WAR, PEACE & PEOPLE

Wednesday, January 23, 2008

Recession?

Well, I have been forecasting a U.S. recession in 2008 for more than four years now largely because of the bow wave effect caused by the ruinous war expenditures linked to structural weaknesses in the economy such as: The fast rising National Debt; the Balance of Payments crisis; the soaring costs of Energy; an excessive dependence on Credit - and so on.

In essence, the Bush expansion has been financed through borrowing and has focused more on consumption than investment so its demise has been an accident waiting to happen. Nonetheless, I did not expect the rest of the world to panic, to the degree it has, at the same time. One has to wonder how many banks and other financial institutions worldwide have been infected by the sub-prime fiasco or been sold some other financial derivative of little or no value. Could it be that Wall Street is deeply and fundamentally corrupt? Yes, it could. Add in the fact that globally bankers are like lemmings and we could be looking at a bigger financial disaster than a U.S. recession.

How so? All too many foreign financial institutions seem to have bought the dubious financial products marketed by Wall Street to the tune of not hundreds of billions, but trillions and then add in the fact that far too much of the world is still psychologically dependent upon the U.S. and stir.

It's hard to be convinced by the proposed U.S. economic stimulus. First, it is too small an amount to have much of an impact on an economy the size of America's. Secondly, a great deal of it is likely to be spent upon imported goods - whereas what we need are well paid jobs in the U.S.. Thirdly, it will take too long to work it's way through the system.

If we are going to have an economic stimulous, and there is a strong argument for it, it should be spent on something sustainable and here it is hard to find more worthy candidates than Energy and Infrastructure.

0 Comments:

Post a Comment

<< Home