The question now is should foreigners pull their money out of the United States?
The big quarterly drop
is no great surprise, given Washington’s ineptitude at managing its spending and its refusal to even consider a realistic revenue base. The crisis in confidence meanwhile simply commutes across the Atlantic from the US to Europe. The big difference is that Europe, however stumbling, is managing its problems, while the US is refusing to manage its own.
There are several tiers to the US problems:
The Federal credit card has maxed out, and the income for the states has been chaotic for many years. The US revenue system is an antique based on 19th century legislation which has nothing in common with real revenue needs. The US is persisting with a policy of zero interest rates which has already failed dismally in Japan, and the results seem to be much the same.
The dichotomy between Main Street and Wall Street is now looking irreparable. Wall Street isn’t achieving anything of note which is valuable to the US economy as a whole. This is business by numbers gambling. The big dips in the market are leaving a trail of trashed, and largely unnoticed, investors. It's musical chairs with capital, and the losers are stacking up.
An encyclopaedia couldn’t do justice to the social issues in the US, even as a simple list. Crime, poverty, violence and the collapse of the entire structure of the postwar boom will have to do as a sketch.
There’s no thinking and no fixes being offered, just some general tinkering with a machine that doesn’t work anymore. There’s no vision- No great ideals, no empathy, and above all no practical approaches with bipartisan support. Obama has proposed a minimal fix to a massive problem, and even that will have to stagger through the geriatric fruit fly intellects of Washington to get anywhere, probably not before the 2012 election.
The foreign investment dilemma
For foreigners, the problems are magnified by their level of investment in the United States. Pulling out of an investment at a loss is never a welcome idea, but sticking around and just taking more losses is even less palatable.
Foreign investment in the US used to be a very good idea. It’s now looking like a particularly efficient form of suicide, particularly in equities and capital investment. The business culture in the US is also an acquired taste. The vast array of useless, overpaid and underachieving networking middlemen is hardly a recommendation. The “thought leaders” are senescent jokes, looking more like they’re doing a crossword than any actual thinking about major issues.
Ironically, it was an American who first coined the phrase “Failure is not an option”. It now seems to be the only option anyone’s prepared to live with. The status quo is failure in its most unambiguous form, and nobody is seriously talking about changing the status quo. Underperforming corporations still blunder along talking about making money while the nation as a whole is losing money on a scale which has no precedent in any society in modern times. It’s as if the future is an forbidden subject.
The future, however, is the basis of investment. People invest to make money in future. A US business culture which refuses to take off its blindfold is looking increasingly like a bad risk for investors.
Bloomberg (link above):
“It’s been a horrific quarter, and investors are feeling bruised and battered across the board,” Alex Tedder, senior portfolio manager for American Century Investments in New York, who manages about $7 billion in global stocks, said in a telephone interview. “We’re coming from a background that is extremely depressed and extremely uncertain with the big question mark over growth that we have globally.”
This is the investment climate- Glacially slow, performing abysmally and with no real indications of an upturn. Capital isn’t being created anywhere near at the speed it’s being lost. “Paper losses”, unfortunately, underpin asset values in many forms of investment, notably in the banking sector, and this unpleasant reality is being scrupulously ignored. Wall Street is in effect becoming a black hole, destroying capital.
Do we pull our money out? Are we expected to believe the range of two year old tantrums that have replaced credible business analysis? Mammon is dying, and dying like an alcoholic, drunk with illusory power and a self-image based on nothing.
Suggestions for foreign investors in America-
Sack these underachieving idiots
. You can always find more morons if you need them.
Put the executive enemas on performance based contracts-
No profit/ no job and no exceptions.
Kill off any ability for executives to grant themselves pay rises.
They haven’t earned a cent so far, and it’s unlikely they ever will.
Replace the networkers with people able to read and understand basic business information.
This would be a first.
Employ fraud overwatch techniques-
This is not only fun, it’s a great way of saving billions.
Spray American politicians liberally with disinfectant.
They might be carrying the disease into your boardrooms.
Be fussy about which American media outlets you talk to.
Most of them are as senile and corrupt as their corporate counterparts.
Listen, you tenth-rate entomological scumbags- You’re costing us billions per day. You're living in a sewer and pretending to be celebrities. You want charity, find a mirror in a public toilet somewhere and play a kazoo. Don’t expect anyone to believe this garbage. Get the act together, now