BK's Presentation on US Economy BK just put up a presenatation in which he predicts the US is going to prosper and soar again even more than its prosperity before the 2008 crisis hit and it could start as early as MAY 2012.
It's nice to see that others (more smarter people than and idiot like me) are beginning to see things like I do.
However, there is one caveat, and that's if once again hostilities flare up in Iran/Mid East.
Kettl :
US - Actually the US has been bankrupt for more than 40 years already. That is why Richard Nixon with one stroke of the pen (executive order) removed the Dollar from the Gold Standard in 1971 (or was it 1970, I'm not sure). Thus, they were then able to print money whenever they wanted to.
If it was any other country, the dollar would be worth pennies today but because of the way the global economy works, most countries are holding vast amounts of reserves in US dollars and that is why they have to accept it as they can't afford to see their holdings lose value.
That is why the US will never default on its debt (as long as the global system remains the same) and that's is why it's so laughable that the rating agency downgraded the US last year (also timed well, I must say, that helped increase the already predominant fear that was prevalent around). That is why Warren Buffett also said that the downgrade was ridiculous and that the US should be rated AAAA if it was possible instead.
China : This is one of the most misunderstood economies around. The problem is the analysts or economists are using current recent trends to measure China. They view China as 1 country but miss the reality that it is actually almost 1/4 to 1/3 of the world's population.
What they don't get is what is happening in China is not something that happens once in 10 years or even once in 100 years. It is something that happens once in a 1,000 years !!! It's where suddenly 1/3 of the world's population is becoming organized and creating a new economy. It's like having a new civilization emerging in the world.
Because of it's political system, things get done fast there (as the government does not need popular approval from its people before making and implementing decisions.) Having said that, the government is painstakingly aware that because of its big popluation and the wide range of their different ethnicities they have to do right for the prosperity of it's people or the country could easily break up (they have seen and learnt well what happened to the USSR).
They are very much aware of the danger of inflation and that is why they implemented measures to cool down their economy last year to bring down infaltion which was approx 5.6% (their accepted amount is approx 4.00%). Now that they have almost acheved it they will remove their brakes a bit and the economy will soft land and continue its growth.
China went on a 3 phase plan from 30 years ago :
1. Opening up of its economy to the outside world to bring in investments and technology.
2. Export Oriented - to increase the earning capacity ot its people as domestically the people did not have enough to be able to provide a domestic market.
3. Creating a Domestic Market - This is their current phase and now that the people have a decent amount of wealth and earning capacity (measured in terms of the Chinese economy and not based on Western type earnings) they are able to now plan for domestic comsumption. That's why I have said that they no longer are dependent on exports. They have 1.3 billion people. They do not need the outside markets. They have 1/3 of the world's population as their market. I have been based in the far east for quite a bit and I have many frineds that travel to China or do business with or in China frequently and they they will tell you of the kind of wealth that is prevalent in China currently that is just undescribable.
There is a foremost expert on this named Tan Teng Boo who runs a Global Closed End Fund that is in 4 countries, (Malaysia, Australia, Singapore and Hong Kong ) called ICapital.Biz. His fund has outperformed all the world's indexes for the past 10 years. He has spent more than 20 years studying the China phenomenon and I have been well schooled by him.
Anyway Kettl, keep up the good work.
Cheers,
Simon Bond