Are you ready for the next collapse?

| May 07, 2012

I learned today more about the global economy and potential economic disasters to come on or before January 1, 2013. Learned by reading news reports and commentary.

Diane and I woke up this morning at our Florida vacation house. The freight took us close last week and we stayed long enough to get the truck worked on at a nearby Volvo dealer. We left the house this afternoon and will pick up freight tomorrow morning in Jacksonville.

My interest in the global economy is general and ongoing but was piqued today by news of the elections in Europe. In France President Sarkozy is out, Hollande is in. In Greece there was also a voter pushback against austerity measures. Pundits took greater notice of that because it brings Greece closer to exiting or getting booted out of the Euro. Such an event would be catastrophic, perhaps on the scale of the 2008 meltdown we saw in the U.S.

Not to worry, though; European leaders have had multiple summits in recent months and years and they “saved” the Euro every time. But to worry, conditions continue to get worse, not better, because these summits only kick the can down the road. That started long ago when it would have been easier to take the pain and solve then-smaller problems. But now the problems have grown and bankers and politicians are running out of road down which to kick the can again.

Leaders in several European countries have paid the price with the end of their political careers. Voters booted them out. But the replacements are faced with greater problems than their predecessors were able to solve and the current leaders have less to work with. Previous bailouts are not having their desired effects. Millions of people are suffering severe economic pain. Disorder in the streets is increasing in some European countries.

Money is an extreme taskmaster. If you have more than you need, money will leave you in peace and reward you with more. But as soon as you come up short, money will grind you into the ground without mercy.

European voters who have seen their conditions worsen are electing leaders who promise to relieve the pain, but money is more powerful. Just as money is grinding individuals into the ground, entire countries are suffering the same fate because they too have taken on too much debt, giving money the opening it needs to exercise its power to destroy.

In the near future we will see more summits, more bailouts and more agreements that are designed to make people feel better. Because the political courage does not exist and the people are unwilling to take the pain, we will not see real solutions. Things were bad in the European Union before. They are worse now and will be even worse soon.

What does that have to do with trucking?

Plenty.

A meltdown in Europe will be felt in the U.S. While the U.S. dollar will get stronger as people worldwide sell their currencies to buy the “safe” Greenback, an economic collapse in Europe will be felt here, dragging the U.S. economy down and the transportation business with it.

And it’s not like we have no challenges of our own. The presidential campaign now underway is getting most of the attention but there is a development shaping up in the U.S. that all truckers should be mindful of and prepared for. It too is the result of politicians kicking the can down the road (and of citizens supporting them in doing it).

Names for the coming challenges (crisis?) include Taxmagedon, fiscal cliff and sequester. I encourage you to Google search these terms and read up on them.

The short story is that on January 1, 2013, huge automatic spending and tax cuts are scheduled to go into effect. Taxes will increase, taking more money out of our pockets. Government spending will decrease, taking stimulus out of the economy. The cuts are huge, such that spending on defense and domestic programs will gut massive programs that we take for granted today.

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