The Global Economy: What You Need to Know

Halloween just passed, but we still sense there are some gloomy days ahead of us that could put a scare into most investors. By the time you read this, the next President of the United States will be known and then it will be all business, as the new administration works on the transition in the White House and the serious need to fix up the ailing U.S. economy and all its problems.

 It will not be easy and we will be met with numerous hurdles, many of which will not be controllable from the U.S. Already, there is increasing evidence that the economic behemoth China is showing growing pains and in fact is in trouble. Interest rates were just cut to try to avert a slowdown, but the fear is that, if China slows, there is going to be a domino effect worldwide. Oil demand in China is predicted to fall to zero percent growth in 2009 versus the previous four percent, as the country’s economy struggles, according to research by Credit Suisse. There is now increasing worry that China is also headed for a major slowing, much worse than many are expecting — and this is not good.

 Japan recently saw its benchmark Nikkei 225 index drop to its lowest level in 26 years. We are seeing major economic problems in Russia, as oil falls towards $60.00. The Russian economy was largely driven by wealth in the oil fields, but with prices down well over 50% from July, the government there is facing extremely difficult times and struggling for solutions to deal with the new lower oil price environment. Russia is more vulnerable because of its dependence on oil prices and due to the lack of diversity in its businesses. A severe downturn in Russia could impact other emerging eastern bloc countries because of the influence of Russia.

 So, before you jump onto the bandwagon, be aware of the global problems, as they will impact the United States.