Are We Headed for a Global Economic Collapse?

The first three days of June, the first through the third, will be most interesting to watch because that’s when the G-8, US, Japan, Germany, France, Italy, Britain, Canada and Russia, have their annual meeting to discuss global issues. Unfortunately, China is missing from the party, and given their importance on the global stage, that’s a huge mistake!

Usually these meetings are photo opportunities for the heads of state to join hands and smile for the huge group of assembled photographers. Not this time! There’s just far too much of a risk with the potential collapse of the global economy. If nothing is done, this could happen, and then we all suffer together.

Efforts need to be made to bring Russia, France, Germany and Japan into a posture of “together we can make this thing work.” For if we don’t take the lead, then shame on us. These very complex economic problems each take on their own lives, and without sacrifice and intensive negotiations, nothing but disaster happens!

Right now getting the Europeans to believe that the US is not trying to undermine their economies with the fall of the Dollar, and the raise of the Euro, should be at the top of the agenda. This will not be easy, but the effort should nonetheless be made. Given the current state of the Euro against the Dollar, no wonder Britain is not too eager to join the group. Germany is being dragged kicking and screaming into a possible deflation mode, and if that happens, again we all suffer!

Japan is in the tank, as well as Germany, while the Italians, British, French and the US are all facing huge economic problems with their sagging economies. What to do? Well, pointing the finger at each other and looking for scapegoats is certainly not the answer! All nations must realize this is very serious stuff, and they ALL need to work together to develop a global plan. The jump-starter to get the global economy back on track falls on the shoulders of the US, and given the way things are going, that will be very difficult to make happen. Capital expenditures are just not happening, given all the bad news we have been having lately. Some sectors are showing signs of life, but overall things are still pretty murky, and their crystal balls don’t look too clear at this point.

The very sorry state of the airline industry is testimony to the severity of the challenges ahead. Unless things dramatically improve with airline travel, Delta, American and United could all be looking at consolidating, and that would certainly not be good for the frequent air traveler.

The auto industry has too many cars on lots looking for owners, and homeowners have pretty much pulled out all the excess profits in their homes via refinancing. Let’s not forget it’s the spending consumer visiting the malls weekly who accounts for two-thirds of the success or failure of the American economy.

If they pull in their horns because terrorists attack the major malls of America, or the SARS virus gets completely out of control, any one of these horrible events could push us all over the edge. I’m not trying to forecast gloom and doom, merely pointing out how close we are to the cliff.

Technology is finally starting to shows some signs of life, but the CEOs are a bit shy about saying the worst is behind them. Financial analysts have a habit of taking good notes at the analysts’ meeting, and a slip of an overly optimistic forecast by a CEO can cause their stock to drop rather badly if they miss their target!

In summary, get China to become a member of this group, and then next year we can call it G-9! Without getting China involved, the global economic challenges become even more difficult.
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William Dollar is a Senior Contributing Editor for the Wisconsin Technology Network, and has his own consulting company at www.billdollar.com. You can also contact him at bill@wistechnology.com.