The Economy-Bernanke Says Up, Roubini Says Down

Geo-Political-Mexico Hurting, The Economy-Bernanke Says Up, Roubini Says Down and  PrudentHome Says Caution

Mexico Hurting: “Mexico’s economy taking hits from all directions”, by Arthur Brice, is the title of this CNN.com/world’s post on 8/23/09. It’s an important piece because not only is Mexico our close neighbor, it is one two countries (along with Pakistan) our security experts seem to believe is in the greatest danger of falling apart. Mexico is also one of America’s largest sources of oil and it’s with all this in mind that we present a few of the article’s highlights:

• “The Mexican economy went off a cliff in the second three months of 2009, with the gross domestic product dropping 10.3 percent from the same period last year according to government figures.
• “Analysts say the main cause of Mexico’s nosedive is that the nations economy is tied strongly to that of the United States, which is mired in the deepest economic downturn since the 1930’s.”
• “Other factors dragging the Mexican economy down include a tourism decline caused by H1N1 flu outbreak and fears over continuing violence, declining oil and tax revenues, and fewer Mexicans abroad sending money back home.”

The Economy-Bernanke Says Up: For an observation/comment on the Bernanke view of the economy we turn to James Howard Kunstlers 8/24/09 post on his blogkunstler.com/blog entitled “Financial Crisis Called Off”. Here’s a portion:

“What a relief! Everybody from Ben Bernanke and a Who’s Who of banking poobahs schmoozing it up in the heady vapors of Jackson Hole, Wyoming, to the dull scribes at THE NEW YORK TIMES, toiling in their McEscher hall of mirrors, to poor dim James Suroweicki over at THE NEW YORKER, to – wonder of wonders! – Green Shoots claque at the cable networks, to the assorted quants, grinds, nerds, pimps, factorums, catamites, and cretins in every office from the Bureau of Labor Statistics to the International Monetary Fund – every man-Jack and woman-Jill around the levers of power and opinion weighed in last week with glad tidings that the world’s capital finance system survived what turned put to be a mere protracted bout of heartburn and has been reborn as the Miracle Bull economy. Our worries are over, If you believe their bull—- [deletions/PH] Which I don’t.”

Roubini Says Down: The Nouriel Roubini article in the Financial Times (ft.com) of 8/24/09 was entitled  “The risk of a double-dip recession is rising”. Among other things it gave seven solid reasons Professor Roubini thinks the economy may be headed into a double-dip recession but for us regular folks he gave this:

“Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant and could be driven higher by excessive liquidity chasing assets and by speculative demand. … The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel.”

PrudentHome Says Caution: We are certainly NOT economists here at PrudentHome but we are observers  and listeners.

We observe that the American economy purportedly depends on the American consumer for 70% of it’s energy and that one in nine American’s is currently on food stamps while all are entertaining an unemployment level of about 16.3%-U6.

This in the context of continuing reduction in home values and equity, no pay increases (please include Social Security here for 2010 at least!), rising state and local taxes and fees, and finally; our local Salvation Army is requesting, via radio, donations of used clothing as they’re running out.

Mr. Bernanke, things may be looking up in your economy but in ours, not so much.

Until next time; keep your eyes on the horizon as the weathers changing fast.