Everyone is talking about collapse of the US home-price bubble and the danger of recession, but no one is talking about the suckers who financed the bubble, namely the savers of Asia...One exceptional fact accounts for the instability in financial markets during recent weeks: the Chinese and many other Asians save about half their income, while Americans save none of their income at all. Foreigners, mainly Asians, invest US$1 trillion a year in the United States...Since they were not allowed to buy US companies like Ford or duPont, they bought whatever they could. In this case, it was mortgage-backed securities. Securities backed by people who were unable to repay them. The thrifty Asians loaned money to the profligate Americans.
Do you think they'll repeat that mistake? Now that the money has all evaporated, do you suppose those investors are taking a look at what happened?
Outside the US, it seems incomprehensible that the average family would save nothing for retirement or against a rainy day. But God takes care of drunks, small children and the United States of America. In other words, the typical American family expected the value of its house to keep appreciating at nearly 10% a year indefinitely, eventually turning into a retirement fund.The problem is that the West is not willing to put their companies up for sale, for obvious reasons.
Of course, one feels sorry for autoworkers in the US state of Michigan, who earn $30 per hour and expected to do so in perpetuity. Sadly for them, workers earning a tenth of that amount can assemble cars just as well. If I were a sovereign investment fund, I would buy Ford Motor Co, shut down all of its production facilities in the US, and keep the nameplate as an emerging-markets and European brand.That means that the easy credit in the US, much of which came from Asia, will dry up as those investors become more choosy about their investments. Without that source of cash to borrow, Americans will have to finance more and more of their own debt. Here comes the hard part.
Americans will have to work harder and save more.And just who is going to tell the public that?
The person who later that day is going to be burned at the stake as a witch.
ReplyDeleteNot it!
KT - You said Americans have to finance more and more our debt. Wrong. We have to reduce our debt. The days of profligate spending must end.
ReplyDeleteNot everyone can have everything. The government can't just "give" everything away. There is no free lunch. I don't know how many ways there are to say this, but it really is that simple.
Kelly - While I'm not exactly asking to be burned as a witch, I understand that my point of view isn't one that people like and I do not doubt that in this case they may shoot the messenger. Oh well. Failure to face up to the problem now, just makes it worse.
There is of course a way for America to come out of this without losing so much face in Asia that no more money will ever come her way from that direction.
ReplyDeleteSimply put, lift the restrictions on foreigners owning the sort of companies you named. Let Taiwanese and Chinese investors buy WalMart and get a good vertical integration going. They could make the products, transport the products on ships made in the dockyards of Korea and retail the products using labour imported from the Philippines, all from the safety of their own companies.
Then, allow them to own the real estate under the businesses that they decide to leave in America.
Finally, when America has nothing else left to pawn, they could be sold the White House.
Ok, it doesn't solve the problem, but it will alleviate the symptoms for a few more years.
aon, if we elect Hillary then we can cut out all the mess in the middle because the White House will have been bought and paid for by the Chicoms right from the start!
ReplyDelete