Saturday, September 03, 2005
Economic Fallout
To Soon to Tell, but GM, Ford, Northwest and Delta in Big Trouble
Gas prices in DC are fast approaching $4.00/gal., my brother said they've topped $3.65/gal. in the Midwest. GM and Ford, whose sales have been sustained by mega incentives are likely to be left with an inventory of Explores, Hummers and Broncos no one wants. Delta's stock dropped under a $1 a share this week and Northwest was teetering on bankruptcy before the oil shock hit.
And it's not just oil. 50% of our coffee imports arrive at the Port of New Orleans - Think $8 frapacinos! and a huge amount of our grain exports ship out of the PNO. Likely causing a rise in all of these commodity prices as supply and distribution problems take hold.
This poses a tricky problem for the Fed. Faced with the need to spur the economy in the wake of this catastrophy, lowering interest rates would be the normal response, but at the same time supply and distribution concerns will drive up prices, making a rise in interest rates necessary. I'm glad I'm not on the federal reserve board this week.
But this pain from these problems, at least for us consumers, will be temporary and don't even begin to approach the pain of the victims in Alabama, Mississippi and Louisiana.
Gas prices in DC are fast approaching $4.00/gal., my brother said they've topped $3.65/gal. in the Midwest. GM and Ford, whose sales have been sustained by mega incentives are likely to be left with an inventory of Explores, Hummers and Broncos no one wants. Delta's stock dropped under a $1 a share this week and Northwest was teetering on bankruptcy before the oil shock hit.
And it's not just oil. 50% of our coffee imports arrive at the Port of New Orleans - Think $8 frapacinos! and a huge amount of our grain exports ship out of the PNO. Likely causing a rise in all of these commodity prices as supply and distribution problems take hold.
This poses a tricky problem for the Fed. Faced with the need to spur the economy in the wake of this catastrophy, lowering interest rates would be the normal response, but at the same time supply and distribution concerns will drive up prices, making a rise in interest rates necessary. I'm glad I'm not on the federal reserve board this week.
But this pain from these problems, at least for us consumers, will be temporary and don't even begin to approach the pain of the victims in Alabama, Mississippi and Louisiana.
