The Dow Jones and Nasdaq are pretty worthless to me as indicators. I've decided those reflect societal and economic reality about as much as CEO compensation reflects average American income. In fact, it has begun to get on my nerves a bit when I see bad news everywhere and yet the market surges because some financial firm got a multi-billion bailout. Phooey. Instead, I try to focus on reality rather than the giant Monopoly game with plastic hotels on Boardwalk & Park Place and funny money.
I prefer in-your-face facts over nebulous interpretations of filthy rich investors. And here's one: You know all those cheap goods we get primarily from China, but also from other Asian nations like India, and Vietnam? They are about to become more expensive thanks to inflation in Asia and a US dollar in the dumps.
The free ride for American consumers is ending.
First, developing countries now produce nearly half of all American imports. Second, inflation in these countries is coming at the same time that many of their currencies are rising against the dollar.
That puts American consumers in a double bind, paying at least some of producers’ higher costs for making their goods, and higher prices on top of that because the dollar buys less in those countries.
Just take a look at Vietnam....
Over all, in Vietnam, one of the fastest-growing destinations for manufacturing investments and one of the fastest-growing sources of American imports, prices rose 19.4 percent from March 2007 to March 2008.
I guess this is the price we pay for being a slave to fossil fuels. And overpopulating the planet. We haven't even begun to see the ugly horrors of the impact of rising food prices on the poorer nations, but we are getting a taste (no pun intended) in places like Haiti:
U.N. peacekeepers fired rubber bullets and tear gas into a crowd that gathered outside the presidential palace Tuesday during the second consecutive day of protests over soaring food prices.
Haitians are particularly affected by food prices that are rising worldwide. Eighty percent of the population lives on less than US$2 (euro1.27) a day. The cost of staples such as rice, beans, fruit and condensed milk has gone up 50 percent in the past year, while the cost of pasta has doubled.
And in Mexico, the 3rd largest supplier of oil to the United States, there's trouble brewing with Pemex, the state-owned oil monopoly.
The government has neglected the public company for 20 years, siphoning off its profits. Now production is dropping, reserves are dwindling, and Pemex lacks the technology to go after undersea oil, the administration says.
About 40 percent of the federal budget comes from the oil company.
I know this sounds dire but relax. Bush says everything is going to be just fine. And he certainly knows what he's talking about, right?
President Bush urged Congress on Monday to resist efforts by Democrats to pass a second economic stimulus package, saying that while the economy is “in a rough time right now,” he is confident it will begin to rebound by the end of the year.
Whenever Bush is confident about something, our internal warning bells should be going off simultaneously.
But seriously, all of that is just today's news, and not even all of it. But it's enough to make me realize we're probably in for a long unpleasant ride. As for the markets, I have a hard time understanding why they're not in a tailspin. If we get through the month of April without a major "correction," I'll be amazed.