Economy Deteriorates Further in July

http://www.usatoday.com/money/economy/2008-08-29-income-spending_N.htm

July served up more evidence of the damage being done to our economy by rising overpopulation and by free trade with overpopulated nations. The “economic stimulus” package has come and gone and, predictably, we’re now right back in the same, sinking boat.

Personal income fell 0.7% in July, the sharpest decline since a 2.3% plunge in August 2005, when Hurricane Katrina hit, the Commerce Department said Friday. Analysts were expecting income to hold steady.

Not this analyst. Not anyone who understands that unemployment will worsen as our population density rises and as we continue to import the effects of overpopulation.

“With the tax refund effect on spending now more or less over, we think the worst is yet to come for consumers,” said Ian Shepherdson, an economist with High Frequency Economics.

The government issued $13.7 billion stimulus checks to U.S. households last month — about half of the amount sent out in June. By the end of July, $90 billion had been delivered as part of the effort to put an extra $107 billion in consumers’ hands this year.

The article also serves up some good news:

The Institute for Supply Management-Chicago business barometer surged to 57.9 in August from 50.8 in July. Economists had forecast the index at 50.0, straddling the line between expansion and contraction.

Separately, the National Association of Purchasing Management-New York said its index of current business conditions rose to 45.3 in August from 38.5 in July.”

But I’m afraid this won’t last. With the economic stimulus payouts behind us, the economy will resume its slump. So too will exports, as the recession begins to spread to other parts of the world.

The reports showed business managers continued to face stiff production costs.

While fast-rising food and energy prices have taken a big toll on U.S. consumers and businesses, a big drop in the price of oil since a record high reached last month could soon offer a wave of relief.

Anyone counting on falling oil prices to salvage our economy will be in for a rude awakening. The temporary pull-back in oil prices is part of the same cycle we see over and over. Prices set new records until consumer sentiment falls to unacceptable levels. Then, prices pull back a little and give the consumer some “soak time,” allowing them to become accustomed to the new level of prices as “normal.” Soon the climb will resume. The next wave of concern may not happen until gas reaches $5 per gallon.

It’s going to be fascinating to watch how the government responds when the recession resumes. Is another “economic stimulus” on the way? Will the Fed find some creative way to flood the economy with more debt, perhaps finding some clever way to make a loosening of lending standards appear to be just the opposite? What assets will the government sell next to foreign investors? Here’s one that wouldn’t surprise me: a sell-off of federal lands, perhaps ultimately our national parks. Seriously. Our foreign benefactors are getting fed up with being stuck with worthless paper. They’ll soon begin demanding tangible assets. Imagine Yellowstone National Park being operated by China. How long would it be before they began logging the park and loading the timber onto ships bound for China? I know this sounds crazy, but this country is getting desperate to raise cash. And as we sell off more and more, the buyers get an ever-stronger voice in the decisions made by the government. Soon, they’ll be virtually dictating federal policy-making.

The only escape from this scenario is immediate action to eliminate our trade deficit. Will the next president have the wisdom to do it or the guts to weather the storm of global outrage that would ensue? We’ll soon find out.

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One Response to Economy Deteriorates Further in July

  1. Credit-based speculation economy means a top segment of society geneates money, not from the production of domestic goods/services, but from the management and speculation of money alone. That seems nuts to me. I agree with your post, the Fed should be institutionalized and the private speculators need to be replaced by state workers. We need a new economic system.

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