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Consumer confidence is low?? Let me put on my shocked face....
As you probably heard, the Consumer Confidence Index (whatever that is, exactly) seems to be in free fall. It's at a five-year low and "Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon. The Expectations Index, in fact, is now at a 35-year low (Dec. 1973, 45.2), levels not seen since the Oil Embargo and Watergate" (full article here).
Wall Street continues to struggle, with academic and financial sector economists both saying "recession." At the same time, I seem hearing a lot of optimism too. Investment gurus are saying "It's a great time to buy! Stocks may be down now, but they always go back up!" We're also being told that the depressed housing market is a great opportunity as well--supply is up, prices are down, but we know that real estate is a safe investment that will always go back up again. Buy now!"
Well, really? Of course, that sort of optimism might look better to people who actually have the financial resources to "take advantage" of this "opportunity," though I suppose it has its appeal to the rest of us: if I just hold on, things will get better.
Again I ask: really? Oil prices are high and seem unlikely to go down. If Peak Oil isn't here, it seems to be right on our doorstep, and while there are alternative energy sources out there, how much investment will be get in them while the economy is weak? Food prices are high and predicted to stay that way. After the bulk of this article takes a global perspective on food, we find that
consumers still face at least 10 years of more expensive food, according to preliminary FAO [UN Food and Agriculture Organization] projections.
Among the driving forces are petroleum prices, which increase the cost of everything from fertilizers to transport to food processing. Rising demand for meat and dairy in rapidly developing countries such as China and India is sending up the cost of grain, used for cattle feed, as is the demand for raw materials to make biofuels.
What's rare is that the spikes are hitting all major foods in most countries at once. Food prices rose 4 percent in the U.S. last year, the highest rise since 1990, and are expected to climb as much again this year, according to the U.S. Department of Agriculture.
The promise of capitalism has been the rising tide that lifts all boats. The requirement has been to continually open new markets for the goods produced, new markets for cheaper labor. The promise is that all the world can be prosperous. Instead what we seem to have is, as all the world tries to match the "prosperity" of America, there ends up not being enough to go around. China and India are industrializing and offer sharp increases in their consumption of oil, but despite assuring the world for the last several years that it can increase output to meet increased demand, Saudi Arabian production (and that of OPEC more generally) has been flat. Peak Oil, anyone? And the rise in food prices seems to stem both from the increase in petroleum prices and the prosperity of the industrializing nations. It looks like unlimited growth and unlimited prosperity may not have been possible after all.
The U.S. economy has been strong and the American people have been able to endure higher gas prices and higher fuel oil and natural gas prices for the past several years, and now we're doing our best to keep up with higher food prices, but for how long can we keep it up? The article I cited above suggests that food prices will rise as much in the next year as in the previous year, that prices will remain high for "at least 10 years." Of course, those are only preliminary reports, so perhaps they're overly pessimistic.
Or they could be overly optimistic.
So here in America, in the midst of a Presidential election, we have to wonder what the candidates are going to offer by way of solutions. I assume we'll hear more once the field is narrowed to two, but you have to think this is another "it's the economy, stupid" election. I was hearing this morning on the radio that McCain is, on the economy as well, looking at an extension of Bush policies. This would seem like political suicide all things considered, but he's looking to extend and expand the tax breaks for the wealthy, putting the tax burden on earned income rather than capital gains and investment income.
The Democratic candidate may be able to get by simply on the basis of "Let's not keep doing what Bush was doing," but I'd feel a lot better if I saw some more substantive plans for dealing with the economic problems we find ourselves facing at this juncture in history.