U.S. to pass Saudi Arabia as top oil producer by 2015 … then fade over next decade

Captain Rick: The U.S. will pass Saudi Arabia as the world’s top energy producer by 2015, but will fade over the coming decade, according to a report from the International Energy Agency.

Massive investment in the production of shale gas has driven the U.S. supply boom, thanks in large part to new technologies such as hydraulic fracking, which has made the extraction of oil and gas from shale rock commercially viable.

But limited reserves will cap the surge in shale oil output within the next 10 years. "Shale oil is good news for the U.S, but we do not expect this trend will continue after the 2020s," IEA chief economist Fatih Birol told reporters Tuesday, at the launch of the 2013 World Energy Outlook in London.

That will translate into an increase in OPEC producers’ share of global output since those nations would remain the only large source of relatively low cost oil. "Middle East oil is crucial to the global oil industry today, and also tomorrow," Birol said.

The OPEC oil cartel, which includes Saudi Arabia, the United Arab Emirates and Qatar, controls the vast majority of world oil reserves. As a major exporter, top producer Saudi Arabia is critical to future energy supplies. By contrast, the United States relies on its newfound energy wealth to power domestic consumption.

The Future … in the eyes of the International Energy Agency …

Birol said despite the growth in U.S. energy supplies, the new era isn’t one of "oil abundance," due to demand pressures and declining production from existing crude fields. The IEA also noted that power-hungry Asia will continue to re-shape the global energy landscape. About two-thirds of future world energy demand will come from the region. India will take over from China as the biggest energy demand center around 2020. The Middle East will also have a rising impact on demand. By 2035 the Middle East will consume the same amount of oil as China does today, according to the IEA.

The Future … in the eyes of Captain Rick …

The IEA has things well figured out. However, what is not weighed into their vision is the massive monetary catastrophe that the U.S. faces. How the U.S. handles (or evades, as has been the case) its pending debt crisis will add to the future outlook. If the U.S. stays on is current course of ‘kicking the debt can down the road’, the future outlook as presented by the IEA could change significantly. The IEA is not considering the fact that the U.S. could be well on its way to becoming a third world country a decade from now. 

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Interesting ATRIDIM NEWS JOURNAL Report Categories:

U.S. Debt Crisis

Captain Rick’s Fiscal Cliff Course 101

Japan: Nikkei stock market plummets 7% Global stock market rally abruptly halted How do world markets compare for gains?

Captain Rick: A global rally in stocks came to an abrupt halt Thursday with a 7% plunge on Japan’s Nikkei index … the biggest one-day drop since the 2011 earthquake and nuclear disaster.
European markets fell by 2% with Germany’s DAX down 2.4% and France’s CAC 40 down 2.1%. This was preceded yesterday by U.S. markets dropping about 0.8%.

What caused this? Investors were rattled for three big reasons:

Japan: The Japanese rally had gone too far too fast. The Nikkei has surged by more than 70% over the last 12 months, far outpacing other markets.
‘Abenomics’, Japan’s version of ‘Quantitative Easing,’ has pumped massive amounts of money printed with red ink into the economy to create an image that the economy is doing good, when it is not.
The Bank of Japan’s policies can’t sustain the rally indefinitely, and Japanese companies will have to start reporting better earnings to bolster investment confidence.

U.S.: The Federal Reserve released minutes from its latest policy meeting revealing that some members of the monetary policy committee were looking to taper off the ‘Quantitative Easing’ bond-buying program as early as June. That is bad news for investors who have been energized by the Fed’s $85 billion of phony red money being pumped into the American economy each month to make it look like the economy is healthy, when it really is not.

China: Weak economic data. The latest numbers from China showed the country’s manufacturing sector contracted in May, contrary to expectations for expansion, reinforcing concerns about slowing growth in the world’s second biggest economy. This is a reality that is beginning to come to light because America, Europe and most of the world have economies that are actually in decline once we strip away the façade of programs like ‘Abenomics’ and ‘Quantitative Easing’.

