Thursday, March 24, 2011

Just a few weeks ago, the U.S. economy seemed to be moving steadily along in an upswing that's been several years coming. Interest rates, along with gas prices, were relatively low. Unemployment, while still high, was getting closer to where it needs to be. But we're not in this alone. Unfortunately, the global economy seems to have more of an affect on us than our own. This article from The Economist discusses how tsunamis, wars, and extra-continental debt crises all trickle down in some way or another to even the most uninvolved parties. What they can't always tell us is how, and this lack of certainty can create more problems than we need. The author describes Japan's stock market as its "fear gauge." After the nation's devastating earthquakes and tsunami, the volatility of the index was expected to jump 224%. That's more than it did after the 9/11 terrorist attacks.

So much of our global economy is based on speculation that it can reach record lows and highs based on the thoughts and fears of a select few investors. In this case, though, those fears have played out to be a reality, and the world will suffer because of it. Just this one event has proven to be cataclysmic worldwide. The infrastructure of one of the world's biggest economic players is temporarily destroyed, and it will take a very long time to grow. We saw this happen on a smaller scale with the BP oil spill. The Gulf Coast's economy, which largely depended on the fishing industries that were paralyzed by the incident, took a massive blow as it was unable to export the goods that made it thrive. Tourists no longer wanted to visit the region, resulting in an economic arrest that the residents had to claw their way out of. There's a lesson to be learned here: Expect the unexpected.

1 comment:

  1. The theory that everything trickles down is a major part of economics. Although the Tsunami did not directly affect the U.S., at some point it will affect every single person. Also, to go along with what Danny was saying about the oil spill, it greatly affected the fishing industry. Not only did people lose jobs, but prices for fish products went up.