Monday, May 14, 2012
Repetition Breeds Familiarity
Well to get to the point, everything has fallen apart once again. This time around, in year 2012, the market doesn't really care. Yeah we are down a little off the highs, but if the market had really cared it would not have rallied the bears away for the first 4 months of the year. Had Greece really and the Euro really been an issue, it would have never left us at the beginning of the year. The world has far from fallen apart, the VIX has barely moved. The masses, rightly so, are convinced that the United States economy is better. Things are better than they were and we are likely not going to have a double dip recession. The irony of the whole situation lays in the fact that we, the big ole United States, will be able to stand on our own. We are just a giant nation of consumers, our service economy will prevail, because we merely make money off of serving one another. The restaurants will continue to make food, nail places will continue to paint nails and so on. Technology will continue to service the masses and be the place to make monies. If liquidity freezes up again, does it really matter? It's obvious that people aren't buying homes anyways. So the point of my ramblings are simple: we have seen the Greece mess many times before and at this stage in the recovery Uncle Sam will stand fine alone. Even if Greece falls apart Americans will keep doing what they have done for years and likely spend more money. Yes the rest of the world falling apart will slightly hinder our bright future, but it will far from destroy it.
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Yeah, we are yankees, and we stick together, we are patriots, nothing can destroy us. Hey dude, have you taken a look at the current account deficit? The education system fostering the know how? It is naive to think uncle sam can make it on his own. No amount of finger nail painting or hamburger eating, beer drinking jocks will save a country with deep structural problems.
ReplyDeleteWe have deep structural problems? Hate to break it to you but we are the best of the worse(obviously our form of state has worked better than the E.U.). Every nation has issues in many shapes and forms. The point of my post was to bring to light the mere fact that the market has decided that Uncle Sam will stand on our own. We are a service based economy that will service ourselves out of the recession. If you care to know how I feel about the debt situation then check out this article: http://www.capitaloverlook.com/2012/05/who-will-survive-in-america.html
DeleteAn economy can't survive on service based growth, it needs a diversified economic engine where manufacturing, energy production and information technology should be vital components. The two latter are flourishing, the manufacturing is weak, and housing also. Housing will always play an important role in modern economies, it shouldn't be downplayed, and it looks anemic. Now I know that TV pundits like to tell us they are seeing a reversal in the housing markets, but the fact of the matter is it doesn't look great as of now, and the housing market will take at least a decade to recover, probably more. The REASON Europe have has the sovereign debt problem is because it has traditionally avoided to resort to monetization, and instead is trying to implement the structural changes in the political and fiscal domain for long term sustainability. The us being a republic, has the advantage of fiscal unity, one central bank, and the reserve currencey, the latter which shouldn't be taken for granted in the long run. Without intellectual import, the know how would be in deep crisis. The US underperforms the rest of the industrialized world in many crucial areas. This, I believe, will be the biggest challenge of the US in the future. How can you give incentives to students to take on huge loans for an academic degree if the jobs are not here? A heavy service based economy will not have enough academic positions to employ the required amount of graduates.
ReplyDeleteThank you for your input. I believe wholeheartedly on many of the facts you mentioned. As I have mentioned before here many times, I think housing is dead for a generation. Americans home buyers are smart enough not to buy a depreciating asset. My hope is this generation can find something beside housing to hand their hat on as a growth engine for the economy. Our future long term remains questionable, manufacturing has been declining in the U.S. since the peak after the Second World War. Only time will tell us what our role will be in the global scheme and yes, we do have a lot of fixing to do at home. Though at the end of the day things are looking much better than 2008 and Americans are spending money. Again, my point of this article was to point out that things for the U.S. are moving in a positive direction and this will be shown throughout the financial markets into the end of the year.
DeleteMany good points, and I think it is great that you publish your thoughts. Only by discussing them honestly can we fix what needs to be fixed. After all, I do think that the US is a great success story and it is one of the greatest nations in many different areas. All nations have problems, and those that have survived others are those that deal with the cracks early on. Keep up the good work.
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