Saturday, January 19, 2008

A Rising Global Tide of Capitalism Lifts All Boats

From an Anonymous comment on CD:

"Isn't it better that the world economy is becoming less dependent on the U.S.? Isn't a multi-polar world more economically resilient than a uni-polar world? Other countries that have been helped by the U.S. in the past are now able to help the U.S. through their sovereign wealth funds. That would seem to be an improvement from a world where the U.S. is responsible for all of the world's ills and gets little thanks for its efforts either philanthropic, diplomatic or military."

The top chart above shows the decline in the U.S. share of world stock market capitalization from more than 50% in 2001, to less than a third in 2007 (32.8%), using data from the World Federation of Exchanges. Even though the U.S. Stock market capitalization has increased in each of the last five years, the explosive growth in many of the emerging markets has caused the U.S. share of world stock value to decline. In other words, the relatively poor countries are getting richer, and the relatively rich U.S. gets richer, but the "poor" are getting rich even faster. That's great.

Likewise, even though U.S. GDP has increased this year at a healthy 3.1% rate, our share of world GDP growth has fallen below 30% (see bottom chart above), due to the even greater growth in the emerging economies like China and India.

One result of all of that economic and stock market growth around the world?

According to the NY Times, "Last year, foreign investors poured a record $414 billion into securing stakes in American companies, factories and other properties through private deals and purchases of publicly traded stock. That was up 90% from the previous year and more than double the average for the last decade.

The influx is the result of a confluence of factors that have made the United States both reliant on the largesse of foreigners and an alluring place for opportunistic investors. The weak dollar has made American companies and properties cheaper in global terms, particularly for European and Canadian buyers. Even as Americans confront the prospect of a recession, economic growth remains strong worldwide, endowing oil producers like Saudi Arabia and Russia and export powers like China and Germany with abundant cash."

Bottom Line: Globalization and the spread of market capitalism has both united the world economies in important ways, while at the same time helping to strengthen and support the U.S. economy. We have the advantage of selling American products to the growing middle and upper classes around the world at a time when U.S. demand is slowing, and also being the recipients of massive foreign investment at a time when it is needed here. Yes, it is better that the world economy is less dependent on the U.S., and it is also better that the U.S. economy can become more dependent on the world economy.


At 1/19/2008 11:02 PM, Anonymous Anonymous said...

The Wilshire 5000 has lost $2.6 trillion over the past 3 months, since October 2007, $2.6 trillion of wealth wiped out in three months, 25 percent of GDP, a 16 percent stock market collapse.

Look out below.

At 1/19/2008 11:24 PM, Anonymous Anonymous said...

Thanks, it's nice to be quoted.

The level of foreign direct investment in the U.S. would seem to attest to the value of U.S. industries and a belief in the strength of the U.S. economy. It is interesting that there is very little objection from Congress. It would seem that a friend in need is a friend indeed.

At 1/20/2008 7:23 AM, Blogger Lammert said...

Blog of lammertdecayfractals
19 January 2008 Quantum Decay Fractals and the US Great Second Fractal Terminal Nonlinearity
Posted at 2008-01-19 Money growth and asset valuation in the US macroeconomy have reached their saturation limits in a well-defined heretofore described simple mathematical quantum fractal growth pattern. As assets depreciate, debt undergoes default, and recessionary job loss - as all three of these elements- synergistically feed one another, there will be a relatively short time interval of great nonlinearity in asset devaluation. In the larger picture of historical US macroeconomics dating to near the year of its constitution, this nonlinear devolution will be timed between 2X and 2.5X of America's Great Second Fractal beginning in 1858. This 2X-2.5X time window is quite large: approximately 35 years. When the devolution occurs, no one will mistake it for anything but the Great US Second Fractal terminal nonlinear collapse. Do the next 10-12 trading days represent the time period of this Great Second Fractal's terminal 2X-2.5X nonlinearity? Time will very shortly tell. As of 19 January 2007 at 13,305.08 and at a 14 month low, the Wilshire - whose minutely, daily, weekly, monthly and yearly valuation spreads have been perfectly ordered since October 2002 in evolving growth and decay quantum fractals and exactly represent the quantitative data points for the directly correlative evolving growing and contracting US money supply and macroeconomy - the Wilshire - now rests 2.6 trillion dollars below its predicted daily interday high on 11 October 2007. From the blogsite 'LAMMERT' a Wilshire decay model dating from 16 August 2007 has been identified. The daily data points are shared among growth and decay models with an averaged 20/50/50 day y/2.5y/2.5y decay model shared with a 17-18/44/34-35/27 day x/2.5x/2x/1.5-1.6x growth and decay 4 phase fractal series. 26 December 2007, the final lower high for the Wilshire was day 34 (2x)of the third fractal. 18 January was day 40 of a 20/50/40 of 50 day averaged y/2.5y/2.5y decay fractal and day 17 of a 17-18/44/34/17 of 27 day growth and decay fractal series. Both are caricatures of the ideal four phase and three phase fractals but with a mutual shared terminal day. The US macroeconomic saturation growth period and corresponding saturation growth curve for the Wilshire have validated the empirically derived simple laws of Lammert quantum fractal progression and have likely delivered all the evidence and data points that the system will yield for many years. Now the focus is on the decay process and a similar validation of necessary, optimal, and ideal quantum fractal contraction of the macroeconomy as represented by Wilshire valuation quantum decay.

At 1/20/2008 12:07 PM, Anonymous Anonymous said...

Well then. I guess that's settled. :)

At 1/20/2008 10:17 PM, Anonymous Anonymous said...

It also means that we're allowing those who should not be dealing with our nation a say in how it runs. That is a problem as it invites corrupt/hostile nations such as China to use our nation to help their military. If that isn't "building the bullet that kills you", I'd like to know how that's defined.

Depending on a hostile nation or three does not make for good economic policy knowing that we have plenty of our own who can rise up to the task. It just seems that it's a cardinal sin to attack the investor in any way(even if for national security).

Something says that the writer of this particular blog has little care for national security or its citizens. As for Congress, it's been bought lock, stock, and barrel.

Thankfully national security trumps economics every time.

At 1/25/2008 7:18 PM, Anonymous Anonymous said...

Competition is a wonderful thing.


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