June 12, 2011
2008 Recession, AT&T, Banks, Bonds, Currency, Dollar, double dip, DOW, Euro, globalization, international, NASDAQ, Proctor and Gamble, recession, Stock Market, Stocks, Toyota, Travelers, United States, Yen
The Dow fell below the 12,000 as nervous investors continued to sell off their stocks. This is the six consecutive day of losses in the stock market, destroying tentative gains made since the recession. The only Fortune 500 companies who successfully made gains were AT&T and Proctor and Gamble. All the other blue chip companies suffered hard losses; the worst was Travelers losing falling 135 points and losing 1.1% of their stock value. Motor company Toyota announced a loss of 1.6 billion in profits, due to the earthquake-tsunami double punch that has crippled the Japanese economy. The S&P and the NASDAQ Composite both fell by roughly 1.1% throughout the course of the day, contributing to their sixth consecutive week of losses. Safer investments, such as US back bonds, surged; driving down the interest rate by 0.04%. The stock market is in the opening stages of a second massive sell off, which will damage the international economy even more than the latest recession.
Why is the Double Dip Recession Happening?
The United States economy needs to get its act together before investors lose their nerve completely and sell everything. The international socioeconomic relies on trust and confidence. As long as everyone can pay of their debts people will gladly invest in any number of derivatives and stocks because it is a profitable thing to do. However, when massive blows to the stock market hammer that confidence consumers quickly stop buying stock, driving down the price. This is bad for the economy because companies rely on selling stocks to the market and their employees to fund their operations. Without the core faith in the stock market investments in new companies grind to a halt. This prevents new companies from entering the market, which further inhibits the economy.
It is a dangerous spiral that quickly stagnates the economy. New businesses cannot form to enter the market and existing companies cannot get the necessary funds to meet market demands. The circular movement of money halts, starving consumers and producers alike. This is the fear of what will happen should this double dip recession ensue; the only issue is that faith in the stock market and investments will be even harder to retrieve because of the recent 2008 recession. The economy could stagnate near indefinitely. One major aspect of this relates to economics, fiat money. The world relies on fluctuating currencies that are valued only compared to each other, they have no value themselves. This is good because it allows for large amounts of money to be utilized.
How Could This Hurt the Economy?
This is potentially disastrous because the money is prone to rapidly inflate and deflate, making counties rich one day and comparatively broke the next. Currencies are traded throughout the international economy, if the American dollar falls do to the currency trading markets driving it down Americans will be hard pressed. They will not be able to pay the mortgage, send their kids to college, or even by grocers if inflation rises too high too quickly. The unstable stock market could toss America into a recession instantly should there be a massive selloff. There is also the threat of a slow transition to a recession; as the American economy is strangled by the reduced investments they produce even less and then there are even fewer investments. This vicious circle is compounded ten times over by the banks leverage working against them, for every dollar they lose in their reserves they lose nine dollars they could invest. The double dip recession would attack America on two fronts, bringing misery to all.
March 23, 2011
corporations, deficit, disaster, foreign, Industrial, Japan, news, Toyota, Trade, United States
Factories from California to Michigan have been ordered to prepare for shutdown. As vital car parts that originate in Japan shrink in numbers new ones have yet to arrive from Japan. The Japanese tsunami killed thousands of civilians, triggered partial meltdowns at several nuclear reactors, and ravaged miles of Japan. [Please Help the Japanese People Recover, Donate Here Anytime] Factories have been crippled in the island nation and the ports have been frozen except for food and medical supplies. Car parts do not meet these strict requisites. New parts will not be shipping soon, which has led to a stagnation of the assembly lines.
This has led to many factories having reduced production, however until the now 25,000 workers that work at the 13 plants have not been laid off, although they may be in the near future. Furthermore, Toyota has promised to continue paying them regardless of the status of the plants and intends to employ them in community related activities, such as grass-roots marketing and social service.
Despite their token humanitarian efforts Toyota will be drastically set back by this tsunami. While Toyota has recently dominated the upper tiers of the car market this shut down could easily allow other car companies, such as Ford or Volkswagen, to take control of swathes of American consumers. The types of cars that everyone is driving will be slightly altered because of this tsunami, there will be many fewer Toyota’s and many more of everything else.
This directly relates to macroeconomics; the consumer price index of will be altered from consuming more Asian cars to more American and European cars. This may not seem like a large difference, but it will translate into millions, if not billions, of American dollars ending up in different hands. The contents of the average America’s financial basket will could change up to several hundred dollars. Some of those funds will be used to help rebuild the decaying American car companies. This may add thousands of jobs here in America, more if the European or Korean car companies set up new factories to replace the closed Toyota manufactures.
This illustrates just how interconnected the whole world is. An earthquake in Japan triggers a long and painful domino effect that has recently resulted in 25,000 American workers receiving vacation with pay, while maintaining the possibility that they might lose their jobs. Economically this is terrible in the short-term, but healthy for the American economy in the long-term. It harms the American economy to allow foreign companies to invade our shores and steal the profits, millions of irretrievable dollars are being sent overseas.
This dangerous trend is one of the key reasons why Americans have to work harder today to maintain the same standard of living than they did forty years ago. Back then they were chiefly working for American profits, which trickled back down into the community. Today that money continues to trickle down, in China, Japan, and India. This tsunami may have brought a small portion of America’s jobs back to America.
January 12, 2011
car industry, corporations, foreign, international, news, recall, Toyota
Toyota suffered some serious damage in the last year - all self inflicted by unsafe braking systems.
Over eleven million Toyota vehicles, across almost every single variety of vehicles, have been recalled due to a potentially lethal breaking system that could very simply break while and leave drivers speeding on the open highway. Almost a year later from the initial outbreak of the mechanical epidemic Toyota is finally plugged their failing sales. According to Consumer Reports Toyota has now lost is lead in the car industry and is now neck and neck with Ford.
Economists everywhere are exasperated by Toyota’s economic lost. The damage of the recalls devastated the sales of the company; very few individuals were willing to buy cars that could potentially kill them and their families. They lost them millions, if not tens of millions, of dollars in profit on cars that would have otherwise gotten sold. These implicit costs are more damaging than any potential expletive costs that have arisen, such as increased costs for parts because suppliers are unwilling or unable to supply parts to Toyota. This tragedy blights the once pristine safety image that Toyota had, back when it was considered perhaps the safest of car companies.
Akio Toyoda, the CEO of Toyota, confronted these issues at the Detroit Motor Show. After evading initial questions concerning the recalls, including two recent ones that cost them thirty two million US dollars because they were announced long after the company knew about the mechanical problem, he finally addressed the issue in a quirky manner. He pulled out a rice ball, a common fast-food from Japan that is a staple in student lunches, and announced that, “the same heart and soul in each vehicle, just like mothers [do to] their children’s rice balls.” This message does not cool the anger of the families with deceased members who died in Toyota accidents and left critics skeptical of Toyota’s short term recovery.
Meanwhile the rusting giant of the car industry, General Motors, have lumbered forward, closing the gap between them and the Japanese manufactures. Ford is matching Toyota step by step, innovating faster than they have in the last twenty years. Volkswagen has released a public statement outlining an agenda that it will reign supreme by 2018.
Each and every single one of these car corporations, except Toyota, benefited from these recalls. The opportunity cost that Toyota has accumulated is staggering, the deficit that will arise due to these recalls has equalized the market. If an incident like this happens again Toyota will not survive, which may not necessarily be a bad thing. Toyota’s plunder has breathed new life into the international car industry, at great expense to Toyota.