♠ Posted by Emmanuel at 1/31/2013 11:14:00 AMThe partisan wuss Krugman and his various acolytes have long argued that the United States is "doing better" than Europe for the main reason that, instead of starting processes of fiscal consolidation, the Americans have the fiscal and monetary spigots wide open. On the other hand, there are those of us who believe the US is embarking on a path to ruin. Instead of moving away from debt-fuelled, import-driven domestic consumption, it is indulging in it. Even more ridiculously, they are cheering gains in home prices. Lots of borrowing, importing and spending beyond their means; throw in rising home prices and it's akin to rehash of 2007.
Do you buy this analogy? Consider too that stock indices are nearing record highs--Dow Jones Industrial Average, Standard & Poor's--take your pick. If it makes Krugman shut the hell up for a while--he yaks far too much anyway--the shrinking US economy belies the false optimism that it has turned the corner during the Bushbama years. What a joke. Actually, Krugman, Europe and the US are both contracting. The only difference is that the Europeans are making structural adjustments that should pay dividends in the future instead of taking on trillions more in debt in the (delusional) hope that they will return to trend growth of 3% or better. Dear Rick Santelli: the US is not Europe now; it's rather worse for not even bothering to address necessary structural adjustments. Contraction plus massive debt versus contraction plus deficit control; I'll take the latter, thank you. Keep dreaming, white boys.
The US jokeonomy aside--I think those wets are getting what they deserve and should be hit much harder besides--the more interesting question is that of rich equity valuations at a time when America is in the toilet of history. There are a number of hypotheses you can advance:
- the market is delusional; another stock market crash nears a la 2007 after the Dow hit record highs;
- double-down US ZIRP/helicopter dropping/money-for-nothing is inflating an even larger speculative bubble in stocks than in 2007/2008;
- listed companies derive an increasingly larger share of revenues and income from abroad half a decade later, so it matters less if another Americollapse is around the corner;
- profits are still increasing their share of national income in relation to wages.
OTOH, I believe that American multinationals have seen the writing on the wall: only a USA#1 cheerleader would consider the US a growth opportunity (don't make me laugh) and have since moved to take advantage of opportunities elsewhere. Even at home, consider that an ever-larger share of national income is going to profits instead of wages for any number of reasons alike the diminishing power of organized labour and the willingness of American wage slaves to accept less remuneration at a time when jobs are scare and tenuous.
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In the past, Americans have accepted greater inequality in the belief that they too had the opportunity to "make it big." In this day and age, of course, this is simply a joke that enhances the comic stylings of Obama who believes that America's best days are ahead of it. Are there really Americans idiotic enough to buy into that happy talk?
New flash from the clash: When you elect all hat, no cattle sorts like Obama to bring more of what he's already brought alike massive deficits and no sustainable economic advancement, you forfeit the future. Is what's good for Apple good for America? I think not. The only question for me is whether ballooning stocks have real momentum going or are even bubblier than they were five or six years ago. I resolutely refuse to hold US Treasuries, but I have not entirely ruled out American stocks and commercial papers.
America is finished (duh), but American firms may not be in the same sense that there are still any number of British industrial giants despite Great Britain having relinquished any claims to preponderance in the global political economy a long, long time ago.