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Surprise! US is not overborrowed. But does it have Growth Story?

If you have even the slightest interest in living in the manner to which you have become accustomed, can I recommend you find 5 hours to watch these three videos of 12 economists talking what is happening in the US financial system and its dealings with the rest of the world?

I am just a lowly psychologist so I try to boil down economics to actionable rules of thumbs that we can use.  When you are done, I’d be interested in your take of mine.

1.  Find your growth story . . . and stick to it!

Find an industry that you enjoy, find the bit that is growing, and grow with it, wherever it takes you.

2.  Help you kids find their growth story

Invest in the things they love to do and take them on holiday to parts of the world where growth is happening.

Think abut a good trip to Brazil, Russia, China or India once in three years, rather than a time-wasting, resource-frittering holiday every year.

And if they have any inclination for languages, help them by doing their homework with them.   It may help when you talk to you grand-children who might be living in another country!

And may be include Arabic on you list of possibles.  Bang on the door of the mosque in your neighbourhood and ask them to include your children in their after-school activities?

3.  Remember that money is losing value as much as houses are losing value

Unless you have a lot of it hanging around, this is a good news story for you. Investors will want to invest in your growth story.

Don’t be desperate for their money. You have something as rare as hens’ teeth.

Bring in investors who believe in your story as strongly as they believe in returns on their capital.

And then write a tight contract for them!  This is a borrower’s market, whatever the mass media tells you.

4.  Learn the numbers and ask your MP and business leaders hard questions

The more we show that we know the numbers, the quicker they will get down and dirty with them too.

Let them watch 5 hours of videos on economic more often than we do.  That’s their job, after all. Let’s get our money’s worth!

5.  Vote with your ballot and your feet for people and firms with growth stories

Question the panic about government borrowing.

It may be different here in the UK – I wish we had a forum like these 12 economists here.  Common sense tells us, though, that we will only get out of our mess with a plan – a plan for getting out and moving along with growth stories in Brazil Russia India and China.

We don’t have to eat and drink ourselves silly to keep up. But starving ourselves and living in sack cloth won’t make us any richer either.

Government borrowing is only a problem when don’t have a plan to make businesses better over the next 5, 10, 20 years.

We want a growth story!  Can we start a fashion?  What will happen if we ask everyone you meet, what is your growth story!

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One Comment

  1. philip meguire philip meguire

    The American nonfinancial business sector is sitting on US$2.5 trillion of liquid assets. Subprime mortgages are being liquidated, and should be gone by 2020 or so. Conclusion: US$ private debts are not a problem.

    The American economy has recovered from the recession of 2007-09, and so its capacity to pay income tax has recovered as well. But corporate income tax payments as a % of GDP and of corporate cash flow, are at unusually low levels. If American tax payments, expressed as a % of GDP or cash flow, returned to the levels prevailing in the late 1990s, 25-40% of the huge Federal deficit would vanish.

    A huge problem is the large and growing unfunded pension liabilities of state and local governments. The USA private sector has a well trod path, called “ERISA,” for shedding pension obligations it deems onerous. At any rate, all private sector pension plans are legacies created before 1970 or so. Every private pension plan created since 1978 or so has been a 401k or the like, namely a mutual fund account enjoying income tax benefits and employer matching contributions.

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    Find an industry that you enjoy, find the bit that is growing, and grow with it, wherever it takes you.
    ME. Reminds me of the way Americans rationalised their absurd mortgage lending that got us all in the poo.

    Invest in the things they love to do and take them on holiday to parts of the world where growth is happening.
    ME. Down Under, that means holidays in Oz. Kiwi kids will easily latch on to the flasher lifestyle. They will not see that this Australian growth is helped along by economies of scale (Oz is 5x larger), mineral wealth, better and more elitist unis, and a huge stock of super savings.

    And if they have any inclination for languages, help them by doing their homework with them.
    ME. When I told my daughter that I expect her to struggle with one modern language of her choice (French, German, Spanish, Chinese, Japanese), she made one hell of a face.
    Thought balloon: “Dad is an authoritarian pratt.”

    It is true that Arabic is a major international language, and also one that only a handful of English speakers bother to learn.

    “Bang on the door of the mosque in your neighbourhood and ask them to include your children in their after-school activities?”
    ME. Fat chance.

    3. Remember that money is losing value as much as houses are losing value
    ME. Right. The housing and commercial property markets will bottom out, if not now then fairly soon. On the other hand, negative real rates of interest on lending will be with us for quite a while longer.

    Bring in investors who believe in your story as strongly as they believe in returns on their capital.
    ME. The advantage of luring such investors is what motivates sociopaths to pass themselves off as visionary venture capitalists!

    And then write a tight contract for them!
    ME. Rather, the investors should write the tight contract for the borrower/share issuer! But sociopaths don’t like to work in harness…

    4. Learn the numbers and ask your MP and business leaders hard questions
    ME. MPs and business leaders don’t hard questions, and don’t like people who know the numbers better than they do.

    BTW, the internet has done much to democratise access to economic and social data. For example, the entire USA national income accounts back to 1929 are available gratis on the web. Ditto for all data collected by the Federal Reserve Bank, including the system of sectoral balance sheets for the US economy called the Flow of Funds accounts. Also see the databank run by the Saint Louis Fed. The USA Bureau of Labor Statistics also gives away all of its data via the web. The Statistical Abstract of the USA is a PDF file uploaded to the web.

    5. Vote with your ballot and your feet for people and firms with growth stories
    ME. Again, talk can be cheap.

    Question the panic about government borrowing.
    ME. Given what continental Europe has been going through, I am reluctant to do as you suggest here. We now see that government borrowing by an entity that is also sovereign over the currency unit in which the debt is denominated, is much less of a high wire act than government borrowing denominated in a foreign currency. Greece, Portugal and Ireland did the latter, in effect, and are now paying the price.

    It may be different here in the UK – I wish we had a forum like these 12 economists here. Common sense tells us, though, that we will only get out of our mess with a plan – a plan for getting out and moving along with growth stories in Brazil Russia India and China.
    ME. It is easy to convene a panel of experts and have them come up with a plan. The plan will mix the obvious, the wishful, and the silly utopian. A fair bit of the obvious will materialise in the natural course of events. Getting any of the rest of the plan to come true will typically prove impossible, if only that 6 months after the plan’s release, everyone will have forgotten about it.

    We don’t have to eat and drink ourselves silly to keep up. But starving ourselves and living in sack cloth won’t make us any richer either.
    ME. It is living beyond our means that got us where we are. Moving forward requires learning to live within our means. The move from the drunken binge to sobriety necessarily involves time spent hungover, a lesson Greece is learning the very hard way. Nobody desires time in sack cloth, but y some of us find ourselves dressed in it, willy nilly and for a time.

    Government borrowing is only a problem when don’t have a plan to make businesses better over the next 5, 10, 20 years.
    ME. Again, what you say here will often result not in plans, but in sociopathic and self-deceived pretenses of plans.

    What will happen if we ask everyone you meet, what is your growth story!
    ME. The USA has done just that for 200 years. Nevertheless, America is the #1 culprit for the financial crisis of 2007-08 and the subsequent half decade of cold breezes down Wall Street and in the City.

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