World Stock Market gains in past 12 months
Japan: 69% (after todays huge loss)
Eurozone: 33%
England: 27%
Australia: 23%
Hong Kong: 21%
U.S.: 18%
Canada: 10%.
Mexico: 8%
Brazil: 3%
China: – 4%

Captain Ricks Analysis: Which markets are likely to go up … or down?
The stock markets in the countries at the bottom of the list (less than 15% gain) are on the strongest footing and are more likely to go up than down.
The stock markets in the countries at the top of the list (more than 40% gain) are significantly over invested with highly inflated values and face significant potential for decline.
The stock markets in the countries in the middle (15% – 40% gain) are in uncertain territory with over investment and inflated values, especially those in the upper half of this range. These markets are more likely to decline than rise, especially those in the upper half of this range.

I welcome your comments, likes, shares and following of my blog! (If not visible, click the red title above)

Associated ATRIDIM NEWS JOURNAL Report Categories:

Japan: https://atridim.wordpress.com/category/japan/

China: https://atridim.wordpress.com/category/china/

Stock & Bond Market: https://atridim.wordpress.com/category/stock-bond-market/

Fiscal Cliff 101: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

U.S Debt Crisis: https://atridim.wordpress.com/category/u-s-debt-crisis/

European Debt Crisis: https://atridim.wordpress.com/category/european-debt-crisis/

All Reports: https://atridim.wordpress.com/

China: World’s 2nd largest Economy in decline … as GDP and industrial production drop + a real estate bubble ready to explode

Captain Rick: Gross domestic product in China grew 7.7% over the previous year during the first quarter. That is great by U.S. standards, which are hovering near 0%, but a significant loss from the 10% annual GDP that China has averaged during the past three decades, which propelled it to become the the world’s second largest economy. Reports on industrial production and retail sales disappointed. Economists are worried about a rapid expansion in credit and a red-hot housing market.

Fitch ratings agency warned China of excessive debt levels and issued rare local currency downgrade
The ratings agency said it issued the rare downgrade because of three factors: Structural weaknesses in China’s economy, an expansion of easy credit and the rise of an opaque shadow banking system.
Credit in China has expanded quickly in the wake of the global financial crisis, with much of it issued to local governments and used to finance infrastructure projects.
Fitch believes local government debt levels are now so high that Beijing will, at some point, be forced to assume some of the burden.

In response to the global financial crisis in 2008, China moved to stimulate its economy by increasing the amount of available credit.
Banks and other lenders responded, with credit in China growing since 2009 at a quicker pace than gross domestic product. Only one country — Qatar — was issuing credit at a faster rate.
By the end of 2012, credit issued by Chinese banks to the private sector reached 136% of GDP, the third-highest level of any emerging market country rated by Fitch.
Much of the credit was issued to local governments, and used to finance infrastructure projects that helped China sustain rapid economic growth in the wake of the financial crisis.

Beijing has tried to get a handle on credit issuance in recent years, moving to cool the housing market and cut back on local government debt.
But when combined with low wages, Fitch said the persistent nature of the trends has created growing risks for China’s financial stability.

Real Estate Bubble heating up and ripe for explosion

The housing market is heating up, leading some analysts to worry about the development — and possible deflation — of a housing bubble.
China’s central government is already stepping up efforts to cool prices, and Beijing has directed local governments to institute control measures of their own.
Several cities, including Beijing and Shanghai, have responded by announcing higher taxes and fresh restrictions on property purchases.
20% capitol gains tax has been added on home sales as well as higher interest rates and down payments for anyone buying a second home in cities where real estate prices are sharply on the rise.

China is the second largest holder of U.S. debt (Japan is the largest)
China held about $1.15 trillion in U.S. bonds through August, the most recent reading available from the Treasury Department.
China had been buying U.S. Treasuries as a way to keep its currency, the yuan, pegged to the U.S. dollar. That helped lower the value of the yuan and made China’s exports more competitive in markets such as the United States.

Captain Rick’s Words of Caution: Notice I said China ‘had been buying U.S. Treasuries.’ Latest indication is that that has stopped. This could have grave consequences on Americas gigantic thirst for deficit spending. Japan remains the only major purchaser of American debt and those days could be numbered as well due to economic conditions in Japan not being anything to ‘write home about’. Our world is skating on very thin ‘fiscal ice’. Countries of our world, including China, depend on America to be a leader of fiscal responsibility. America has not been setting a very good example with its legislative gridlock on solving its monumental thirst for deficit spending. The world can only hope that America will wake up from its deep sleep and do what is necessary, before its speeding train goes over the ultimate ‘fiscal cliff’ and takes the world with it.

