THEY SAY
An Economy That’s Scared
From Editor Mark Lacter’s Comment in the May 17 Los Angeles Business Journal:
Everything seems normal enough. Consumers keep buying stuff, which pushes companies into the black, leads to healthy increases in gross domestic product and encourages new jobs.
All of which is the essence of economic growth, those two magical words that help make the world go around (and help elect presidents).
So if everything seems normal enough, why is everybody doing the stutter-step? Why are companies still holding back on expansion and hiring? Why are Forbes and Fortune so thin in ad pages? Why is the Dow struggling to stay above 10,000?
To these basic questions, there are the basic answers (higher interest rates, record oil prices, insurance hikes, job losses, blah, blah, blah). But underlying all that is a factor far more basic: an economy that is beyond anyone’s control,more so than any time in memory.
This is about a market that has lost its footing. Oil prices have jumped 10% since late April, when suicide bombers made an unsuccessful attack on an Iraqi offshore oil terminal. Just last week, insurgents damaged a key pipeline carrying oil to the city of Basra. That, along with another pipeline shutdown, has kept 400,000 barrels a day from reaching market, according to The New York Times. Oil traders are now factoring a “risk premium” that runs anywhere from $4 to $8 a barrel.
Behind those numbers is the true culprit: emotion, real and imagined. Iraq has become a virtual powder keg that threatens to disrupt oil production throughout the Middle East. Just the threat of additional terrorist attacks, in the United States and elsewhere, has created a kind of global malaise that won’t show up in any balance sheet or government report, but is nonetheless hard to ignore.
And if something awful really does happen, forget it, brother.
So yes, it’s nice to see more Americans with jobs and increases in California exports and consumers still buying cars and houses. Yet this economy is far from robust. It is, in fact, running scared.
