation and lack of regulatory oversight of U.S. based hedge funds is causing severe heartburn to financial leaders throughout the world. Treasury Secretary Rubin has foresaken his responsibility to protect the American and global consumer, in favor of protecting a small group of wealthy speculators. Hedge funds intentionally created the economic "crises" of Thailand, Indonesia and Malaysia. They profited by destroying the lives of people. The more the economies dropped, the more hedge funds profited.

If hedge fund managers are willing to do that to millions of people struggling to survive in third-world nations...what stops them from doing it to you? The American market has a further potential to drop and much more money could be made by driving the U.S. market down by one third than driving down dozens of third-world nation currency or stock markets. It's not a question of morality, ethics or patriotism - it's money.

I do not hope for this to happen. I fear it happening. The massive U.S. service industry will have no one to service if discretionary spending drops. Sound economic reasoning has been replaced by clever financial schemes.

-- PNG (png@gol.com), April 13, 1999.

Thank you for your comments! Someone did post that gasoline was far more expensive in other areas of the world on another thread. I had not been aware of that. I live in a rural county where there is no mass transit. You either drive or you ride horseback or walk. I live 20 minutes by car from the nearest town of 600, so without petrol, I do not go to work.

In California, the gas shortage was caused by environmental regs. Air quality requires additives (such as MTBE) and the refineries are specially "tooled" to produce compliant gas. Adjacent states do not have this requirement, so California is isolated from the general supply. Ergo, the refinery fires were said to cause a shortage that could not be backfilled by "importation."

That does bring up the ancillary issue of our stringent environmental policies. Should we be isolated from imports by the effects of y2k, it would seem that home production will most likely go to a few very large companies that can afford the technological overhead of environmental compliance. The regs have been structured so that small producers cannot afford to comply.

For instance, if you own even one cow or horse and that animal is confined in an area that has no pasture forage and comes in contact with surface water, you could be regulated under the Clean Water Act as a Confined Animal Feeding Operation. As currently proposed by the EPA, this would require you to hire a specialized consultant to write a waste management plan. (BTW, the EPA has stated that it doesn't care if it is y2k, they will enforce all their laws in 2000, regardless of circumstances.)

Right now in California, the cost of cutting private timber for sale (even on residential property) involves acquisition of several permits and submission of a "timber harvest plan." If the area involved is over three acres, one has to hire a professional forester to write it. In our county, right now, the Dept. of forestry is asserting that any trees, whether cut for personal use (firewood) or clearing ag land of a few scrub oaks or juniper require permits. There are also several suits in California to halt all cutting in any watershed where salmon have been historically present or where water is "impaired." (Midnight firewood cutting?) The National Forests are also being systematically shut down from harvest, firewood cutting and roaded access for hunting.

The Endangered Species Act is interpreted by the agencies to prohibit any modification of habitat that "harms" a lifestage of the species. (e.g. no disking of fireprone grasslands where kangaroo rats are present.) The technical info. required in an "incidental take" permit application can usually only be written by a professional biologist. It is as though the regs. intentially favor only the large companies. If we try to default to a "self-sufficient" mode through y2k, or move back into localized industry, we will run smack into a regulatory nightmare of environmental restrictions.

Originally, this policy favored multi-national conglomerates who just moved part of their production off-shore to countries where labor was cheap and raw resources could be harvested without regulation. The American public came onboard with the lure of cheap imports. Domestic industry that could not compete was strangled.

Now we have a different scenario. y2k will surely effect the availability of these imports for some time. Large companies that can afford domestic compliance can grab a monoploy by default. I see no acknowledgement of y2k possibilities and room for self-sufficient responses in our current environmental policy of increasing federal command and control. I have been dealing professionally with the trend for more than a decade, while watching small family operators fold one by one in the process.

-- marsh (armstrng@sisqtel.net), April 13, 1999.

Of course Y2K expenses will be borne by consumers. It will all converge in a smoking heap soon. Good thread BTW.

-- h (h@h.h), April 13, 1999.

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