THE ECONOMY-NOW : A “thanks!” Is due survivalblog.com for sourcing this important article, “Two signs that something is seriously wrong” presented in dailykos.com on 11/12/08.
The first sign refers to the dramatic drop in the price of moving raw materials around the world by boat/sea as evidenced in/by the Baltic Dry Index. This index has recently fallen by 98% due to the collapse in the world credit markets. This collapse manifests itself here in a lack of financing available to ship goods thereby reducing world trade.
The second sign refers to the Federal Reserves’ unprecedented involvement in the U.S. economy as not only the lender of last resort but as the only truly significant lender, period.
As a little add-on of interest, the article points out one result of the credit freeze is barter as a recourse. Here it noted that Thailand was planning to barter rice for oil with Iran.
THE ECONOMY-TOMORROW: money news.newsmax.com on 11/14/08 offered the views of Wilbur Ross, a Warren Buffet-class investor, on the bailout of GM in their article “Ross: Automaker Failure Devastating”. In this article, Mr. Ross opines that allowing GM to fail would not merely throw the company into bankruptcy (chapter11) but would, due to the tight credit markets, push it into liquidation (chapter7) thereby increasing government spending on workers unemployment, healthcare and pensions.
Note: The article didn’t mention the possible domino effect of a GM bankruptcy taking down Ford, Chrysler, and a host of auto suppliers as well as other dependent businesses to the tune of an estimated 3 million lost jobs.
Forbes.com of 11/12/08 (courtesy of a point-to by survivalblog.com) presented an article by Professor Nouriel Roubini (Stern Business School of NYU) entitled “The Worst Is Not Behind Us”. Prof. Roubini supports the title of his piece expertly as usual but points to something we’ve been saying here at Prudent Home: pay attention to the people whose opinions and observations have proven to be correct (regardless of the source).
Prof. Roubini says, “…Beware of those who tell you that we have reached a bottom for risky financial assets. The same optimists told you we reached a bottom and the worst was behind us after the rescue of the creditors of Bear Stearns in March; after the announcement of the possible bailout of Fannie and Freddie in July; after the bailout of AIG… in mid-September; after the TARP legislation was presented and after the G-7 and EU action….excessive optimism …has been proved wrong at least six times in the last eight months alone.”
Prof. Roubini continues, “…we will experience…the worst (global recession) in decades; … we are in the middle of a severe global financial and banking crisis, the worst since the Great Depression…”
FOOD-US: “Hunger among U.S. children skyrockets in 2007” states the cnn.com headline of 11/18/08. “Some 691,000 went hungry in America sometime in 2007“…while close to 1/8 of all Americans struggled to feed themselves. These numbers reflect the situation before the current economic crisis.
FOOD-THE WORLD: commodityonline.com in it’s piece “Meltdown to hit agriculture, food shortage looms”, notes that the UN’s Food & Agriculture Organization predicts that the current financial crisis along with land and water constraints could very well produce a shortage in food production especially in the under- developed world.
Food security will be a topic on Friday. Until 11/21, keep your eyes on the horizon.
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