Frederick, (apologies for off topic,not much NOVL activity lately)
I am, if anything, gloomier than Paul. Your point on the US inaction in 1929 is part of the reason.
Japan today seems to be reacting the same way we did then. Julian Robertson commented in Barron's this week that they are acting "like deer, paralyzed by headlights". They have been impotent since day one, why should they suddenly act decisively?
Until they realize that they need to cut taxes, reduce regulation, and open the money spigot, instead of strangling the flow, bad things can happen.
Look at Korea for a situation where the authorities let things get out of hand without positive action.
China is a potential trouble spot, also. Robertson also comments that China's economic strength (export boom) is being led by state run businesses that are not operating profitably, financed by Chinese banks that are all broke.
So the US today is looking very strong. Beneath the surface we are also over regulated and over taxed, and not addressing our medicare and SS problems. Can we alone fuel a world economy that is in danger of imploding?
We have countries devaluing their currencies and raising tariffs when they get in trouble. An underfunded IMF coming in to rescue them with demands that they raise taxes, and tighten money. And no growth virtually anywhere but here.
How long can this last? We're swimming in consumer debt, and also geared up to be an export economy?
In many ways the fundamentals are worse today than they were in '29. The debt and taxation situation is far worse, making the range of options narrower.
Remember that all of this is happening when the world economies have been growing. What is hiding out there and will begin to show up if growth slows or recessions begin?
Bottom line for me is that if anything we have worse political leadership in the world today than we have ever had.
Can we really trust them to get it right?
Dwight (Happy Holidays to everyone, in spite of my gloom!!!!!) |
