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Strategies & Market Trends : John Pitera's Market Laboratory

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To: Cogito Ergo Sum who wrote (10983)	12/19/2008 9:20:11 PM
From: Hawkmoon	1 Recommendation Read Replies (2) of 33421

Yeah.. crap.. Because some people seem to be obsessed with the downfall of the US economy to the point that they can't see the forest for the trees when it comes to what actually has driven the global economy for the past 60 years (since the end of WWII). Certainly we should expect a return to a multi-polar politico-economic global power structure. And actually, it will most likely be in the form of regional trading blocs. But I still believe that there's a reason the US economy has outperformed those of Japan and most of Europe over those years and it has to do with out cultural and political differences. We're not as consensus based and we're not so afraid to rewrite the rules when we recognize we've screwed up. I really don't think China has that ability with the political structure it currently possesses. In fact, there are already signs of unrest mounting as employers close their shops and duck out of paying out for work hours already completed. The corruption in China is likely far in excess of anything here in the US, but just hasn't yet been revealed because the Chinese market was a bubble being inflated by the US bubble. Everything was hunky-dory so long as US markets were open, Americans consuming relentlessly, and Chinese profits being re-invested in the US financial system to keep our interest rates low (resulting in lots of cash to support sub-prime loans). But now Americans are in a saving mode. Read today in the The Economist that American savings went to 5% in May an average 2.4% in the following months. And they pointed out that a 5% savings rate would result in about $500 Billion in reduced consumer spending, with a large part of that consisting of Chinese manufactured goods. So I'm going to be very interested in seeing how China's government manages to mitigate their own economic problems and consequent social issues. But don't misunderstand me.. I fully recognize that the US is not facing a rosy scenario. However, I just believe that those countries with less political and economic stability, who have been dependent upon US markets for their prosperity, are going to have a more difficult time. And let's remember that China's "consumers" did with far less for decades under Mao. But now expectations have been created and if they are not met, there will likely be political unrest. Hawk

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