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Friday, September 25, 2009

The world economy at a glance

This picture was taken near the Port of Singapore – the busiest port in the world in terms of total shipping tonnage. There are no wakes. These ships are parked.

And the picture doesn’t do it justice. According to shipping reports, this is the largest fleet of ships ever assembled in history. Locals say you can’t even see the horizon. More ships than that of the British and American navies combined!

It is a visible reminder of just how bad things are in the worldwide economy. Two years ago these ships would have been steaming across the oceans laden with consumer goods. Today, they’re idle. [More}

The world economy is struggling. The only growth we’re seeing is not real growth – it’s the result of government stimulus. And that is merely stealing from the future.

As for America's latest stimulus, Cash for Clunkers, consider these figures:

A clunker that travels 12,000 miles a year
at 15 mpg uses 800 gallons of gas

A vehicle that travels 12,000 miles a year
at 25 mpg uses 480 gallons a year

That means the average Cash for Clunkers transaction will reduce gasoline consumption by 320 gallons per year. The government claims 700,000 vehicles were involved in the program. Based on the example above, that comes out to 224 million gallons of fuel saved per year.

That would equal about 5 million barrels of oil – or about 5 hours worth of U.S. oil consumption. Now here’s the kicker. At $70 a barrel, that would equate to savings of $350 million dollars.

The U.S. spent $3 billion on the program. Considering the assumptions above, that equates to a payback period of almost nine years. And they destroyed 700,000 operable vehicles for that?