Sig,
I'm not in complete agreement with you in comparing the current malaise in the US economy and especially its erratic stock market with that of Japan. While both have suffered from massive bubbles and subsequent devaluations, I feel that the Japanese situation is far more hopeless because of 1)demographics and 2) bureaucratic ineptitude that can't be corrected. First to demographics. Japan is a closed society and doesn't allow immigration. The young women in Japan are rightly on strike on the issue of new issues, i.e. children. They live in a over-crowded, too-costly and too anxious a country and they know it. Thus, from all projections I've seen, Japan will be the greyest country on the planet by 2025, with retirees greatly outnumbering the worker population. This does not bode well for any sort of sustainable recovery in their economy. Particularly with the well-heeled capitalist class moving their operations off shore. Second, the bureaucrats of Japan are hopeless meddlers and pathetically inept at monetary policy. The country is saddling itself with mountains of debt, suffers from a "liquidity trap" of gargantuan proportions and steadfastly refuses to do what the US is good at, namely recreating its industries in the painful game of "creative destruction". While what happens to redundant workers in the US is a scandal, by civilized standards, the opposite in Japan, where lifetime employment is just now being eased out is an example of maladaptive social policy gone awry.
No, I see the current malaise in the US to be quite akin to the situation in 69-70, when we had the euphoric rise of the Nifty Fifty. You can see the same sort of bleeding edge growth companies of last year being in the same class of investment, where the hope for the future greatly exceeded the present value of the companies involved (think BRCM, PMCS, JDSU, AMCC, etc.) and now that the shocking truth that the telecom sector is grossly overbuilt is coming to everyone's attention, there is hell to pay for all the wild-eyed zealots in the tech speculation game.
Re: How much more can farmers afford for fertilizer made from natural gas?
Funny you should ask. I just posed this question to my Dad yesterday. He's in daily contact with farmers in his area, Northwestern Illinois. I'm certain that he'll get back to me with some interesting insights into this input to the crop price. Since wheat, for instance, is trading at about 2.65/bu. and the profit on it is slim to non-existent, there is some reason to suspect that there will be a mild to moderate decline in acreage of planting this spring. Winter wheat, of course, is already a done deal and looks to be a normal crop. But the next cycle could get dicey. Especially since worldwide wheat reserves are at their lowest level since 1966. (68 day suppply, worldwide.)
I'll be checking with my local fertilizer vendors this coming week and see what I can glean from their crystal balls.
Inflation and more unemployment leaves far less left over for investment.
I think the U. of Michigan consumer survey report is very telling here. Confidence is at a nadir. We are matching the pessimism of the 1990 recession. This becomes, eventually, a self-fulfilling prophesy. Greenspan's testimony before the Senate last week is an interesting example of duck speak. The Chairman was calm as can be, above the water line, spreading ridiculous blather about productivity gains:
Message 15348748
while below the water line, I'm sure he's squirming and frantically trying to sort out all the contradictory money flows in the economy. JMHO.
No wonder the markets are confused, with more bad news in the future and some kind of inflation
It is very easy to predict a period of '70's style stagflation for a few years here, as the economy absorbs the energy price shock and energy inflation works its way into all sectors of the real economy. The parts that are left standing, I mean. Already, we are seeing signs of marginal businesses, eg. brick manufacturers, hot house operators, bakers, laundromats, etc. reeling from the energy price spikes they've had to endure. Lots of businesses on the cusp are going to close their doors and send countless thousands of low-skilled workers out into a much tougher job market. Should be good news for the prison-industrial complex.
Ray |
