The road to economic recovery for the world and the U.S. contains some formidable potential roadblocks. Economist Nouriel Roubini, for example, says we run the “big risk” of a double-dip recession.”
“Roubini, a professor at New York University’s Stern School of Business, said it appears the global economy will bottom out in the second half of this year…[while] U.S. and western European economies will likely experience “anemic’ and ‘below trend’ growth for at least a couple of years.”
He said that policymakers are in a no win situation in their efforts to avoid “toppling into a depression.” If policymakers raise taxes and cut spending, “they could undermine any recovery.”
“On the other hand…if they maintain large deficits, worries about inflation will grow, causing bond yields and borrowing rates to rise and perhaps choking off economic growth.” (Going even deeper into debt by consumers spending money they don’t have in order to stimulate the economy is a losing plan also.)
Another factor is the price of oil rising as the world’s economy recovers. Iranian officials said that “oil demand could increase by more than 500,000 barrels of oil per day as the global economy moves out of recession…” (08/27/09)
Mohammad Ali Khatibi, Iranian governor to OPEC, stated that as the economy recovers, “it is expected that oil demand in the year 2010 will be increased between 500,000 and 1 million barrels.”
And “oil prices would remain bullish as global oil producers are reluctant to sell off their stocks in anticipation of growing demand.” He added that the economy “might push oil prices beyond $80 per barrel by January.” (A number of oil analysts have predicted record setting prices over the next 3-5 years, depending on the strength of the world economic upturn.)
Recent reports say that the United States may be shutting down or idling some of its refineries over the next few years, meaning we will be competing with the world for more of our gasoline and diesel. Prices will rise and oil products may not be available at times.
“Asia has been importing oil products like gasoline and diesel from the west for decades to keep the wheels of its economies rolling. But the tables may be turning as the region’s two largest economies, India and China, aggressively pursue capabilities to refine crude on their own, not only for local use but also for export.
“Some small European refineries have already closed, while many in the United States are struggling to stay afloat. Bloomberg reported at the end of July that refineries from Germany to Hawaii, foreseeing 25 percent idle capacity in North America and 30 percent in Europe within five years, are weighing plans to shut or sell plants. These include big names such as Petroplus Holdings, Royal Dutch Shell-one in Germany and another in Montreal-Total SA and Chevron Corp. from the United States.”
The American Petroleum Institute “projects an even bleaker future for U.S. refineries, saying one in six will probably close by 2020 as more efficient plants come online in India and China. (The U.S. is already buying refined oil products from India.)
In addition, U.S. refiners have to deal with the climate bill recently passed by Congress. According to the American Petroleum Institute, “this bill unfairly penalizes U.S. refineries with strict provisions, making the United States more reliant on fuel imports from places like India where refiners will not be under the same restrictions.”
As for China’s soaring economy leading the way, that may not be accurate, according to Forbes:
“Officially, China is firing on all cylinders. The China National Bureau of Statistics reported gross domestic product increased 7.1% in the first half of 2009 over year-earlier levels, down only slightly from the 9% growth rate all last year. Sales of textiles, cement, soft drinks, tractors and automobiles grew at double-digit rates. The Shanghai stock market is up 86% since January.
“But behind those numbers is an unprecedented expansion of the country’s money supply. The government has poured $586 billion into a stimulus program it started this year to combat the world financial crisis. Banks have issued new business loans at four times the rate of last year. If that spending stops-and there are hints that the government is trying to put on the brakes-China’s economic growth rate will stall. It may fall all the way to zero…” Global analyst Albert Edwards.
“If China falters, it would remove one of the most important props supporting whatever economic recovery is underway. ‘A slowdown in China-especially one that is sudden and sharp-will have a huge negative effect on the U.S. corporate sector,…'” Yasheng Huang, MIT.
And there is a continuing threat to Middle East oil fields and refineries by terror groups. A successful attack on a large supplier, Saudi Arabia, for example, would have a devastating effect on the world’s economy.
In a recent report, “Detained members of an al Qaeda-linked group planned to attack Kuwait’s Shuaiba oil refinery during the holy Muslim month of Ramadan…” August 2009
“Political analyst Shafiq Ghabra says the planned withdrawal of U.S. troops from Iraq has not discouraged al Qaeda from planning attacks on U.S.-allied Arab countries.” See Kuwait Foils Qaeda Plan to Attack Oil Refinery.
There are a number of threats to a recovering world economy. But there are other factors in play over the next four decades that will have the final say on the future of the world as we know it.
The corporate/government alliance that brought America globalization is responsible for this interdependent world which caused our economic collapse by putting in place trade agreements and institutions that exercise sovereignty over nations (World Trade Organization, North American Free Trade Agreement, Trade Tribunals, North American Competitiveness Council).
The corporate exodus from the United States sent American jobs and factories overseas, setting in motion events that ended in the failure of our economy. And don’t forget the unregulated financial sector that brought us bogus mortgages and loans to anyone who could put their x on a contract.
The bad mortgages are still there, many in forms not easily identifiable. Predictions are that, as a result, many smaller banks will collapse over the next few years.
We are told that this will be a “jobless recovery” for Americans. The U.S. Census Bureau says that we will have 100 million more people in three decades (3.4 million per year). Most of those will be from the third world (south of the border), along with a high birth rate. Many will need to be added to our welfare system. And did our government ever consider the consequences of an immigration amnesty bill that will flood our prison system, a system already over capacity? Arnold, the governator of a bankrupt state, is considering releasing around 27,000 inmates, all the while saying that those millions of illegals in Mexifornia are not the reason for a large part of the deficit.
With this future guaranteed for our nation, how can we conserve our dwindling resources such as oil, water and food supplies? Will we survive as a nation when many of the new residents have voiced loudly that America will become part of a new Spanish-speaking continent?
Our leaders, Democrat and Republican, are proceeding with business as usual. And President Obama is promoting prosperity for everyone in an integrated hemisphere while he keeps digging our grave deeper. There is change on the horizon but not the one promised.