I welcome your comments, likes, shares and following of my blog! (If not visible, click the red title above)

Info from previous reports:

China: https://atridim.wordpress.com/category/china/

Fiscal Cliff: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

U.S. Debt Crisis: https://atridim.wordpress.com/category/u-s-debt-crisis/

GDP: https://atridim.wordpress.com/category/gdp/

Dow plummets 266 / 1.79% … biggest 1 day drop of 2013 … Cause: dismal economic report from China + bomb blasts at Boston Marathon that killed 2 and injured 70+

Captain Rick: The Dow Jones started the day off with a major slide after dismal economic news from China, followed by a small gain and then a continuing slide as a result of the explosions that rocked the Boston Marathon that killed 2 and injured more than 70. The result was the largest one-day Dow plummet of 2013, erasing all gains of the past week. President Obama is addressing the nation.

While many in the news media are accrediting this major market drop to the Boston explosions, that is not entirely true.  I circled in red in the chart above, the drop that occurred after the bombings occurred at about 2:45 EDT. Tomorrow’s market will reveal where we go from here.  I will report on more of this, especially the declining economic situation in China in future posts.

I welcome your comments, likes, shares and following of my blog! (If not visible, click the red title above)

Imagine if your household budget was controlled by the U.S. Federal Government … You would be in serious financial trouble!

Captain Rick: If the U.S. Federal Government was in control of your household budget, you would be in serious financial trouble!  I have prepared this simple comparison to show you why:

Annual Financial Statement of the United States of America:

U.S. Tax revenue: $ 2,170,000,000,000

Federal budget: $ 3,820,000,000,000

New debt: $ 1,650,000,000,000

National debt: $ 16,571,000,000,000

Interest on the National debt: $ 222,800,000,000

Recent budget cuts: $ 38,500,000,000

Let’s now remove 8 zeros and pretend it’s an annual household budget:

Annual family income: $ 21,700

Money the family spent: $ 38,200

New debt on the credit card: $ 16,500

Outstanding balance on the credit card: $ 165,710

Interest on the credit card: $ 2,228

Total budget cuts so far: $ 385

What would happen if the bank froze your credit card, preventing more debt?

Can you imagine how bad your budget would be if you were spending $16,500 more each year than you received in income? The interest on your credit card balance would be $2,228 this year and would be added to your massive balance of $165,710. Each year your debt is growing larger at a rapid rate.

Now, suppose your bank lost faith in your ability to pay your balance. Its easy to guess that your bank will freeze your credit card, allowing no further debt. How will you pay the $16,500 in expenditures that were beyond your budget?  How will you make your loan payments, or even pay the $2,228 in interest on your credit balance? You would probably be left with one choice…declare bankruptcy. Luckily, you would have the U.S. Federal Government (Uncle Sam) to excuse your debt and allow you a new financial start.

What would happen if the bank froze Uncle Sam’s credit card, preventing more debt?

The situation with Uncle Sam’s budget is identical to yours, only exponentially larger. However, there is a large difference in who controls the credit. Uncle Sam’s debt is not held by a bank. It is held by a large number of investors, investing firms and countries all around the world. Japan and China hold a large portion of America’s debt. It is highly unlikely that all of the creditors would freeze Uncle Sam’s credit all at once. But, supposing one day China or Japan lost faith in Uncle Sam’s ability to repay their investment…or even the interest on it? Its easy to guess that they would stop further investments in the U.S. federal government.

When a large enough source of new investment is stopped, how will Uncle Sam finance America’s programs which count on $1.65 trillion of borrowed money each year? How will it repay its debt to investors…or even pay the $223 billion in interest on the balance? Unfortunately bankruptcy is not an alternative for Uncle Sam. There is no bigger entity to bail it out or give it a fresh financial start. Its only remaining option will be to reduce payments to various programs so that it stays within the limits of new debt which can be sourced. It could also mean that the U.S. would have to default on its debt owed. This in return would most certainly stop most, if not all of America’s creditors from making further investments. This would worsen the situation and virtually force America to live within its budget, drastically slashing its programs by $1.65 trillion per year. Programs like Social Security, Medicare, Medicaid and Defense would most certainly be significantly affected, as they are the largest budget items. Such massive cuts would most certainly cast America into a deep recession, probably far worse than the Great Recession a few years ago.

