Re Mac..: Economist article..tks..ending with..."and something has to give."
I am scratching my head trying to figure out what that something is going to be. It's probably not going to be anything that now is all that obvious..i.e., commercial R.E., high debt,etc.
I'm guessing, of course, but maybe China will come into the picture. As I wrote a day ago, trade issues with China, world protectionism, tariffs will cause a massive slowdown in China's exports and result in an increased in rate of the world wide economic slow down and be inflationary..(too much money chasing too few goods etc.)
World stagflation would probably be the primary repercussion with the sale of $$s(and $ debt) by China as they'd be forced to slow down big time to catch their wind and regroup without the present benefit of huge exports.
Just a thought. Nobody seems to be talking about it. But, that's when it happens..whatever it is, is a shocker not something already factored in or discussed in print or on the air. Maybe I'm all wet..just tossing it out..open to opinions (for sure)..
I believe protectionism and high tariffs are inevitable. I also believe they are necessary even though it flies in the face of everything I have ever been taught.
When this country was started, we had no manufacturing base - just an agrarian economy and, under the system of mercantilism, we provided raw materials and England did the manufacturing of finished goods. It was the imposition of tariffs that allowed fledgling industry to take hold in the U.S.. It also forced southern plantation owners and others in the agrarian South to pay higher prices and was, in my opinion, a major cause of the Civil War. O.K, enough of the history lesson.
Given the high cost of labor here (which I do not see getting fixed without great disruption), I see instead a return to an America first mentality. The U.S. is still rich in most needed natural resources and technically could be self sufficient.
The day will come when the U.S. renounces its debt and moves towards isolationism again, in my opinion.
If the loss of a carry trade, buying money for next to nothing in one currency, and investing in say, Australia for higher yield, dissipates with the US dollar no longer the source, the attractiveness of the dollar, little as it is, swoons because we are the largest debtor nation being propped up by the world's carry trade.
We've seen what happens in Japan, their market tumbles by 1/3 and they've all the money. Imagine what happens to the US dollar when our carry trade swoons even a 1/4%, our market will discount the pop all the way to 4% almost immediately because it will perceive the first tightening as the portender of 18 more months of quarter point Chinese water torture.
Unless unemployment is first shown three successive quarters of growth, expect the selloff in the market first pop to be catestrophic.
We've solved none of the bubble real estate issues, none of the banking issues, too big to fail is worse, the bubble is actually the old issues unresolved we've chosen to ignore by erasing rules like mark to market.
Ignoring the crisis is like ignoring cancer. At first you're symptom free. Then the body collapses, because you've ignored both disease and therapy.
Everone here with $100,000 in SLW will have $200,000 in the next 36 months. Every dollar you own by then will be able to buy 33 cents of real goods today.
Unless of course you buy shirts and pants made here in the US. Those will be "half price". Anything made overseas will be 50% "more".
Luckily we make all those shirts and pants right here in the USA, right? You want to check that label again?
We're going back to manufacturing the hard way, but not until you're out of pocket half your stash. You have to triple your dollar worth, just to stay even.