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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (571)	5/1/2003 2:26:36 PM
From: GraceZ	Read Replies (3) \| Respond to of 4912

I don't disagree that there are huge imbalances and those imbalances can cause painful disruptions. He's looking at the outcome and thinking it is the cause. The dollar is falling but not necessarily for the reasons he cites. The imbalance is caused by the simple fact that we have a much higher standard of living then much of the rest of the world which allows us to buy more of what they make then they can buy of what we make. The only cure for this type of imbalance is to have us reach parity with them. This is happening slowly, but it tends to happen in fits and starts with attendant booms and busts. That's capitalism. It's messy. Prior to the Great Depression the US had numerous booms and busts. To suggest that these types of imbalances can be resolved with monetary policy is ludicrous. Plus, trying to resolve them with some sort of global monetary policy simply adds another layer of disaster. When you look at what the IMF did in developing countries you have to ask yourself which was worse the disease or the "cure". The international currency markets are fairly efficient at clearing excesses. Even as we speak, it is clearing the excess in the dollar. Slowly but surely the rest of the world is coming up to our standard of living. As they do, we find cheaper places to buy goods. If the more expensive country can't make the transition from being an export based economy to having a strong domestic economy they will face serious upheaval. We made the transition in the 1970s and it was probably (aside from the Civil War period) one of the worse periods for social unrest in our history. The mistake Japan makes is in trying to hold onto that export economy when clearly they can't compete in terms of labor cost with the other countries in Asia as low cost computer aided manufacturing closes the quality gap. They've competed thus far only because they've developed operational excellence in manufacturing to a high art. Unfortunately that's something that can be cloned to a certain degree. And, like us, they don't want to give up their high compensation or their social benefits. When the US found itself unable to compete in manufacturing with the rest of the world it moved to making higher cost value add goods. The biggest market for those high value add goods is right here in the US. But now some of those jobs have now been turned into commodities and are moving to lower labor cost countries. What is accelerating this is that one of our biggest exports for years has been education and training. A country only has one of two solutions when it's standard of living rises above other nations and that is to either lower it's labor cost (lower it's standard of living or lower the social costs tacked onto the cost of labor) or develop some new business that adds value to what is produced in the lower labor cost countries. We did this in the 80s and 90s. We added value to low cost chips and boards. When computers were turned into commodities we added value with more sophisticated software and networks. Now that all of that is turning into a commodity to be out-sourced, one has to look for the next thing. My thoughts go to biotech simply because it is the one area that is still very much in its infancy, biological systems are more complex then anything man made by a large multiple. The great thing is that what is necessary to make great strides in biotech is now firmly in place. Abundant cheap computing power along with high speed networks and automated research tools with a highly educated global work force that can put together the brightest minds from anywhere on the globe. The great thing now is that this latest tech bust has freed up a lot of our human capital which just three years ago was scarce and expensive.