Domino Effect

[kmguru]

Recession in US seeps to Mexico because that is where a lot of US manufacturing is done.

When US suffers, we reduce import from Far East

European exports are reduces by weakness in US, Mexico and Far East. Europeans thought that they are immune to US economy. Now EURO is falling.

Oil prices rise affects Europe and Far East with somewhat less impact in US.

So where did it start and what is the solution?

 

[kmguru]

Fortune 7.23.2001

"When things turned sour for the U.S. economy at the end of last year, European economists and policymakers sniffed at fears that the downturn might make its way across the Atlantic. "It used to be the case that when the U.S. got a cold, Europe got pneumonia," French central bank chief Jean-Claude Trichet smugly proclaimed to the Washington Post in January. "Those times are over."

Well, better get out the antibiotics after all. Every week, it seems, another big European company announces an earnings shortfall. Economists have been steadily ratcheting down their forecasts for 2001 European GDP growth. The region's biggest economy, Germany, may already be flirting with recession. And it's not just Europe: East Asia's export-oriented economies are being hammered by the U.S. slump. Japan's decade-long malaise is, if anything, getting worse. ...."

 

[wet1]

The global economy

Yes sir, step right up! Take your chance!

Welcome to the global economy. You see, USA has the largest consumer economy of the world. It also has the greatest amount of disposable income to spend on things. That's why you hear all the foofaraw about trade. Every one wants to sell here. The USA gets to say who can and who can not. Naturally most will jump through the hoops to qualify for selling and they do.

But when money gets tight and the American consumer quits spending, they do so dang near in mass. So all of a sudden all these markets around the world have extra goods to sell and no one will buy. Well, it costs money not to sell. Warehouses are full and that costs to hold them, trucks don't move but there are still payments to be made, insurance, tags, ect. Same for shipping. Air ditto. Then with the slow down, to save money companies start laying off workers that they can't afford to pay. This backs up around the world. And there my friend is the start of a recession. It's a little more complicated than that but this is economics 1 1/2.

 

[thecurly1]

We live in a global economy. Its like a bunch of cars on a road, while a few small movements in one car, won't affect the others, if a single car in heavy traffic comes to a quick stop the other cars have to stop quickly as well or they'll crash into eachother. We are all linked together, and the trend will continue.

The recession will clear up when people need new things to buy. I think it could be that simple. You also need a better stock market, and consumer confidence. This will be recession, but I don't think it will last more than three years. In the long term we're in for good times, but let us take this news in heed. If we aren't careful we'll screw it up.