Bending the Third Rail
Because We Should, We Can, We Do
Tuesday, May 30, 2006
Sign of the Times
Something very interesting happened in the stock market today. Walmart announced disappointing sales figures causing stocks to tank a bit.

So let's look at the forest.

Gas prices skyrocket. Poor people are impacted the most by high gas prices, thus having less dispensible income. Poor people are Walmart's key demographic. And where does Walmart get it's products? That's right, China. What happens if Chinese exports drop? They have less money to buy treasuries relieving the so-called "international savings glut". Few buyer's of treasuries equals higher interest rates, lower consumption, and a slowing U.S. economy.

Lather, rinse, repeat.

I'm not saying we're in for an imminent economic collapse, although such an event wouldn't shock me. More likely we're going to see a topping of GDP growth in 2006 followed by a longish recession with higher interest rates.

Happy times are here again!
1 Comments:
Anonymous romunov said...
I made a post about ""high gas prices". It may put some things in perspective how the rest of the world is off.