IQ,
Apparently you have more extensive macro economic knowledge than me. I had a few economic classes when I was at school but not enough to fully understand the market on macro level but I would still like to discuss my understanding, but I am not sure it is correct.
From my understanding, you assumed that US economy will continue going up because:
1. The potential of US productivity owning to its cutting technology has not been fully displayed.
2. The international trades will offer US a tremendous global market for its technology.
1. How we measure the level of economy? Is it controlled by a corresponding productivity? Does an economy level represent what this society's productivity level can produce?
No. We can produce far more than current GDP if the society needs. In China they measure GDP by what they produced each year, but a large portion of that simply oversupply and finally wasted. So what a society produces should match what the society demands. Demand is a restraint that controls the economy level. When technology develop, the productivity improves and cost decreases, it can stimulate demands. But there is a level that further reduction in cost will no longer stimulate demands. If P500 sell at $2000 I may buy one but my neighbour will think it's too expensive. When price drop to $700 I may buy the second and my neighbour may buy one. But when every one has one or two computers, even price drops to zero there will not be further demand. No body wants to fill all his room with computers, even if they don't cost too much. Therefore , to see if economy will go high, we need to find whether there is higher demand in front of us. I believe in longer term, the US economy still has place to grow, owning to its technology innovation to stimulate demands, but in short term (1 or 2 years) we come to a slowdown because the demand reaches its up limit. Even continuous reduction in computer prices could not raise much demands. Unless some technology breakthrough occur, this slowdown may continue for sometime.
2. The Asian countries have not passed their worst time and they have a long way to go before recovery. Those who think Asia's problem lay in their economic or political system are too naive. Their assumption is that Asian countries could not find best social system for themselves. But a couple of years ago when Asian economy was strong and US was in stagnation, lot people thought US economy would stagnate forever and the future was in Asia. Why at that time their system didn't hurt them?
Now things reversed. It is an economic cycle and there are causes behind it.
The current US economic prosperity has been built on computer industry, which by its new technology and new product stimulated demands.The demands for other industries, cars, televisions, have come to their demand limits. Only those computers enjoyed growing demand and lift US economy.
But for Asian countries, there were far less demands than this country. Asian people couldn't realize the benefits of internet communication because their different language. Few my friends in China bought computers and even some of them bought, it was used as a game player. Because few people can communicate in English, internet usage is small and, as a result the access fee is several times higher
than here in US. All these facts make computers less attractive as in Western countries.
In 1980s televisions become popular in more and more Chinese families. If you saw a large part of these TV were made in Japan, you would understand the economic prosperity in Japan several years ago. Now almost every Chinese family has one or two televisions, what the next Japan will sell to China? And what China produce for itself? Computers? Few people can use it. Unless Asian people can solve this problem, they will not be able to enjoy the latest technology, and the rest part of the world will lose that part of demands. And the US economy will continue being adversely affected by Asian problem.
As the need for internet communication become more and more extensive, why we can't create a new computer language, with most words consist of 1,2, or 3 letters? This creation will make us easier to type when communicating, and people of other languages could learn it quickly, then all people in the world could write each other and they will buy all the computers that IBM, MSFT and INTC,DELL could produce. Is this idea too naive?
Anyway, my point is, the slowdown of the economy is a sign that we have come to a stage of economic cycle, the demands for computers are at their temporarily up limit. Unless further technology breakthrough occur in short time, this slowdown will continue for a while. And Asian situation will not help this situation.
Excuse me if there are some errors in my post, as English is not my native language.
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