Some analysts are making the case that it’s time to look outside the U.S. at stocks in non-U.S...
Dear World, You’ve Got Mail
07/25/2011 11:19 am EST
You can hate the current budget mess, but there are few viable alternatives to US bonds or government spending, writes MoneyShow.com senior editor Igor Greenwald.
If you don’t like our mountain of debt, you’ve got options.
You could buy gold, but it’ll cost you many multiples of the current price if you’re at all serious about making the switch, and in the end you’ll get no income from your overpriced bullion.
Or you could buy other countries’ debt, though presumably not that of Greece, Spain, or Italy. Perhaps Germany’s, which—despite the Teutonic aversion to big budget deficits—now yield a bit more than Treasuries.
But don’t forget who’s really going to be bailing out Europe’s debtors if the Eurozone survives, and who’s going to be dealing with lower-cost competitors for exports if it doesn’t.
Japan’s debt is like our debt, only a lot larger relative to the size of the economy, and is facing a demographics cliff as aging domestic investors stop buying bonds and start to spend their savings.
Perhaps Brazil looks better than any of the developed alternatives: after all, its bills and notes currently yield more than 12%. But let’s face it: this pool is tiny compared to the ocean of Treasuries, one reason the real is now so overpriced. Brasilia just doesn’t borrow enough to satisfy all the would-be lenders.
Perhaps you’re more excited by the global smorgasbord of equities; corporations, after all, are on much sounder economic footing than most national treasuries.
Just remember that their profits depend on global economic growth, which still leans heavily on the US consuming 5% to 6% more than it earns. In fact, we buy more than a quarter of the world’s annual output. Yank that chain by shunning our debt, and see where the global growth rate goes, and how your global equities investments start treating you.
And, by the way, did we mention that a non-trivial proportion of our budget deficit comes from financing a military that we can no longer afford but that secures many of you from ornery neighbors?
So go ahead, world, pull the plug, and let China buy your exports. And let France defend you from China. We’ll be at the movies while you figure it out.
The United States
You hate us, we get it. Washington is your No. 1 villain, a scapegoat for the economy’s many failings and your own inability to agree on a common set of values.
In good times, you esteem us only slightly less than used car dealers, and in the current soup that has sunk to Casey Anthony depths. The president is despised by a significant minority of the electorate, and yet the presidency—which can at least create an illusion of purposeful resolve and continues to command impressive firepower—remains far more popular than Congress.
Which is proving so unequal to the task of solving America’s long-term budget problems that it’s wrapped itself into a pretzel in a so-far-futile attempt to prove it can act, as it looks for ways to stop obstructionists from scuttling any compromise one amendment at a time down the road.
Hence the flaming campaigns in social media, like the past weekend’s F___ You Washington meme on Twitter. Hence the Tea Party and the popular appeal of calls to roll back government.
The thing is that, on issue after issue, from Social Security to Medicare to taxes, we’re only doing what we’re told. We’re an accurate reflection of the national will to have its cake and eat it too without gaining a pound, as born out by poll after national poll.
You hate government, America, but like many of the things it provides, like medical care, roads, and all those terrorist-hunting drones.
In fact, if it wasn’t for your insistence of all those drug prescriptions and MRIs, and your refusal to pay for these via taxes, we wouldn’t be stuck here trying to pretend that we can make it all work out.
Look around you, and see what your alternatives are. You want to do away with Washington? Social Security, Medicare, and “other payments to individuals" now account for 15% of the GDP.
You don’t want to be stepping over starving old people at the Wal-Mart entrance. Or maybe you do. But Rome doesn’t get wrecked in a day.
Therefore, kindly get on with whatever you were doing before, while we figure out a stopgap solution that doesn’t give one side too much of an edge in next year’s campaign.
Every democratic nation gets the government it deserves. So take a long, hard look in the mirror, and enjoy.
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