The era of `sensationalizing finance'
Hyperinflation is a process where productivity is slowing down and money is being printed indiscriminately. Germany as recent as Hungary were two countries which had gone thru this. Just fifty years back an average worker use to put in 50-60 hours of work today an average worker with all that urbanization puts in 35-45 hours of work, it was always thought that we will see mass unemployment as technology advances so was said about computers that they shall replace millions of office workers, what we find now is that the problem is too much employment and not lack of it, the people who are talking about unemployment are people who were going hoarse with slogans of inflation bringing this market down just few months back. The protectionists who thought that NAFTA's and trade alliances will shift lot of jobs south of the border are seeing that US which was suppose to be hit the worst has lowest level of unemployment.
Non farm payroll in this cycle has direct relationship to strength of the economy, I am surprised that with unemployment as low as 4.5% and 300,000 plus jobs being created and consumer confidence on new highs where do you get your feelings of deflation-- most of these economies have been recently discovered by investors, these ASEAN economies were not significant even to warrant attention in 1987 lest not be too much concerned about 1929, I don't agree that comparisons with any previous cycle are relevant, humans are humans and markets are markets but possibility frontiers are growing every day as cost of communication falls, the amount of people who hold stocks in their 401 from 1987 has increased from 12% to 41%- the savings are under-reported as any gains made on real estate and stocks are not even a part of savings, ASEAN Chinese and Global markets mattered a hoot in 1929 and 1987, they were mostly hidden behind the iron curtain. Just Poland with all its weaknesses is one example in last five years Warsaw has seen a explosion in private people buying cars-- in my own Pakistan in 1987 the number of cars were 600,000 in 1997 it is 3.8 million, and by the way these are very poor countries with per capita of less than 600$-- Telephone lines have exploded globally and these lines are being used, communication is expanding as never before, the times you are referring too were times of Titanic not space age Iridium's, we have no boundaries left except in minds of man, Beach your fellow Canadian waits the whole night to see drama unfolding in ASEA, I live in ASEA Europe and I tell you that the signs of deflation are just not their, may be it is a stage where we cannot even comprehend the strength of human potential. The Club of Rome study back in 1975 called for not falling commodity price but rising prices by 90, it was predicted that world will collapse under its own weight of population, it was also predicted that US will collapse under its own weight of indebtedness, we have budgetary surplus from 450 billion/annum potential deficits, the inflation is harnessed, the bond yields are low in 1987 they were rising, the banks are more transparent the markets take no tie in protecting hype.
I tell you we are here not by accident but by design, I disagree with you that human act in the same manner as they would have acted back in 1875 the year of your reference, back in 1875 Agriculture and Commodities were the back bone of economy today services comprise 55% of the economy, it is the leisure time activity which generates a lot more profits, the patterns have changed with the exception of people for who dooms day mentality is carved up like a stone, on one hand you think population growths and GDP growths does not matter on the other in next few lines you lament about aging population, don't you worry Americans are multiplying at a speed of a developing nation 2.3% growth rate is quite strong and will bring many a baby boomers decades ahead. Saving less you must be joking, if you add the capital gains which are not allowed and your other assets which have grown in value over number of years you will see that US is one of the most prosperous and deeply protected nation as far future is concerned.
Again your assumptions of fears are comparable to Japanese model, the consumer confidence and personal disposable income are two areas I look at for changing patterns and I extend these parameters to get my bearing right the consumer confidence is climbing, only slightly slowed down recently, but it is at the sky high level, I just don't see how are you making your case of huge slow down..
This global interconnectivity has put new stresses on everyone, people all of a sudden have realized that far beyond countries matter, as these countries economic problems hit the wires and hit the monthly statements bottom lines as market in US takes cue from closes in ASEA so does Europe, but like Oct of 97 you will see that newly discovered fear is exaggerated beyond all bounds.. they will affect the global market but we are not in the age of deflation we are in the middle of a greatest human affluence mankind has ever witnessed, the cycle will extend to year 2020 until Tech advancement stalls, those who think world is shrinking are looking at the world from a limited vision, internet and computers alone have bring opportunities which will be unbelievable, imagine just two weeks ago I needed some curtains for my house in London, they quoted a price of 27,000 pounds within and hour we were able to get a source in ASEA where they delivered the products by FED EX in one week we paid 12,000 $ for it, the difference was that a tailor in London would take 70% of charges as Labour whereas the tailor in Thai was 10% of that cost, however the unemployment in London is at record lows, they want their currency lower so as to be competitive imagine the strength of US economy not a single company complained on US $ strength they all took the hits which were shown in their second quarter profits, falling $ will eradicate the little imbalance that was created due to $ strength. Global situation is excellent and in my opinion these boom and bust cycles will be part of the upwave, the fundamentals remain intact, DOW at 10000 and DOW at 7000 is not an issue in terms of global growth and interconnectivity we have traversed a long way and it is nice to be here.. Oil tankers don't disappear in cold night like Titanic did, lack of technology to forewarn it of impending dangers, they do run aground like Valdez but if the pilot is smart and keeping his eye the global economy may see far better days and serve mankind like a robust oil tanker does. Planes do crash and automobiles have serious accidents but we don't live with fears and gloom we see the lighter side of things, despite of high rate of car accidents I never always think of disasters when I turn my key in ignition, it is state of mind, I want to live happily and look at the facts if others want to worry and live the choice is theirs but the current facts and not normative premonitions should administer our future course, the world as it is quite stressful lets not stress ourselves extraordinarily with the problems of the world we have just discovered remember they have lived for centuries without prying eyes of Wall Street investors, Russians were able to send a man in space before the Americans, they will just not self annihilate, Chinese build the great wall and forbidden palaces we did not teach them any thing may be we have learn a great deal from them, so they know how to fix their problems the only difference this time or disadvantage for them is that it is being reported live `second to second'.. by CNBC-we are sensationalizing finance that is it.. |
