<do the Cole attack, the presidential election fiasco, and now the California blackouts, shake your confidence in the USA? Do you think that events such as these coming close one after the other, combined with the untried Bush administration, could shake confidence in the American dollar and start something ugly?
I have to confess that I feel uneasy again, and sold almost all my stocks in the last couple of days>
Kyros, my confidence in the USA is at an all-time high. Certainly there are plenty of problems and stupidities, but that has always been the case. The New Paradigm of globalisation, silicon, fibre, CDNA [TM], United Nations, CDMA, monoclonal antibodies, dendritic cell vaccines, and millions of other inventions and billions of people, [more than have ever lived at one time and with more having lived in the past century than almost all of human existence] is largely centred on the USA which has strict property laws and protection of individuals.
The USA has always had quite a hilarious aspect to it, made all the funnier because many Americans are fanatically hand on the heart about what they think is the greatest nation which has ever existed. Which is true in many ways, but the idle boast ignores the harsh reality of how humans really work in the long run. People who beat their chests about being the greatest are usually young and naive and all too often, not long for this world. Empires and 'the greatest' come and go. Egypt, Athens, Rome, China, Mongolia, Britain, USSR ... all gone... just the individuals remain and life goes on with great chest-beating elsewhere. Interestingly, women don't seem so prone to that male affliction and with the passing of territoriality and conquest as a means of human development, perhaps the trend for women to run politics will accelerate and guys will run off to conquer cyberspace [which is already a trend]. Bill Clinton wore his heart on his sleeve [a feminine attribute] and was highly successful. I suppose George Bush will be the last of the macho males to occupy the USA Presidency. I expect women to take over [as they have in NZ, which leads the world for number of women running the show] as women are better suited for 'running the household and family', which is what countries are becoming. Guys will need to find something more Guy-like to do. Cyberspace is the new battleground. Outerspace is passe. Globalstar notwithstanding. Going to the moon, literally, is seen as anachronistic. Young Guys are fighting to the death in Quake in cyberspace.
The major mistake is the idea that there is a single entity called the USA. It is actually 280 million people, bumbling around with different political views and a legal system which operates only partly on an objective basis. But it is more than that too. It now includes me and millions of others who invest and are otherwise integrated in some way with the USA. However, I am also integrated with other countries. So it's all quite messy. The USA isn't a single entity. The individuals within it are the single entities. But there are individuals outside it too, which are part of it.
Summing the whole global mess up, it is looking wonderful from my point of view. Yes, there is murder, mayhem, theft, failure, disaster and even catastrophe. But think back through the 20th century and consider what extreme failure and shambles existed in that time.
Yes, I think things are, overall, the most amazing and greatest time in human history by a long, long way. The USA has had a large part to play in bringing that about through the individuals who have been able to live and enjoy their lives within that system, creating amazing things, such as Irwin Jacobs and his merry band at QUALCOMM have done.
The mad monkeys who live in simplistic dominance hierarchies like Saddam Hussein will never achieve anything significant. They can confiscate enough slaves and property to build palaces, but what a hollow shell a palace is. Saddam and people like him will never stand in front of thousands of people as Irwin Jacobs did at last year's annual meeting to enjoy the appreciation of brilliant achievement in creativity. I was happy to be a part of that applause. To me, that is the success of people.
That success is roaring into the 21st century with millions of people propelling it. From $ill Gates to solitary internet inventors in their bedrooms and from fish farmers developing new feeding techniques to DNA manipulators who can give us new plants and animals and even new us with fewer DNA defects such as myopia, asthma, cystic fibrosis and hopefully improvements such as better brainpower, there are millions of daily achievements and creative actions which will improve life further.
It isn't really noticeable on a daily basis because each day seems much like the previous, but looking back a decade at a time and the gains are spectacular. Those gains are accelerating, not slowing, because there are more people and they are wealthier with more time to be creative instead of merely struggling in a rice paddy or textile factory for day to day survival before an early end [which was the lot of most humans well into the 20th century].
The Cole attack is trivial. The presidential election fiasco an interesting amusement. The California blackouts might serve to remind people that free enterprise means free markets and central planning [whether of production or prices] as in the USSR didn't work in Russia and won't work in California. The blackouts themselves will give some spoiled Californians a bit of a wake-up call. Which is no bad thing.
So, no, I don't think there will be any loss of confidence in the USA dollar, which I believe Alan Green$pan and buddies have managed very well, [contrary to most people in SI, I admire Alan Green$pan and like what he's done each step of the way].
My expectation for 2001 is that he will lower interest rates and the stock markets will zoom up and he will retain focus on economic activity and inflation, ignoring the markets because the wealth effect will be much more moderate this time around because people are chastened and will have less margin and will be mindful that things could crash again.
I don't believe he was simplistically targeting the stock markets in some kind of pique that people were making a lot of money and he was jealous. I think he was targeting inflation and maintaining the value of the dollar, which must always be his primary concern.
He has only one thing to sell and that is the confidence people have in the USA $. The confidence stems from a belief in the political and economic stability of the USA and the continuing viability of the currency. The currency must not be allowed to inflate or deflate dramatically. A small, constant inflation would be ideal because they make profit from printing the extra needed to cause that constant inflation and that's an easy way of being paid for their efforts. As long as they don't get greedy and print too much, they can maintain the system indefinitely.
Since there is no backing for the currency such as gold, shares, oil wells or land, the real value the currency has is in stability as a means of exchange. It isn't so much the "store of value" concept which offers value to users of the money so much as the means of making transactions. The store of value aspect of money was more important when it was backed by gold and it was more difficult to store value elsewhere, such as shares.
Nowadays, shares and other productive assets are the best store of value. So people will increasingly hold shares in an account [as we do] which is our store of value. We only use money as a means to effect transactions, such as buying a car, house, plane ride etc. We have a small amount of money as a store of value but that will decrease with time as financial management systems at financial institutions improve.
So, in a decade or so, the store of value component of money will be small and the transaction value will be by far the important issue. I think people will increasingly abandon money as a store of value as they realize that it it doesn't give them a good return on investment compared with productive assets such as QUALCOMM investment.
Alan Green$pan's trick will be to keep interest rates and inflation as steady as possible. Which will be impossible in the short run, but essential, averaged over the long run, to retain confidence in his product [$].
My expectation is that because of loss of confidence, share prices will outrun returns on holding money as a store of value to lend to companies and individuals. Don't forget, companies only borrow the money if they think they can make more profit on it than the money costs them to borrow. So why not own the company and get ALL the profit, instead of lending it to a middleman, the bank, which then charges big fees to lend it to the companies, which then make profit on it?
To own money and lend it to a bank which then adds their premium [plus taxes] and then lends to the company, one needs to believe the company is making a bad decision on that money. I think I've got that right!
Anyway, that's what I think.
Fully invested and with some borrowed as well,
Mqurice
PS: Well, you did ask! |
