U.S. facing recession? Last thing this country needs...

Politically though, this would end Bush. Why is there now speculation that the U.S. will finally have to pay the price of incompetentcy from our president? Alan Greenspan raised alarm this past week that the U.S. might see a recession at the end of the year.
What was his reasoning?

Former Federal Reserve Chairman Alan Greenspan warned Monday that the economy may fall into recession by the end of 2007, according to a published report.
Greenspan told a business conference that it's difficult to forecast the timing of recessions but that it was "possible" that one could occur later this year, the Wall Street Journal reported.

The former Fed chief, who spoke to the conference by satellite link, said the U.S. economy has been growing since 2001 and that the economy cycle is nearing an end, according to the newspaper.

"When you get this far away from a recession, invariably forces build up for the next recession, and indeed we are beginning to see that sign, for example in the U.S., profit margins ... have begun to stabilize, which is an early sign we are in the later stages of a cycle," the Journal reported him as saying.

Well, Shite! But not to fear, Greenspan also assessed that our economy is resilient than before.

So Here IT Comes

From the AP we learn that today China is facing a big cool down in its economy.
Today China's stock exchange took a nine percent plunge and now Wall Street is feeling it.

Wall Street fell sharply Tuesday, joining a global stock decline sparked by growing concerns that the U.S. and Chinese economies are cooling and that U.S. stocks are about to embark on a major correction. The Dow Jones industrials dropped more than 140 points.

A 9 percent slide in Chinese stocks earlier set the tone for U.S. trading, a day after investors sent Shanghai's benchmark index to a record high close.

"Corrections usually happen because of a catalyst, and this may be it," said Ed Peters, chief investment officer at PanAgora Asset Management. "The move in China was a surprise, and when a major market has a shock it ripples through the rest of the market. With all the trade that goes on with China, there tends to be a knee-jerk reaction with that kind of drop."

So let's not get too panicked. But the trend will be troubling when we have a Vice President who in Australia on a diplomatic mission had this to say about China: "China's continued fast-paced military buildup are less constructive and are not consistent with China's stated goal of a peaceful rise."

Of course What Cheney considers diplomacy is closer to a bear telling a bunny to stop moving while he has his paws on its throat.

Greenspan doesn't seem to be too concerned from an economic standpoint about the coming recession because we have such a robust and "resilient" economy. But when we consider a couple of issues (check it out here and here)which this president, unlike the rest of America, has completely ignored, things could pretty hairy, especially when we want to talk smack to China.

Let's look further: 1. Dollar not doing so well from Asia Times:

Growing political instability in the US will weigh heavily on the dollar during 2007. This weight, combined with growing political pressure for dollar devaluation and a slew of negative economic factors, is likely to prompt significant dollar depreciation against most other currencies. The dollar's decline will help send asset values in the US sharply lower and precious metals prices soaring.

Needless to say, economists can often live in theoretical worlds that don't necessarily reflect the realities of the world and life (not to say political ideology doesn't either, libertarians or communists!)Politics and environment, etc. affect the economy. Not numbers, which is why our economy does look much better than many Americans feel that it is. If our economy was truly resilient, the whole country could be feeling it, not the rich elites who are running the damn country for their own benefit.
Read the whole article. It is where things are headed. If so, that means Bush is doomed, and we are not far behind. Democrats on the other hand might enjoy political benefits because of Republic Party incompetence.

Second reason we should worry about coming recession and any racheting tensions in the global marketplace: U.S. in debt.

There are some strange facts about the asset and trade positions of the US economy in the globalizing economy. The United States runs massive and growing trade deficits, is borrowing at a clip that would arouse the suspicions of a casino pit boss, and has been selling its assets to anyone who will buy. In the past 24 months, the US balance on goods and services comes in just shy of negative-$1.5 trillion. Across the same period, the US has sunk further into debt to the rest of the world.

For 2006, exports of US$1.4378 trillion and imports of $2.2014 trillion resulted in a goods and services deficit of $763.6 billion,
$46.9 billion more than the 2005 deficit of $716.7 billion. For goods, exports were $1.0237 trillion and imports were $1.8598 trillion, resulting in a goods deficit of $836.1 billion, $53.3 billion more than the 2005 deficit of $782.7 billion.

Who owns most this debt? China... Hold on for the rollercoaster.


Update: Wow, I scooped AP.