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May 31, 2006
Global ABCs
Written by Jeff Thredgold, CSP, President, Thredgold Economic Associates
…This is the companion piece to “Domestic ABCs” of May 17
America—being the world’s only superpower isn’t what it’s cracked up to be. Ongoing solid U.S. economic growth helps the global economy
Budget Deficits—a serious issue in the U.S. and around the world. The French, the Germans, the Italians, the Japanese, and many others have similar challenges
China—powerful economic growth continues, with leaders still trying to slow the economy down. China could challenge Japan’s position as “top dog” in the Pacific Rim within a decade
Dollar (the)—modest weakness in the dollar versus the euro and the yen is actually good news, helping to reduce our trade imbalance with the global community. The dollar still remains the global community’s preferred currency
Europe—sluggish growth has been the norm during the past three years, hurt by rigid labor markets that limit hiring and render Europe non-competitive in various industries. Another challenge? Most European governments simply cannot afford prior promises to their citizens of early retirement and extensive social programs
France—countrywide riots earlier this year by young people regarding modest hiring reform was akin to cutting off your nose to spite your face. National unemployment near 10.0% limits opportunities for all
Global Growth—real (inflation adjusted) growth in 2006 should exceed 4.0%. Comparable growth since 2003 now equates to the strongest four-year period since the early 1970s
Hunger—an estimated 40,000 people around the world starve to death every day…a major travesty. Can’t we work together better to deal with this reality show?
India—which country features the longest-standing democracy, the largest middle-class, the largest English-speaking population on the planet, and one of two nations dealing with the most severe crisis with AIDS? …you guessed it
Japan—this island nation is finally showing clearer signs of moderate economic growth, primarily tied to stronger consumer spending and rising exports to China. However, concerns regarding a return of deflation, sick investment portfolios, and an enormous national debt remain
Korea (North)—political “leaders” in this nation ignore the massive starvation of their people and a failed economic system. Meanwhile, Korea (South) enjoys solid economic growth
Latin (and South) America—economic growth is sporadic, especially in Argentina, Brazil, and Chile. Venezuela remains a political powder keg, with declining oil output. Impressive flows of capital returning to smaller countries are a vote of confidence in the future
Mexico—our Southern neighbor’s economy is stable. Why? The destination of 90% of Mexico’s exports (the U.S.) is performing well. The second largest component of Mexican GDP?…money transfers from the U.S. to relatives at home
Neighbor to the North—Canadian economic performance has been solid in recent years, with the energy-rich Western Provinces booming. Canadian unemployment at 6.4% is near a 30-year low. However, Canadian dollar strength of recent years has hurt exports and tourism
Oil & OPEC—a handful of factors led prices to $65-$75 per barrel over the past year. We expect greater oil price stability in coming years near $50-$55 per barrel…a price that consuming and producing nations can live with. Much higher prices would provide consuming nations stronger incentives to develop non-oil energy alternatives…exactly what the Saudis (among others) DON’T want
Protectionism—the other major threat, besides terrorism and avian flu, to global economic growth and rising global standards of living
Quagmires—there never seems to be a shortage. Today’s list still includes Afghanistan, the Middle East, Chechnya, Iraq, the Sudan, and other parts of Africa. Who’s next?
Russia—solid economic growth has occurred in this hotbed of political corruption, tied primarily to higher oil production and higher oil prices. Even as Russia’s economy improves, however, its annual economic output of goods and services is less than that of Florida, ranking it approximately 80th in the world
Social Safety Net—we have concerns in this country about the future affordability of Social Security, Medicare, and Medicaid. The challenges are much greater in Japan and “old” Europe
Terrorism—easily the most serious threat to the U.S. and the global community. Any significant terrorist “successes” in major Western nations (especially the U.S.) could temporarily derail the global economy
U.N.—a largely ineffective institution that must step forward and assume more responsibility around the world. Wouldn’t it be nice if the U.S. could just be one member of a more relevant and viable United Nations?
Volatility—pick any descriptor…political…economic…financial market
World Wide Web—the powerful explosion in U.S. Internet activity has been followed by solid expansion around the world. One estimate has global companies saving $1.25 trillion in operating costs during the next three years alone by using the Internet. Another estimate suggests we have tapped only 10% of the Internet’s potential
Xports—one of the “keys” to success for global companies…product quality is crucial…price is secondary in select cases. Despite all we hear about China as a major exporter, its appetite for goods from around the world is enormous. U.S. exports need to accelerate, while our appetite for global goods needs to slow
Young People (around the world)—facing a rising tax burden in coming decades to finance the retirement years of Baby Boomers (and Boomers’ parents) if minor changes are not soon made
Zones—three major trading zones—North America, Europe, and the Pacific Rim—still define the planet’s future. Most expect two-thirds of the incremental growth during the next 20 years to take place within the Pacific Rim
“Tea”sers
Hillbilly Medical Terms:
Barium…what doctors do when patients die
D & C…where Washington is
Enema…not a friend
Nitrates…cheaper than day rates
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