Tuesday, September 28, 2010

Seedlandfund View

New Equilibrium

Seedlandfund subscribes to the theory that we are heading towards a new equilibrium in the 'flat world' global economy. The US, less a producer, is in economic decline or at least entering a period of slower growth. The tightly managed production economies, such as China, are rising in the world.

Focused, state-controlled capitalism will be the winner over a chaotic US-style 'capital controlled state' because the US system lacks sufficient unity of purpose to be able to pull together and reverse the economic decline. The US gets motivated only when the US faces a deep, unifying crisis, like WWII.

But, the stock market is rising! The US stock market is simply a mood ring indicating the sentiment of investors about the growth prospects of large global corporations but does nothing to reveal the true state of the health of our people.

We believe better 'people metrics', to track and monitor the US economy, might be the US poverty rate, the home foreclosure rate, the financial condition and budgets of US cities and states and the financial condition of US pension funds as well as the current level US household wealth (to name just a few). Recent news of these indices are indicating quite negatively.

A more cohesive and unified US could be a place that values its people and natural resources and promotes sustainable systems that help rebuild the financial health of US households.

To China's credit, China pushes very hard to keep its people working, often at the expense of the global environment but more and more in the production of alternative energy industries. .

US capitalism is measuring growth and success based on the revival of historic peak GDP growth rates, peak housing starts and car sales (all consumption rates!).

Traditional measurements reveal historical US consumption patterns that will/must inevitably change in the new economic reality.

Over the past five decades we evolved into the world's consumers but now we do not have the household income sufficient to afford traditional US consumption levels.

US companies dependent on recent peak domestic consumption levels will suffer. We head to new equilibrium.

An iceberg has been struck, the Titanic image keeps coming to mind as a metaphor for the US. The gaping hole in the side of our economy cannot be ignored.

Sent from my iPhone

No comments:

Post a Comment