The threatened trucker's strike will have a more profound effect on the economy than the Bear Stearns implosion ever will. Most of the mainstream media have been focusing on the effect that investment bank failures would have on the economy. While the potential failure of investment banks has dire consequences, the threatened trucker's strike will have even more profound effect on the American economy.
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There has been a lot of talk of the Bush Administration using its power to put all of the economy's problems off until after the election and place the blame on the new Administration. However, I don't think Bush will be able to do it. The potential strike -- even if it doesn't materialize -- will affect Main Street in ways that Wall Street's troubles never will. Here are two potential scenarios:
- The strike goes on. Stores do not get the resupply they need to keep essential products on the shelves. Social unrest follows as consumers are not able to get things they need to survive. Knowing Wall Street, though, the stock market will probably go up because of it.
The powers that be will probably keep thinking that they will be able to turn public opinion against the truckers. I suspect that they will be in for a rude awakening as they realize most Americans will sympathize with the truckers.
If the strike is successful, businesses -- which have been running on thin profit margins -- will have to raise prices in the face of a recession. Sending strapped consumers to cut even further (or having a cascading effect on other workers demanding raises to cover their increased costs).
- If the strike is averted, delivery costs will undoubtedly have to go up, anyway. The same effect will result as in example 1.
American consumers can't take more squeezing. Something will have to give. They are already teetering due to personal debt levels.
What is interesting is that the Federal Reserve calculates inflation based on "wage inflation." In other words, the Federal Reserve wants wages to remain flat, even if it is bad for the country. They have reached an impossible impasse. Wages must go up, regardless of what happens with the trucker's strike.
This Administration will not be able to pass the mess they have created off on to the next one. To make this nightmare scenario worse for them, truckers are in many ways traditionally Republican voters. Maybe they will start to see what we have been seeing. Imagine what the numbers will be like in November if workers like truckers start voting Democratic.
Yep, it's going to be an interesting year.