Mort Zuckerman wrote an article about the end of American Optimism today in the Wall Street Journal. Over at the Financial Times, the lead article is one about how China has moved ahead of Japan. China is now the second largest economy in the world. No doubt, they will eventually be larger than the US.
Is this a cause for concern?
No! What we need instead of a rush to panic judgement is clear eyed analysis. Size of an economy doesn’t win an Olympic gold medal. The metrics of a good economy are freedom, standard of living and quality of life. By all those metrics the US is far ahead of most anyone that anybody would care to compare us to.
No doubt, there are significant hurdles in the way. But, virtually every hurdle can be overcome. Most have a similar root cause-incorrect incentives caused by government. Others are more structural and long term-but the heights America needs to climb are not insurmountable.
Currently, we are still in a period of deleveraging. This is a painful process that takes time. Unfortunately, the focus of our government is to use government solutions to virtually every problem. What they should be doing is managing the process by cutting back government reach and letting the market sort itself out.
The stock market action of late is telling. There is no confidence in our leadership. It’s fall allergy season and the market has an allergy to rallies! Tremendous uncertainty in the outcome of financial regulation has caused everyone to pull back. Banks are stuffing money into their mattresses by only investing in government securities. Money velocity is non existent.
Another aspect of this whole pessimistic view is the aging of the American population. Baby boomers are bald and gray haired today. Today’s Chicago Sun Times had an article by Rick Morrisey on Babe Ruth.
“You reach an age when you begin to believe the world is worse than it used to be. I don’t know what age that is. Forty? Fifty? Whatever, it just happens.
You start to look at the past through the lens of a hazy, pleasant sentimentality, and it makes the present look harsh by comparison. That’s certainly the way it is with sports. Today’s athlete is angry, greedy and self-absorbed — not like the athletes of the faded past, who were good and honest and helped widows across streets.”
American demographics are turning us into a nation of proverbial grumpy old men (and women). The future is not as bleak as our minds are making it out to be. There is hope, but we can’t rely on the government to give it to us.