ANALYSIS, USA — According to The Age newspaper online:

“The economy suffered its biggest decline since 2001 in the third quarter, ushering in what may be the worst recession in a quarter-century … Gross domestic product contracted at a 0.3% pace from July to September, according to a Commerce Department report.

“The crisis really kicked up in late September,” Ethan Harris, co-head of US economic research at Barclays Capital Inc. in New York, said in a Bloomberg Television interview. “We’re going to be looking at a very unfriendly GDP number in the fourth quarter, with a drop of 2 to 4%.” –
US economy goes into reverse

The 2thinknow View.

The trends indicate a strong US recession. They have indicated a recession, since December 2007 when, ahead of others, 2thinknow predicted a US recession, using our proprietary nascent trend analysis.

The broad trend lengthening & deepening such a recession is volatility.

The duration of volatility will be determined in part by the decisions until December during the lame-duck session of the current US president.

And how long it takes to set asset prices.

Sources of Finance.

One reason the credit crisis effects business, is business capital & confidence are both tied to stock market & house prices.

Listed companies are financed by share issues. ie. the stock market.

Small business is financed by mortgages. And sometimes personal loans or credit cards. But often it traces back to bricks & mortar.

For an interesting explanation of the economics of small business financing, that is often over-looked, read Peruvian economist Hernando De Soto. His Mystery of Capital (on Amazon, at right) is one of the best books on economics of wealth ever written.

Short-Term US economic Trends.

High levels of personal debt. Liquidity problems. Falling employment. Assets that cannot find a price. Reduced spending on coffee, y spending. Distrust in Government response. Lack of trust in banking & finance system. Incompetent Federal Government.

Short-term, the market is testing various levels until it sets a new price for assets such as property or stocks.

All of these trends short-term create a perfect storm.

Long-Term US economic trends.

Producing nothing. Financial services focus. Shipping jobs off shore. Debt, debt, debt. Consumption driven growth.

These negative trends are the true cause. The ‘magic happens’ economic theory of shipping jobs to China, and buying back finished goods, in the name of free trade produces the illusion of wealth. Even more illusory when backed by debt.

As a trend, this theory has just started to reach the end of it’s cycle. This time around.

What’s good for GM is good for America?

Interestingly GM lost approximately US $15 Billion, in August. Then, revised upwards after finding some extra zeros.

Looks like big cars, finance alone as a profit centre & global supply chains didn’t work out so well. GM was a great company, and could be again.

There was a ‘joke’ inside Ford. Why don’t we just shut down all the plants, and let some else make the cars?

Perhaps if GM had stuck to making ‘local cars people want to buy?’

Made in China.

The fact is, China is producing the goods America buys. And India delivers the services.

Trade is essential.

Yet 2thinknow view the local economy as the key to wealth.

Not WalMart’s China & lower minimum wage strategy. Bad for local communities, but great in theory. Economic theory.

What’s your view?