Yesterday, I told you about some positive news on the US economic front. But don't get lulled into a sense of false security. Keep your eyes on warning signs like these -- they could signal trouble ahead in a fragile economic recovery. There are still a lot of dangers to navigate.
FedEx (NYSE: FDX) announced that it will park some aircraft and reduce its workforce, and it has scaled back its forecast for global economic growth from 2.9% to 2.3%. When shipping companies scale back, it is a sign of economic slowing, not expansion.
Gasoline prices continue to rise. So far this year, they are up 60 cents a gallon, which represents a drag of about $100 billion on households. The weather-related drop in heating costs has sheltered the economy from the full effect of rising fuel prices, but as we move into the travel season, these prices are likely to hurt consumers. The rising conflict between Iran and Israel could be devastating to oil prices and the global economy, and the outcome is impossible to predict.
The 2003 tax cuts are set to expire at the end of 2012. That will likely inhibit economic growth and investments, because households will have less disposable income. We once again face a situation on Capitol Hill that will likely keep businesses and individuals guessing until the last minute about what taxes will look like after December 31st. The continued uncertainty is a headwind to growth.
Fiscal cuts are by necessity kicking in at the federal, state, and local levels. Deficit spending inevitably has to be reined in, and the mandatory "cuts" due to the debt ceiling debacle will activate in 2013. Though these cuts are necessary, they will hinder economic growth in the near term. We do believe that, in the long run, reduced government spending is a tailwind to the economy. (A great historical perspective on this topic is This Time Is Different by Carmen Reinhart and Kenneth Rogoff.) We could see a 3% to 4% hit to GDP next year from this fiscal withdrawal, and it would not be surprising to see a recession in the first year after an election as the new kids on the DC block want to get any pain over well before facing reelection.
A recession in Europe and slowing Asian economies are likely to lead to a contraction in US exports, which would be a headwind to GDP growth.
Last week, the S&P 500 experienced the largest weekly drop of the year. The 30-year Treasury yield experienced its largest improvement of the year, and gold moved back into the green for 2012. Volume remains exceptionally weak, indicating a lack of conviction by investors in the bull run. On the other hand, the low volume (with its lack of selling pressure) makes it easier for the Fed to buoy the markets with interventions. Corporate insiders don't seem to share this enthusiasm for their own company stock. The ratio of insider sellers to buyers has surged from 5:1 in January to 14:1 in February to 35:1 in March! Perhaps they know something that other market participants don't?
Actually,Hitler was voted in on a platform to stop Hyper-Inflation that was prevalent in Weimar Germany.
Initially,the Intelligent was very much with him as he moved to restore Germany to its past Glory which was lost in World War I;it was only later (sadly much-much later) when they realised the full extent of his madness did they decide to stop supporting him.
By then,however it was too late....
In Today's Europe you are unlikely to such a sceanario repeat itself;for the simple reason that Germany today already owns all of Europe(which falls under the Eurozone).
Quite Ironic,What Hitler could not achieve even after sacrficing Millions of lives,the Euro accomplished without even a shot fired(yet).
chapAnjou, maybe I was unclear. I'm not saying anyone should be denied a voice, even fanatics of one brand or another, What I'm saying is that unless all the other people -- who fill in the spectrum between the most extreme proponents on the right and left -- also make their voices heard, then the results are skewed.
In an effort to stem all of my negativity, let me just say that your best case scenario is exactly what I want to see happen. I think it is possible for the voice of the few to trump the voice of the many.
Honestly, all I care about is that me and my family are happy and enjoying life...that seems to be the case these days, so I'm not too bothered with what's going on in the background.
I know this wasn't your whole point and I'm just focusing on a very tiny piece, but I'm just thinking aloud:
Was the election of Hitler to office in Germany the result of the intelligent choosing not to do anything and letting the loonies run the asylum? Or was it a case of the intelligent being just as intelligent as ever and voting in a man they believed would deliver their country from the economic hell that it had fallen into?
Hindsight is a wonderul thing in this case....it would be one thing if:
a.) Hitler had run on the platform of: "will commit atrocities for the greater good"
"...we can't just allow the people on the fringes -- right or left -- to have a voice."
@cat tail, but isn't this the point of a democracy? That every group has a say in what's going on? It's like the whole issue where everyone pines for Freedom of speech until someone says something that upsets them haha.
In my opinion, everyone should have a voice. I'll disagree with about 95% of anything that's being said, but that doesn't mean they shouldn't be heard.
On The Latest news from the French Campaign Trail,I hear that Francois Hollande had to back-pedal on his 75% Wealth Tax proposal;primarily because of Pressure from his country's footballers-Who all Threathened to leave(and play elsewhere in Europe) if this Tax was implemented.
More here,(its in French so you might need to use Google Translate)
No matter how Socialist a Politican is in Europe,He dare not mess with his country's footballers.
That's like a death sentence for his Political Career.
Regards
Ashish.
P.S But Yeah I get your basic idea-Europeans would rather someone else paid for their benefits rather they hunker down and accept the fact that they need to work harder for less Income & Benefits need to be slashed sharply.
Demographics(which are declining very,very sharply in most of Europe) is an inescapable trend(it also does'nt help that they are vehemently anti-Immigrantion).
we need more independent voices like you in charge and voting big time for political change.
Otherwise November is Gonna be a Battle between the White Obama(Romney) and the Black Obama....
No real change is going to come from either candidates.
Romney in particular will just take us further and further to a disastrous war with the Iranians from which there will never be any Good news coming out.
To get an understanding of what happens when Intelligent People get disinterested/disenfranchised from the whole political process(which has been happening in America for the last Three-Four Decades,a little after JFK became the President);Take a Look at Germany under Hitler.
Don't Forget Hitler was democratically elected.
Or Closer home,just check out the crazy stuff our own Government in America is doing (and has been doing for the past few decades);particularly with where they spend Taxpayers Money.
1)Paying American Farmers 2 Billion Dollars (Yes Two Billion);to not Farm their Land;
2)Paying Pakistani Farmers 30 million Dollars to Develop better Mangoes...
3)The Useless Health Department plans to spend 500 million Dollars on Research trying to find out why Children can't sit still.
4)100,000 Dollars on a Celebrity Fruit Promotion show in Indonesia!!!
Read the full list on Infowars.
Initially I found the list so funny I had to double-check to verify its veracity.
When I did Verify,I realised that the Government needs to Shut down with Immediate Effect ,the respective Departments of Health,Education & sharp cuts in Militiary Spending-If the Japanese,Germans,Koreans and the Arabs want us to be their Policemen-Then start paying us for the Privilige-How does USD 75000 per every Single American Soldier we deploy overseas sound??
Which is why my position was so strong when I made my first post here.
Thing is its one issue,if The US Government had the money for this programs.Today,we clearly don't.We are running Budget Deficits as far as the eye can see and Printing Money to pay Interest on our Debt.
I already know what will happen if we slice these useless items of our Budget-The US Dollar will strengthen and once again,we will move onwards towards becoming a Real Economic Superpower(as Capital starts returning to America) because of faith that the US will not default on its Debt.
The political system really does make you feel disenfranchised. I guess the only reason I vote is because I refuse to let the inmates run the asylum. Like it was noted early, we can't just allow the people on the fringes -- right or left -- to have a voice.
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Forget about business growth as long as the future of tax rates remains unclear, regulation continues to expand in unpredictable ways, and legislation keeps creating increasingly onerous burdens.
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