Toyota (TM) said its earnings fell 28% in the fourth quarter. It blamed the Yen and a slow car market in the US. Although no one was surprised, the figures were worse than most expected.

The Toyota numbers are a sort of portrait in miniature of what faces the world economy in general and multinational companies in particular. Currency values now trump the value of goods and services as they move across borders. A slowdown in the US economy, especially consumer spending will ripple across the oceans to Europe, Japan,and China.

The value of dollar, so the logic goes, is the victim of US monetary and interest rate policies. Those make oil more expensive and damage the balance of trade. Toyota seems to be saying that if the Yen and dollar were in proper balance, their earnings would be better.  If wishes were horses, all the beggars would ride.

The other side of that coin is that the dollar’s value is not necessarily bad for US companies, depending on how much business they do overseas. But, since a buck is not worth what it once was, OPEC can say that all of this is the cause of higher oil prices. US business gets helped when it exports and gets hurt when its sells things to US consumers who cannot even afford gas.

Toyota’s message is even more ominous. The car company is saying that its sales around the world cannot offset a slow US car market. That is tied back to the dollar if it is, indeed, a cause for high oil and gas. New cars sell poorly in a weak economy and they sell more poorly when petrol is as expensive as platinum.

Financial experts need look no further than Toyota’s earnings to see what troubles the global economy. It is now the world’s largest car company and one of the biggest manufacturers on the planet. What it cannot escape is inescapable.

Douglas A. McIntyre

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