A common theme right now is the ongoing economic crisis.  Ordinary people who have invested their money are watching it vanish with the woes of the stock market and the ups and downs of the dollar.  The Bank of Canada today lowered interest rates to their lowest level in nearly half a century in order to encourage consumer spending.

Regardless, this will take months to trickle down through the system.  The only way to get out of a depression or a recession is to spend money.  Not just the government, but everyone.  This is what stimulates the economy.  However, as I mentioned previously, this does not fix the larger problem.  This only makes the economy run in a cyclic pattern.

I’m glad that I am no longer working in the home theater or consumer electronics fields.  I think that this luxury sector will be hit very hard as we get deeper into this recession.  The  big box stores such as Wal-Mart and Costco will survive, not only because they are diversified but they sell these products ridiculously cheap.  The Internet-based companies will, for the most part, continue to exist due to the fact that they have low overhead and slim profit margins.  The specialty home theater companies, that rely on high markup and low volume, will feel the most crunch.  In this economy, they simply will not be able to survive.

Sony announced that they are laying off 8,000 full time people and 8,000 seasonal people globally today.  Due to the high value of the yen, it is costing Sony more to manufacture their product, which in turn leads to higher prices.  Higher prices lead to less sales, especially when you are competing against discount brands such as Vizio and I-Inc (or whatever Chinese company).  Sony has a great name in the electronics industry – so much so that there are people who will only buy Sony products.  I own my share of Sony product, but a name only carries you so far.  Merry Christmas from Sony.

The North American auto industry is in dire straits as well.  The CEO’s of Chrysler, Ford, and GM have been petitioning Congress to provide them bailout money.  Their Canadian counterparts have asked the provincial and federal governments to do the same.  While I understand and sympathize with these companies, if the governements are to provide any monies then serious restructuring is necessary.  A handout cannot be allowed to happen.  Furthermore, the unions, who are opposed to any kind of salary restructuring for their members, must also give in.  Auto workers are some of the highest paid people per hour in the world, and good for them being able to negotiate those deals.  However, the trough is almost dry now, and if everyone is to feed, then everyone needs to take a little less.  The Japanese auto makers are doing just fine – so it’s not the industry itself.  People are still buying cars.  They are just not buying American made cars.

I can see one of the big three companies closing its doors prior to any injection of cash by either government.  Of the three, Ford is in the best shape, followed by GM, and then Chrysler.  Looking at the big picture, if one of these companies close, all their workers will be laid off.  However, the suppliers of parts to the company that is rendered insolvent will also have no customer.  Therefore, they will shut their doors and lay off their employees.  And so on and so forth.  This trickle-down would affect thousands of people.  Tens of thousands.  The United States is already reeling from a staggering November job loss of over 500,000 people.

Even the Chinese are affected.  Last year, Wal-Mart cancelled over two billion dollars of orders from their Chinese suppliers.  Now, the Chinese are being hit with factory closures and layoffs due to the sluggish economy.  They are getting a brutal lesson in Capitalism.  China is due though.  The majority of their exports are to Europe and North America, and people are getting fed up with their shoddy manufacturing efforts.  Initially, the goods were of decent quality and they were cheap.  Now, the majority of the goods produced look, feel, and last relative to the cost to purchase them.  They grew too fast, and now it is catching up with them.