Sunday, April 19, 2009

Economic Facts

One important fact about this global recession is that 70% of the economy of the united States is built on the consumer market. When the cycle of unemployment and slower consumer sales resulted, impacting reduced sales on all sorts of goods, then this slowdown was especially destructive to Asian imports. The economies of Asia have overbuilt their strengths by counting on the United States as a main destination for their products. For example, Japan has witnessed a 50% drop in export demand in just the last six months alone, especially due to reduced sales in the American market.

President Obama recently urged China to plan their own form of domestic stimulus approach to strengthening the domestic market for goods in China, reducing their dependence on the American export market for Chinese goods. This seems like good reasoning, since the the recent reduced demand for Chinese goods has resulted in the closures of 70,000 factories as well as job losses for 20 million Chinese workers.

On the flip side of this equation, is that one of the best hopes for the survival of the American automobile industry is to increase sales of Chinese manufactured models such as those from financially troubled GM. GM's Chinese manufactured Buick models are especially strong sellers among Chinese executives and a sign of affluence in China. Currently China has the largest automobile market in the world, with monthly sales in excess of 1.1 million units a month, far larger than the monthly 800,000 units sold in the United States. Another possibility is the untapped market for American goods by opening up trade with Cuba, although the average monthly income is Cuba is only around $20 a month. However, with so many aged 1950's cars and trucks in Cuba, there should still be a healthy market for American automobiles and other goods that could only help to spur billions of dollars per year in sales of American exports to the Communist land. Cuba could use American imports of all types. This is a potentially big market for American goods including agriculture.

The fundamentals of the world economy are undergoing a big shakeup. However less Asian dependence on exports to the U.S. as well as increased American goods sold in nations such as China where their economy still continues to grow at a rate of at least 6% a year, are some important keys to working the global economy out of this economic mess.

One real positive for the United States is that it has always not only emerged from every recession and even the Great Depression in stronger condition. So at some point after all of this suffering for so many, a rainbow should someday be shining down the road someday.


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