So the world IS expericiencing inflation (takes more devalued currency to buy our goods), and the banks are in trouble (interest rates for available money are higher)
IMO,to a degree. I watched 5 different programs and all of them pointed out that the banks, although suffering a big loss, were not overexposed, had insurance, etc. None of them said the banks are in trouble. JPM shot up 50% this year and yesterday ended up where they started the year.
DELL, CPQ, INTEL, etc - do manufacturing in the Asian region. I remember Mike Dell last week being questioned on investing in such a unstable region. His reply was that if the economy is real bad, that means labor is much cheaper. Unit production is much cheaper. You can hire more workers. In other words, if a widget manufactured locally costs a day's pay before downturn, it still costs a day's pay after downturn. OK, that's simplistic but it is generally true.
We used to scream about how these economies sell to us but do not buy from us. Now there is a downturn and we want to say the world will collapse because they can't buy our goods.
We can't argue this both ways. If they weren't buying from us in the beginning, we can't argue that a loss of their buying power is going to torpedo us.
The Asian thing was already factored into the market. This week it was the Russian scare - return of the cold war. Not likely. Most TV experts had it right - Russia is run by gangsters posing as businesses and they are not too interested in wasting money on the military by having another cold war.
IMHO, this whole downturn is painful but very good. Most of the economies in trouble are cleaning house, making a more transparent economic system and getting a firm economic footing. What we have had up till now is gangsters, cronyism and a world press that did not want to say the emperor has no clothes. If you look now - in Korea, Indonesia, Japan, - you name it - the people are demanding and getting an more honest appraisal of their banks and businesses. No way the Japanese politicians are going to sweep the dirt under the rug for the banks this time. Nobody believes them anymore and the international ratings reflect it. As the markets start to come back it will be on a firm footing. Also, had all this not happened places like China would have been encouraged to cheat as much as possible. I can remember a year ago watching TV as Asian business people told us their system of doing business - credit based on family ties political position - was much better. Look at our results!, they pointed out. |
