Risk Rap

Rapping About a World at Risk

Bottom of the 5th

According to Paulson “we are closer to the end of the credit crisis then to the beginning.” He surmises that we are about half way through an 18 month cycle. If the Credit Crises were a baseball game we would be in the bottom of the 5th. Ideally would be sending our best hitters “the sweet spot in the lineup” to face a measly rubber arm that is running out of steam. “Ideally” being the operative word.

We just escaped a quarter of .6% growth in our GDP. Paulson believes that the only reason any growth occurred at all was that manufacturers built stockpiles and increased inventory. Apparently had that not occurred the US economy would have experienced negative growth.

Yesterday ADP reported that April employment in the service-providing sector of the economy grew 64,000, while employment in the goods-producing sector declined 54,000, the seventeenth consecutive monthly decline. Manufacturing employment fell 26,000 in April and marked the twentieth consecutive monthly decline.

What gives me pause is ADP’s assertion that manufacturing employment has fallen for 20 consecutive months. It’s not news to anyone that the manufacturing base of America continues to dwindle but if manufacturers did not “build up inventories and stockpiles” during the past quarter the US economy would not have grown at all because service industries can’t build inventory. So at least for this quarter American factories and a little dollop of inflation saved the day. Hoping that the credit crisis doesn’t go into extra innings we still got 4 and a half innings to go.

Banks will not be lending to build commercial space and new housing construction probably won’t pick up until later in the year when the excess inventory is worked out of the market. That leaves manufacturing as the strategic economic engine to get some base hits, put runners in scoring position and start putting some runs on the board.

Automakers can provide some leadership but their earnings continue to be anemic. We need them to get out of their slump. The economy needs this industry to hit the ball well. Automakers can become a locker room leader that manufacturers can look to for indications of forward traction and a restored sense of confidence. The bad news is that banks will not lend capital to manufacturers to build inventory. The better news is that the weak dollar is a good and present helper to manufacturers that export goods. It is the national interest of the US to promote the growth and stability of the global economy. Brand America needs to reposition itself as a promoter of peace so we can win the war against recession at home. We only have a few more innings to win this game.

You Tube Video: Eddie Vedder, Take Me Out to the Ballgame

Risk: Recession, Manufacturing, Banking, Credit, Employment

May 1, 2008 - Posted by | banking, Bush, credit crisis, folk, Paulson, recession | , , , , , , , , ,

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