Captain Rick’s Solution Scenarios

Maintain Current Course of Deficit Spending with only small, token reductions:

This is not an acceptable solution. It will lead to failure of America’s financial system within a few years. The cost of America’s entitlement programs like Social Security, Medicare and Medicaid are growing in size at an astronomical rate. In a very short time these three programs will consume 100% of all Federal Tax Income, leaving nothing to support the entire balance of the government without deficit spending. With this course, its not a matter of IF the world’s creditors will cut off America’s credit…but WHEN.

Balance the U.S. budget within 10 years:

This is the course America must take if it is to survive. The Fiscal Cliff had a goal of cutting half of the deficit spending 10 years. That was a good start, but congress cant even achieve it. Congress continues kicking America’s debt can down the road, agreeing on allowing only token spending reductions and tax increases. America must do better…soon!

It will require major spending reductions affecting all programs and tax revenue increases across the board. It will also require significant entitlement and grant program reform. The days of Uncle Sam handing out money with a blindfold on must end soon.

Does America have the ‘guts’ to make these sacrifices? Time will tell…but time is running out quickly. I hope for our children’s sake that America gets its act together soon or our kids will likely find themselves living one day in a third world country.

I welcome your comment and hope you will share this with your friends via one of the means I have provided. Together, our voice can make a difference.

More Info:

Fiscal Cliff: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

U.S. Debt Crisis: https://atridim.wordpress.com/category/u-s-debt-crisis/

Bret’s report from China: visibility poor, food awesome, living conditions depressing

Captain Rick: I received a report from my friend Bret who is a frequent commenter on my blog and is on work assignment in China. He sent the following photos and report:

Bret of Arizona reporting from China:

We flew into Shanghai, drove 2 hours to Suzhou, and the next day drove what was supposed to be 4.5 hours to Jingua (ended up being 6.5 hours because of traffic.)

Visibility was at best 1 mile. I saw no houses, just miles and miles of dingy apartments.

The food was absolutely awesome! It was depressing to see how people live. Almost no recreation, and everywhere you looked, there were little vegetable gardens. One thing I can say is they are self sustaining people. I saw no commercial farming at all, just little family gardens everywhere.

If you look closely at the picture of the scooter, there are 4 people on it with the baby on the back facing backwards…very common.

Shanghai was clean, but went on and on for miles…It is hard to comprehend the amount of people. My pics were all from a Samsung Galaxy tablet, that is why they are low quality. I hope you enjoy them. Bret

Geithner: U.S. to hit debt ceiling Monday + Captain Rick’s ‘Dream for America’

Captain Rick: Here we go again. Treasury Secretary Tim Geithner warned Congress in a letter that U.S. borrowing will hit the debt ceiling on Monday, and that Treasury will begin using ‘extraordinary measures’ to prevent government spending from exceeding the legal limit of $16.394 trillion. On Monday, debt subject to the limit was just $95 billion below the $16.394 trillion debt ceiling. That allows for spending over $13 billion a day through next Monday. It makes my head spin thinking about how fast the U.S. spends money and that over $1 trillion of what it spends each year is borrowed money (deficit spending) that adds to the U.S. National Debt.

The extraordinary measures include suspending the reinvestment of federal workers’ retirement account contributions in short-term government bonds. All told, the extraordinary measures can create about $200 billion of headroom under the limit — normally about two months worth of borrowing.

If America begins going over the ‘Fiscal Cliff’ on Tuesday, January 1, as all indications point to now, $600 billion in annual spending cuts and tax revenue increases will kick in and slow the generation of debt to half speed. This would double the period of time to 4 months remaining before extraordinary measures would be exhausted.

After the extraordinary measures run out, Treasury won’t be able to pay all the country’s bills in full and on time. At that point, the United States will run the very real risk that it could default on some of its obligations, such as making interest payments on America’s National Debt which total a staggering $260 billion per year. This would have a severe negative impact on America’s credit rating which would have a ripple effect of making it more costly for the U.S. Treasury to borrow money. At some point foreign governments, like Japan and China, which hold large sums of American debt, would slow lending or even curtail it. The American economy would grind to a halt and be thrust into a deep recession, dragging all world economies along with it.

