The economy?

[Eugene Coyle <eugenecoyle@xxxxxxx>]

Please help me think about this:

I see the USA economy being hit harder by the housing crash than does
the conventional wisdom of the conventional economists.

A recession ahead.

But food prices seem bound to increase -- wheat price is surely going
to rise as the Australian drought knocks much of the export crop
down.  The largest river in Australia is predicted to run dry by
August.  Corn in the USA is being diverted to ethanol production, as
absurd as that is.  Drought in North America may (or may not) further
impact world grain production.  The FED will see the rise in food
prices as the dreaded inflation -- never mind the dreaded drought.
And the droughts may be connected to global warming, but never mind
that, says the FED, raise interest rates.  That will help the dollar
and hurt everything else.

The weak dollar will raise the prices of imports.

So the FED will see inflation.

Ford and GM may get some succor from the falling dollar but I guess
it will not be enough to raise production levels enough to save many
UAW jobs or other jobs.  Toyota and Nissan probably have enough
cushion to trim their North American prices.

A big factor will be oil prices -- but even if the recession here
eases demand, oil price might not fall in US dollars because of the
weak dollar.

So, with a recession AND inflation, what will be the policies
attempted to keep the lid on anger and maybe protest in the USA in
the next years?  Or is it even possible?

And if USA demand falls enough, will the Chinese economy stagger?  If
hit hard, will China have political upheaval?  The rest of Asia?
Will Europe be hit hard or only a bit?

And I'm leaving out questions of Iraq and Iran.  And leaving out
income distribution --

And  I'm leaving out what most occupies my mind these days, global
warming.  Al Gore has a wimp's solutions but I am thankful for him.

Help me out with your thoughts.

Gene Coyle