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Friday, June 06, 2008

Consumers Go Down While Commodities Go Up

The U.S. lost jobs in May for a fifth month and the unemployment rate rose by the most in more than two decades to 5.5%. Obviously, the US consumer is in trouble. And yet prices for hard assets and commodities keep soaring, as I showed you with a list of links in my post earlier today.

What the heck is going on? How can prices of things go down when US consumers can't buy.

Well, this is where we need a giant Dr. Phil to confront Uncle Sam and bellow, "It ain't about you."

Instead, it's about global demand. China has a huge natural disaster -- a massive earthquake -- and what do the Chinese do? Buy more cars, in a nation that is adding 8.5 million new cars to its roads this year alone. In the US, if we had a massive earthquake, we'd probably all stay home and watch endless loops of the video on CNN.

India is another nation that is buying a lot of cars. It's way behind China -- Indians bought just 1.6 million cars last year -- but Indians do buy 8 million motorcycles and scooters a year. And auto sales in India should nearly triple to 4.6 million by 2014.

Now, we are seeing countries like India, Indonesia, and other emerging market tigers cut their fuel subsidies. This may crimp spending going forward. Still, right now, experts expect that India's consumer spending should quadruple by 2025, overtaking Germany and making it the fifth-largest consumer market, behind the US, Japan, China, and Britain.

I think Peak Oil will have a lot to say about global consumerism, and may even derail it. But until then, we are probably going to see the standard of living rise in other parts of the world even as the standard of living goes down in the US.

As the great Bruce Springsteen wrote in My Hometown, "These jobs are going boys, and they ain't coming back."

Well, that's depressing. Try to have a happy Friday and good weekend. Here's a video to cheer you up ...

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