Other solutions could be to default on Social Security, Medicare, Medicaid and other government program payments. We all can comprehend the immediate, massive, destructive effect that would have on society.

Thus, we can conclude that default of any kind  is not an acceptable solution. The only immediate solution will be to increase the national debt again. Those who have studied Captain Rick’s FISCAL CLIFF Course 101, know that its just a matter of time before raising the national debt ceiling will no longer be a workable option. This is why it is so important that the ‘Fiscal Cliff’ spending cuts and tax revenue increases take effect on January 1.

Captain Rick’s Dream for America

I find the manner in which the President and Republicans and Democrats in Congress are trading off fiscal ‘trinkets’, in an effort to fool America that they can come up with a better solution than the ‘Fiscal Cliff’ to solve America’s serious problem of thirst for debt … almost laughable.

The President and Congress should stop playing fiscal games. The current members of Congress should stay home on vacation for the rest of the year. A new slate of legislators will be sworn in on January 3, hopefully with a work ethic that is void of politics (I am holding my breath), and work towards raising the debt ceiling along with the creation of Fiscal Cliff 2 … another painful round of spending cuts and tax revenue increases that would finally balance America’s budget and eliminate deficit spending. Ideally, it would start on January 1, 2014, when the next raise of the national debt ceiling will most likely be required. Hopefully that would be the last need to raise the America’s National Debt Ceiling.

Perhaps Fiscal Cliff 3 could kick in on January 1, 2015 with another round of spending cuts and tax increases that would begin reducing America’s National Debt and its interest on the debt which will be well over $300 billion per year by then.

If America were to follow this painful fiscal road, our children and grandchildren could have a realistic chance to make a descent living and recapture some of the Great American Dream that kids growing up in America back in the 1950’s and 1960’s once had. I was one of them. They were great times that are ‘long gone’, but can be rekindled if we, the generations who helped create America’s fiscal ‘nightmare’, accept some sacrifices. I urge everyone in America to accept the ‘Fiscal Cliff’ with a ‘grain of salt’ as it becomes effective on January 1, 2013 and urge your legislative representatives to work towards achieving Fiscal Cliff 2.

View Captain Rick’s entire FISCAL CLIFF Course 101: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

Japan nears “Recession” as economy contracts: GDP dives to negative 3.5%

Captain Rick: Japan, the world’s third largest economy, saw its economic growth sharply contract 3.5% in the third quarter of 2012. If its GDP (Gross National Product) growth rate remains in negative territory during the fourth quarter, Japan will officially fall into recession. Some economists have warned that looks likely. Some believe Japan is in recession already. Many fear that in light of China’s economic contraction, this is wake up call that the entire region might be headed for recession. I will help clear it up in my closing thoughts below.

Japan’s economy, especially exports, has been battered by the 2011 disasters caused by the earthquake, tsunami and subsequent meltdown of several nuclear reactors. China is Japan’s largest trading partner, but its diplomatic spat with China over disputed islands has made Chinese consumers reluctant to buy Japan-made products, especially automobiles.

Last year nearly 20% of Japanese exports were sold to China, compared to 15.3% to the U.S.

Captain Rick’s closing thoughts on Asia, Europe and the USA:

Japan has been busy gobbling up U.S. debt over the past year. Its current holdings of $1.12 Trillion might soon pass the current top holder of U.S. debt … China at $1.15 Trillion. I find this very interesting and hope to focus on it in an upcoming report as America nears the “Fiscal Cliff”.

To help clear up the controversy of whether or not Southeast Asia is headed for recession, we should consider the problems that our friends in Europe face. Several countries in Europe are already in recession and more on the brink. Europe is facing a very serious financial challenge.

The most serious of all world financial problems lies in the United States of America. Its called the “Fiscal Cliff”. If this financial “nightmare” is not addressed head on with real and meaningful cuts in spending, coupled with increases in taxes, I assure that the negative financial echo effect will have the potential to thrust all countries of our world into recession. Watch for more of my reports on this matter of major global importance.

