Saturday, March 08, 2008

Pop Goes The Economy

Mr. & Mrs. Howell and others of their ilk may soon be the only Americans able to afford bread, milk, eggs, corn and gasoline.

The top story in the Saturday 50 cent edition of the Times Union: "Recession Fears" with photos of George Washington next to some Pounds and Pesos, a Wall Street dude and those ever-risin' gasoline prices. The headline screamed "Economy On The Ropes" and according to the Cox News Service article that followed last month saw the "Biggest job loss in 5 years" which "shocks analysts, who expected payrolls to increase in February" [what were they smokin'] and a report that 63-thousand jobs "disappeared" in February.
See Also: David Leonhardt: Seeing an End to the Good Times (Such as They Were)
The story we all SHOULD BE CONCERNED ABOUT was tucked down in the lower right-hand column, headlined "Ethanol fuels new worries." To date I'm battin' a thousand when it comes to predictions about gas prices, housing and the economy. NOW HEAR THIS: Ethanol will be what puts the nail in the current economy's coffin."

The original article appeared in the L.A. Times back on March 2nd...key points:
Corn is a key element of the U.S. food supply. It is what dairy cows eat to make milk and hens consume to lay eggs. It fattens cattle, hogs and chickens before slaughter. It makes soda sweet. As the building block of ethanol, it is now also a major component of auto fuel...

Economists are cautioning that the nation's growing dependence on corn would make for a double jolt in the event of a drought across the Midwest: soaring prices not just for food but also for gasoline...

Because of the interrelationships among crops, a major shortfall in the U.S. harvest could tip global grain and soy markets into chaos. It would affect the prices of food made directly from these commodities, such as bread, pasta and tortillas, and food made indirectly, such as pork, poultry, beef, milk and eggs.

If it happened this summer, it would be especially bad because of the current pace of global food inflation.
The bad news is that it COULD happen this summer! The entire original article is available HERE. Every American should read it!

And we go on...
What's going on with the economy? Paul Krugman blogs through some basic scenarios.
"The financial crisis seems to have entered its third wave. Panic in August, then partial recovery thanks to lots of money thrown at the system by the Fed. Renewed panic late fall, then partial recovery thanks to even more money thrown in, especially the Temporary Auction Facility. And panic has set in yet again...This is now the third time Ben & co. have tried slapping the market in the face — and panic keeps coming back"
Krugman cites Steve Randy Waldman's Interfluidity blog. In an earlier blog posting of his, Waldman makes a distinction between a panic and a reckoning.


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