Most Americans act as though the global economy does not apply to them and many tend to ignore what happens in the rest of the world. Living in the US gives many the sense that they enjoy a financial bubble protecting them from the economics of the rest of the globe. Feeling that what goes on in Europe, Asia or South America is somehow “irrelevant” to their daily lives, Americans have not realized that the massive financial problems drifting around the globe will be affecting everyone in the US very soon.
Sadly, most Americans seem to be more concerned about the latest troubles of Justin Bieber or the “twerking” of Miley Cyrus than the downward trip of the global economy. The mainstream media sees where the interest of the typical American is and feeds more gossip on celebrities which means Americans show more interest in the glitz, glamor and gossip of Hollywood than what is going on globally. That, in turn, makes mainstream media feed more pablum and helps the dumbing down of America.
While America has gone through a short period of relative financial calm, anyone that is willing to do a little online reading can see that the signs of instability in the global economy are not like anything that has been seen since the financial chaos that began in 2008. The problems are not just in a few, small countries, but are affecting countries everywhere. This is truly shaping up to be a global phenomenon.
During the past several years, the Federal Reserve has joined other global central banks and fueled inflation with unrestrained money printing. Much of the money printed has been dumped into emerging markets globally. Now that the Federal Reserve has started tapering off on the new money supply, investors everywhere are seeing it as a sign that the party is over. Investors are pulling out of emerging global markets at a pace never before seen and the resulting vacuum feeds the financial instability. The financial problems that have been growing over the past half decade in established economies continues to escalate. As the global financial problems continue to spiral downward, there are some key things for Americans to watch out for.
Australia Unemployment Jumps
Australia’s unemployment has climbed to the highest level in 10 years. Traders are pulling back and throwing the Aussie dollar into its biggest decline.
As the jobless rate rose, hopes that the Reserve Ban of Australia would switch to a tighter policy were foiled. Toyota Motor Corporation and General Motors are closing plants and shedding jobs because of the high costs of production. With the closing of the two plants, roughly 50,000 jobs in Australia’s auto industry will disappear.
Australian Prime Minister, Tony Abbott, won September’s election with a promise to restore consumer confidence in the economy. It is not a promise he has been able to fulfill. According to Bill Shorten, opposition leader from Canberra, over 60,000 jobs have been lost since Abbott was elected. Many in Australia are wondering what can be done to stop the flow of tens of thousands of jobs which are either disappearing or leaving the country.
In a February article about the economy in South America’s second largest country, the Associated Press stated the nation’s inflation rate stood at 44 percent. A day later, the AP printed a correction saying they had miscalculated. The actual rate is 55 percent. The AP’s correction is notable because it shows just how bad things have gotten in the land of tango.
Since 2007, the Argentine government has continually underestimated its inflation and overstated economic growth. Even formerly close allies to Argentina’s President, Cristina Fernandez de Kirchner, have abandoned the administration’s official data. In December 2013, desperate because of spiraling living costs, the police in 14 of the country’s provinces went on strike demanding pay raises. They demanded a 30 percent increase.
Many Argentines have lost faith in the economic system and are trading pesos for dollars as fast as they can get them. In January, the peso was devalued suddenly and sent economic shock waves through the entire supply chain. It is not uncommon to see the price of basic necessities such as toilet paper and milk rise between the time you take it from the shelf and get into the checkout line.
The economic future of America is tied closely to Argentina. The South American country owes $10 billion to the Paris Club, which includes the United States.
Tres Knippa, Kenai Capital Management owner, says that Japan will have an economic meltdown in 2014 resulting in a default on their debt. Knippa says that Japanese officials are accelerating the country’s debt problem in an attempt to protect the country from a bond crisis.
Japan’s Nikkei stock index dropped 14 percent recently and financial experts join Knippa in saying that a Japanese financial crisis is on the horizon. The catastrophe is driven by a stale economy and a population which is rapidly aging.
Meanwhile more Japanese investors are looking outside the country for a place to park their yen. In Mexico, Japanese are buying up land and energy sources to protect their weakening financial resources from the economic problems at home. To make it worse, Japan is expected to see a drop in productivity as its population ages. By 2030, Japan will have three retired people for every person working.
The worsening economic problems in Australia, Argentina and Japan reflect what is happening in today’s global economy. Greece, Italy, France and Germany are also warning signals that many Americans disregard as they continue to enjoy their bubble of imagined security. Some in America are beginning to see, understand and connect how the actions of other counties, regardless of how seemingly remote, can impact life in the USA.
By Jerry Nelson