Dow Dives 243 points, 1.82% … following slew of disappointing earnings … igniting fear that the global economy is on shakier ground than previously expected

Captain Rick: Big sell off on Wall Street as a result of three major U.S. industrial companies filing disappointing earnings reports, igniting fears that the global economy is on shakier ground than previously expected. DuPont, a Dow component fell 9% after reporting weaker-than-expected quarterly earnings and announced plans to cut 1500 jobs worldwide. United Technologies lowered its forecast and 3M missed revenue estimates. Continuing uncertainty about economic health in Europe and China contributed. This was the biggest Dow dive since June.

In September, 2012, the Dow came within 4% of the all time Dow high of 14164.53 reached before the 2008 market crash. This correction knocks it back to –7.5% from the all time high. The Dow is still up 7.24% for 2012.

I see lots of uncertainty lying ahead with the U.S. facing the “Fiscal Cliff” in January, the fiscal problems in Europe and the degrading effect that all of it is having on the economy of China, which are all working in unison as ingredients brewing a very volatile global fiscal and economic storm. I will do my best to report the important elements.

Cummins to cut 1,500 jobs by end of 2012 due to weakening global economy

Captain Rick: Cummins, the world’s largest producer of diesel technology with $1.85 billion in 2011 sales,  announced that it will cut as many as 1,500 jobs by the end of 2012 because of uncertainty regarding the direction of the global economy. Cummins employs about 44,000 people worldwide. Based in Indiana, it also has factories in Minnesota, New Mexico, North Carolina and several overseas. It instituted a global hiring freeze after a recent drop in sales in North America, China and Brazil.

World Bank slashes Asia forecast and warns it could get much worse if U.S. does not solve ‘Fiscal Cliff’ debt crisis

Captain Rick: The World Bank lowered its growth outlook for Asia on Monday, and warned that a major unraveling in Europe could knock 2% off Asia’s GDP growth next year.

The institute warned of even slower growth in China and Asia if the Eurozone debt crisis were to cause a disruption of financial markets in Europe, or the so-called fiscal cliff in the United States went unresolved. A “major” Eurozone crisis could reduce growth in Asia by 2% next year, while the fiscal cliff would erase another 1%.

Weaker demand for East Asia’s exports is slowing the regional economy, but compared to other parts of the world, it’s still growing strongly.

The World Bank also forecasts a slowdown in China, where growth has been relatively tepid. GDP growth will fall to 7.7% this year, the institute predicts.

The downgrade is latest in a series as economists adjust expectations for China. Swiss banking giant UBS last month lowered its China GDP forecast to 7.5% from 8%.
Goldman Sachs has issued a slightly less dour outlook for China growth — dropping it to 7.6% from 8.0%.
While China is still growing fast, especially compared to less than 2% growth in the United States, it marks an uncomfortable soft patch for the world’s second largest economy. Over the last three decades, China has barreled ahead at an average growth rate of about 10% a year.

Economic momentum in China is expected to be weak during the coming months.

5 Global Risks to Grasp + 3 Fiscal Cliff Scenarios … including the current track of doing nothing, a formula for Recession

Captain Rick:  Click and Play the video below to get an excellent 3 minute summation of the world’s 5 Global Risks, each of which can completely change the global outlook. There are two in Europe, one in the Far East, one in the Middle East and one in the U.S. … the pending Fiscal Cliff … potentially the biggest global risk of them all. 3 Fiscal Cliff scenarios are discussed of which one is following the current course of doing nothing. This would cause a 4% contraction in GDP and cast the U.S. into Recession. For the first time in a very long time our kid’s generation would be worse off than ours. Two other scenarios are discussed that offer hope. The conversation includes a statement that a fix must include compromise of tax increases and entitlement cuts. Mathematically, the problem can’t be fixed by addressing one side only.  We are fortunate that we have a currency that everybody still wants, so we still have some time to get it right by enacting proper tax and entitlement reform. We just need politicians that are willing to compromise, which could be the most difficult job of all.

