Thursday, September 23, 2010

Asia to the USA: "We've got you by the b@lls!"

A friendly Asian tourist shows onlookers who's the boss near Wall St this afternoon 

Who is really in the position of power here:  Asia or the US?  There are a number of arguments one can make about which party has "hand" - to use a Seinfeldism.  Asian export economies have surely felt some pain as the American consumption engine has slowed.  At the same time Asian countries (namely China and Japan, but do not forget about Hong Kong, Taiwan, Thailand, and Singapore) hold over $2 trillion in US treasuries.  Based on the current strategy, that number is set to grow quite a bit over the next decade so we need to keep the tap running.  China is particularly important because as of July they were the biggest holder of our debt, with $850 billion in treasury bonds on the book.  As this position grows, China becomes increasingly concerned about the Administration's largess and its impact on the value of the dollar.  To make matters worse, Washington continues to whine to Chinese Premier Wen (1 point Laruso for alliteration!), pressuring him to do his part in accelerating the appreciation of the yuan so the US can gain a competitive advantage via exporting goods of its own.  (I will not even get into protectionism here but that is another variable that makes this game of chicken even more dangerous...some interesting thoughts on free trade by my buddy Ken Monahan - LINK).         

If the US wants to slay the dragon (if that is even possible) it has to get back to work and find ways to participate in the next bull market which will be driven by the emerging world. Some food for thought from a recent Huffington Post article: "Ninety-five percent of the world's consumers live outside of our national borders, but only one percent of American businesses sell to them. We're in a global race with China, Japan and Korea to enter and corner key markets of fast-rising Asian economies. If we want to grow our economy, we need to go where the growth is. One billion people will join the global middle class in the coming decade. That's a billion worldwide consumers buying cars, traveling on planes, consuming electricity and purchasing better medical care. That's one billion new opportunities for American businesses." (LINK)  I tend to agree......

1 comment:

  1. not a step in the right direction: