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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Knighty Tin who wrote (7225)5/28/2004 3:24:09 PM
From: mishedlo  Read Replies (2) of 116555
 
Will “Investment” In SUVs Help Us Pay The Interest On Our Foreign Debt?

It is bad enough that the growth in our capital stock has slowed below trend. But what is worse is that the consumer durable goods share of the capital stock has accelerated. In the three years ended 2003, our net indebtedness to the rest of the world has increased by $1.3 trillion to a level of $4.3 trillion (see Chart 1). Will our stepped up “investment” in SUVs and big-screen plasma TVs help our economy grow faster in the future so that we can pay the interest on our foreign debt and still enjoy a rising standard of living? I doubt it. Squandering resources on SUVs and TVs rather than investing in private sector plant and equipment implies a slowdown in the non-inflationary growth potential of our economy. And while our economic “pie” is going to be growing more slowly, a larger “slice” of it will be going to the rest of the world to enjoy. Higher interest rates will be the market mechanism
that induces us to cut foreigners a bigger slice of our economic pie. We had better hope that the SUVs and TVs we have recently purchased last a long time because I doubt we will be in a position to buy as many in the years ahead.
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Some interesting charts here:
northerntrust.com
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