Individual economic predictions are usually pretty useless, and predictions of catastrophe are as ubiquitous as rednecks at a NASCAR race. Therefore when I see general doom-and-gloom predictions for the economy I tend to ignore them.
On the other hand, there is a tipping point. When both official and private sources all over the world that aren't known for being alarmist start screaming "fire!" then it is time to pay attention.
Before I make a few personal comments let me quote my sources.
The International Monetary Fund today warned authorities worldwide to "think the unthinkable" in planning to cope with a mounting crisis in the global financial system.
In the news and the blogs there have been a series of reports, valid or not, that the world is looking at a global economic downturn of significant proportions. While this maybe true or not, one thing to note is more Americans control their own retirement accounts and are subject to choice and market conditions. Are we setting up an economy of fear? Riding the wave of emotional sentiment when your retirement future is bouncing on a VIX 100 foot wave fear and uncertainty sea is no way to build a secure social safety net.
Some interesting stuff happening in the manufacturing sector. The US Dollar, despite the President's claim today that he wants a strong currency, continues to drop. Rising material costs, be it ore or petroleum, has had some unintended consequences. I noted on Daily Kos last week, that many businesses are starting to take a second look at the US given the rise in transportation costs.
Run, don't walk, to read today's article in the New York Times about how soaring gas prices, shortages due to continued subsidies, and a crashing stock market are affecting China. And make sure you check out the pictures! Here's a sampling, but read the whole article:
Returning the fueling nozzle to the pump, Zhang Li jumped into the driver’s seat of his gas-guzzling Land Rover. “Such a long line,” said the 45-year-old tour guide, shaking his head. “What’s the world coming to? My stocks are worth air, and now I have to wait an hour for overpriced gas, too.”
....
Price controls have saved Chinese consumers and businesses billions ....
U.S. employers probably cut jobs in June for a sixth consecutive month, while manufacturing contracted at a faster pace, signaling the expansion is still at risk, economists said before reports this week.
There is a fierce debate going on at across a number of economic and financial blogs about the most recent price spikei in oil. After years of seemingly orderly increase, the price of oil took off dramatically in February 2007 and even moreso in early 2008, rising from $55 a barrel only 16 months ago to $140 a barrel now -- a percentage equivalent to the move from $20+ a barrel to $55 a barrel in the entire decade from 1997 to 2007.
Clearly, something happened in the last year and a half to cause the price of oil to go "parabolic" -- the straight to the heavens chart that we have seen before in the 1920s stock market and the Nasdaq tech bubble.
When I worked as a school teacher, I never saw, touched, felt or smelled funds that were supposedly taken from me for Social Security or income taxes. The same was true for the school janitor and the superintendent of Schools. Maybe each of us had the money for an imaginary instant in the mind of some bookkeeper, but where did the money come from? Maybe where the money came from is even more important than who paid it. Obviously it came from the taxpayers in our school district.
Wage concessions were apparently key to persuading Ford Motor Co. to direct many of the 4,500 new jobs involved in building Fiestas to the Ford plant in Cuautitlan, on the outskirts of Mexico City. Union leaders at the plant told The Associated Press they had agreed to cut wages for new hires to about half of the current wage of $4.50 per hour.
"We agreed to it," said Ford union leader Juan Jose Sosa Arreola. "We need to be more competitive. That's the truth. That's a reality."
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