“America is caught between a rock and a hard place. Exploding energy prices and the rising cost of living – on one side and a stuttering economy with little to no growth expected on the other.”
Last week I reported on the rising cost of living in New York and nation-wide in America. A few readers wrote me back: “When I divide the New York product costs by 1.56 (the Euro-Dollar exchange rate) things such as milk are more expensive here in Germany. Not to mention gasoline.”
Driving a car will soon be an expensive activity in America, too. Right. But Americans aren’t paid in euros, they’re paid in dollars. Therefore, you have to more or less assume the exchange rate as 1 to 1. As far as gasoline goes, that’s right, too. But we’re not comparing Germany with America, we’re comparing America 2007 with America 2008.
Second, gasoline is so expensive in Germany because the government taxes it so heavily. Third, Americans drive much further distances (their fault, I know, I know) and their 6 and 8 cylinder vehicles are horrendous polluters and gas hogs.
But the tide is turning. The small car segment is now the most popular. The Big Three (Ford, General Motors and Chrysler) slept through the trend in oil prices and are now feverishly transforming their fleets. “Smaller, more efficient, more European,” is suddenly the watchword in the land of bigger-is-better, now that belt-tightening has set in.
On Friday I heard a new economic report that puzzled me: the unemployment rate rose to 5.5 percent. Sounds harmless to us Germans, but these numbers reflect only those unemployed who are “officially” looking for work. There’s no place in American statistics for those who have already given up looking.
How high that number might be is unknown. But it is in the millions.
Plus, it’s the fifth consecutive month that unemployment has risen in the USA. In addition, many large employers have already announced more future cutbacks in the labor force.
So America is caught between a rock and a hard place. Exploding energy prices and the rising cost of living (experts expect a 12 percent increase each year until 2012!) on one side and a stuttering economy with little to no growth expected on the other.
Other economic data last week were also worrying. The number of home repossessions climbed to a new record and incomes for those still employed went down when adjusted for inflation. Americans’ purchasing power (US consumption until now has been the most important driving force in the world economy) is becoming weaker and weaker.
Small wonder that the Iraq war has ceased being America’s number one worry.
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