Please help me think about this: I see the USA economy being hit harder by the housing crash than does the conventional wisdom of the conventional economists.
A recession ahead. But food prices seem bound to increase -- wheat price is surely going to rise as the Australian drought knocks much of the export crop down. The largest river in Australia is predicted to run dry by August. Corn in the USA is being diverted to ethanol production, as absurd as that is. Drought in North America may (or may not) further impact world grain production. The FED will see the rise in food prices as the dreaded inflation -- never mind the dreaded drought. And the droughts may be connected to global warming, but never mind that, says the FED, raise interest rates. That will help the dollar and hurt everything else. The weak dollar will raise the prices of imports. So the FED will see inflation. Ford and GM may get some succor from the falling dollar but I guess it will not be enough to raise production levels enough to save many UAW jobs or other jobs. Toyota and Nissan probably have enough cushion to trim their North American prices. A big factor will be oil prices -- but even if the recession here eases demand, oil price might not fall in US dollars because of the weak dollar. So, with a recession AND inflation, what will be the policies attempted to keep the lid on anger and maybe protest in the USA in the next years? Or is it even possible? And if USA demand falls enough, will the Chinese economy stagger? If hit hard, will China have political upheaval? The rest of Asia? Will Europe be hit hard or only a bit? And I'm leaving out questions of Iraq and Iran. And leaving out income distribution -- And I'm leaving out what most occupies my mind these days, global warming. Al Gore has a wimp's solutions but I am thankful for him. Help me out with your thoughts. Gene Coyle
