Wednesday, January 26, 2005
Deficits Don't Matter
Because you can always invest in China
I'm no economist. In fact, in my undergraduate days at the University of Michigan, I took Macro-Economics twice. But one thing is increasingly becoming clear - For many years the United States was able to fund large deficits (both in trade and government spending) because the return on capital (money) invested in the United States was higher than elsewhere. Our vast economy was the market for the world. But now, with China's economy fast approaching $7 trillion (purchasing power parity), there's another big player emerging on the scene. One whose economy offers return on capital investment, a large and growing market for exports and a demand for oil equal to that of the United States. Meanwhile the United States continues to spend like a drunken sailor...or perhaps Mike Tyson.
There's been a lot of debate about a dramatic plunge in the dollar with catastrophic consequences for the American consumer. But more likely, at least to me, is a continued gradual erosion of the dollar, a steady diminishing of our power and one day, we wake up and find ourselves the number 2 economy and power in the world.
War cost drives record deficit
http://www.usatoday.com/news/washington/2005-01-25-budget-deficits_x.htm
China's economy grows 9.5 percent in 2004 vs 9.3 percent in 2003
http://news.yahoo.com/news?tmpl=story&u=/afp/20050125/ts_afp/chinaeconomy_050125081009
Companies belly up to juicy buffet in China
http://www.usatoday.com/money/world/2005-01-26-china-usat_x.htm
I'm no economist. In fact, in my undergraduate days at the University of Michigan, I took Macro-Economics twice. But one thing is increasingly becoming clear - For many years the United States was able to fund large deficits (both in trade and government spending) because the return on capital (money) invested in the United States was higher than elsewhere. Our vast economy was the market for the world. But now, with China's economy fast approaching $7 trillion (purchasing power parity), there's another big player emerging on the scene. One whose economy offers return on capital investment, a large and growing market for exports and a demand for oil equal to that of the United States. Meanwhile the United States continues to spend like a drunken sailor...or perhaps Mike Tyson.
There's been a lot of debate about a dramatic plunge in the dollar with catastrophic consequences for the American consumer. But more likely, at least to me, is a continued gradual erosion of the dollar, a steady diminishing of our power and one day, we wake up and find ourselves the number 2 economy and power in the world.
War cost drives record deficit
http://www.usatoday.com/news/washington/2005-01-25-budget-deficits_x.htm
China's economy grows 9.5 percent in 2004 vs 9.3 percent in 2003
http://news.yahoo.com/news?tmpl=story&u=/afp/20050125/ts_afp/chinaeconomy_050125081009
Companies belly up to juicy buffet in China
http://www.usatoday.com/money/world/2005-01-26-china-usat_x.htm
