<the reason the semiconductor equipment industry experiences such massive swings is that it sells capital equipment to an industry that sells cyclical goods.>
The cyclicality of demand is only part of the problem. The rate of increase in supply is more volatile than the change in demand. It's oversupply, rather than weak demand, that causes most of the cyclicality in the semi cycle, IMO.
<Less cyclicality of demand for end products.>
In this latest recession, consumer spending was stable, while business spending was/is highly volatile. That is not the usual pattern. Usually, both decline in a recession, with the business spending dip lagging. I need to see more evidence, before I believe the theory that a services-based Information Economy will not be cyclical. Certainly, the last 2 recessions (1990 and now) have been shallower and less frequent, than the pattern of the rest of the 20th Century. Assuming I can use past tense to describe the depth of today's recession.
<This recession has been noteworthy because it is the first time in 50 years that almost every one of the world's economies has slowed down at the same time. This is not the norm.>
Here's where I see a change in underlying conditions, which is causing a permanent change in past patterns. Usually, I expect the future to be a reprise of the past, but not in this case. Reasons:
1. the downside of the Global Village, is a coordination of economic cycles globally.
2. We are seeing the dollarization of the planet, an accelerating cascade positive-reinforcement pattern. Today, I see only 3 defensible currencies: $, Yen, and Euro. That's it. Every other currency can be successfully attacked and destroyed, by Soros and the other Global Capital Cowboys. The collapse of confidence in the local currency, which we've seen in numerous countries over the last few years, means that individual countries will be unable to use the main lever they have, in the past, used (misused, actually) to smooth out economic cycles.
3. Another accelerating pattern, is the widening and deepening of regional free-trade zones and customs unions. This is an intermediate stage, leading to totally free global trade. And, again, as with currencies, it means that governments lose control over the flow of goods accross their borders, and they thereby lose another tool (restraint of trade, or protection of local jobs, take your pick) to smooth out economic cycles, and insulate themselves from global economic conditions. |
