Sundry Things

Some days when I write in my blog there is very little to talk about, but today is a day when there is plethora of items to write about. All of them are connected by economics.

It seems that Europe and the U.S. are taking turns at destroying the world’s investment market, while China continues to grow. First it was the bursting bubble of the U.S. housing market, then it was Greece and Italy. Now economists are questioning how long China will be able to keep up its growth. In all three cases one must ask if these problems are being dealt with, or are the politicians placing bandaids on the issues rather than going through with the critical surgery.

The European problems stem around the lack of agreement. “The 17 countries and four European institutions now entangled in the euro zone crisis will continue trying to muddle through, but their dawdling can;t be sustained.” All the players cannot agree on a solution, so they continue to languish, and change the players.

According to the Wall Street Journal China is also on an unsustainable economic path. The centrally planned economy, and the owners of its businesses, will not allow a distribution of wealth to the people of China who need to have purchasing power. The transfer of wealth to Chinese consumer is being hindered by fixed investment in state owned enterprises. The need for more of a laissez faire economy to create real growth is being stymied by state-controlled capitalism.

The last part of the triage of economic issues involves the U.S. There will be no restoring of confidence in our economy until there is “a credible plan to cut spending on entitlements and defense while raising revenues.” This means that our leadership needs to work together to develop an innovative solution. According to today’s Wall Street Journal there seems to be hope in this arena.

The super committee has the daunting task of eliminating at least $1.2 trillion from our federal deficit. The deadline for this activity is November 23rd. It appears that progress has been made, “by inches, not miles.” I can’t even imagine what $1.2 trillion looks like, but they are attempting to meet this objective. “Democrats have asked for at least $1 trillion of tax increases, while Republicans have offered up $250 billion. A week ago, Democrats were at $1.3 trillion and Republicans at zero. At the same time, Democrats have offered $1 trillion of spending cuts and the Republicans $700 billion, with both proposals carving a significant amount from safety-net programs.”

The Europeans are too fragmented and will need to work hard to save the Euro, and China, the economic leader heir apparent, may also fail due to a philosophical commitment to a centrally planned economy. However, it appears that we just might pull through. It is too early to tell, but maybe our leaders just might finally do something right for a change. We’ll see! Today is November 12th, in eleven days we’ll see if they can pull our economy out of the fire.

And that is my thought for the day!


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