THE COMING COLLAPSE OF THE AMERICAN INDUSTRIAL COMPANIES COMPLEX!

The coming recession in the US industrial based is leading to a highly segmented American Marketplace.  The industrial companies are slated to collapse between 30% to 40% and will take another five years to work out the economic deflation.. Why has this happened?

1. The Chinese Manufacturing Depression  has resulted in the collapse of commodity prices and demand from emerging economies commodity or currency. The Chinese have to dump industrial goods at lower world market prices.  The global competition for markets is shrinking.

2. The Strong US Dollar has created a super-demand for foreign  consumer imports and equipment. The strong dollar has created a trade barrier for American manufacturing companies. The Chinese have needed to devaluate their currency to create demand for their products.

The cost of industrial goods has gone up and no longer is economically feasible to buy these industrial goods.  It makes no sense to buy American industrial products , but it does make sense to bring Government subsidies to these industrial companies. 

3. The American industrial companies are suffering from industrial overcapacity and dropping sales and earnings. American banks are holding billions in electronic credit with the Federal Reserve and they would benefit from the Federal Reserve increase.  They would continue to refuse to lend to consumers. Banks could begin to lend on a massive scale but who is borrowing when prices are dropping?

4. The Federal Reserve is currently looking at unemployment numbers and housing starts to plan on a December rate hike to 1 or 2%.  This would increase the cost of money and add an additional burden to Industrial Companies.  This increase of the cost of money within a deflationary economy will result in at least a 4,000 pts. drop in the stock market.  This will result in higher industrial and construction unemployment.

5. The Federal Reserve higher cost of money decision would  be bad alternative in a deflationary economy. The Keynesian theory holds that increasing the  accelerator and multiplier will create greater demand.  The Federal Reserve would do the opposite. The Federal Reserve would  scare off spending and create a need for savings. Industrial Companies have cut the capital expenditures and it has already impacted downward supply chain of suppliers. The Investment dollar is now frozen.

  Debt is no longer an asset in a deflationary economy.  You are paying back in expensive dollars. The Federal Reserve would freeze housing sales and car sales. The downward deflationary spiral could last for years. Is the Federal Reserve willing to gamble with the consumer sector and create a deflationary freefall?