FORTUNE Video by PIMCO CEO: http://money.cnn.com/video/magazines/fortune/2012/10/04/f-el-erian-pimco-ceo-global-risks.fortune/

GDP report: U. S. economic growth revised sharply lower + ‘Caution’ for the future

Captain Rick: The U.S. economy grew significantly slower in the second quarter than the sluggish pace reported in August. Q2 GDP was revised to 1.3%, down from 1.7% reported in August. This came as a surprise to most economists. It wasn’t surprising to me. What I found surprising is why last months Q2 GDP estimate was increased to 1.7% from the previous 1.5%. So, I am not surprised to see that it fell back to 1.5% and more. The surprised economists are already busy forecasting GDP will come in at 1.9% in the third quarter. Perhaps they will be equally surprised when it doesn’t. I should mention that 1.9% is still well under what is needed to break even. I believe economists need to retire their dart boards and start paying better attention to what is really transpiring around our world, as I have been doing for many years. It helps take the surprise out of things.

Gross domestic product (GDP) is the broadest measure of the nation’s economic health. 3% economic growth, represented by the red line in the chart above, is necessary to provide enough new jobs to keep pace with U.S. population growth. America has fallen short in all but two of the past three plus years. This means that the percentage of eligible workers who are working continues to drop almost every month. Real unemployment is continuing to increase, in spite of the bogus and meaningless unemployment percentages the U.S. government publishes each month. America’s unemployment rate is currently published to be 8.1%, but the real number is actually about twice that…and rising, not falling.

I am saddened to say that I do not see anything on the horizon that is going to raise America continuously up above that red line, where we need to be to enjoy a healthy and growing economy, for the next several years, perhaps 2017 or beyond. Even the Fed, the IMF and other global financial authorities predict similar sluggish growth through 2015.  Europe appears to in recession or close to it. U.S. growth of 1.3% is knocking on recessions door.  China’s economy is slowing quickly as a result of economic sluggishness in the West. This paints an anemic image of America’s economic health., with a global ripple effect.

I caution local and state governments to exercise fiscal restraint and filter out some of the local growth hype that is beginning to surface. Some of it is beginning to closely resemble fuel for another financial bubble…not real growth. It will be much smarter to put some funds in a ‘piggy bank’ for a ‘rainy day’ than to spend all of the receipts as fast as we can while the sun appears to be shining brightly.

I urge federal legislators to address the ‘Fiscal Cliff’ ASAP. This does not mean coming up with another political compromise to ‘kick the can down the road’ for another year. It means finding a real solution to reduce Americas debt NOW! Every time we postpone a proper ‘fix’, we bring our nation much closer to the real ‘Financial Cliff’…the one that will have the power and magnitude to reduce the United States of America to a third world country. How America handles this monumental problem will affect the entire world for decades to come.

CATERPILLAR lowers profit and revenue forecasts for 2015

 Captain Rick: Smart companies have long range planning foresight. Caterpillar, the world’s largest earth-moving equipment manufacturer, one of America’s largest remaining manufacturing firms and listed on the Dow Jones Index is one such company. As a mechanical engineer, I followed the trail of this great company over the past half century.

Caterpillar’s CEO Douglas Oberhelman announced at an industry conference in Las Vegas on Monday that the economic slowdown has been sharper than the company anticipated. I suspect much of this relates to the significant manufacturing slowdown in China, as a result of shrinking economies in Europe and the U.S. As I reported in my blog entry on September 19, 2012, Caterpillar over estimated potential growth in China and made significant production cutbacks at its Chinese excavator plant. Monday’s announcement caused Caterpillar’s stock to slide to 87, a 7.42% loss year to date. I applaud Caterpillar for keeping a realistic eye on the future, considering the serious economic challenges facing our world. 

FedEx, Caterpillar and others feeling the pain of China’s slowing economy

Captain Rick: The sluggish economies of the U.S. and Europe are having a direct effect on China’s economy, all working in unison to amplify the global financial crisis. FedEx, the world’s largest air package shipper says the impact on China’s economy is far bigger than most have estimated. FedEx has trimmed the number of planes carrying shipments into the United States.

Caterpillar, the worlds largest maker of earth-moving equipment, has slowed production at its main Chinese excavator factory, including a two month shut down and cutting work hours. Caterpillar is exporting most production out of China as a result of overestimating sales potential in China. Many other companies are also effected. The report continues …

For more info, read the above Fortune Report:  http://finance.fortune.cnn.com/2012/09/19/fedex-china/