Now that the elections in France are over, it is clear that the voters want an end to austerity. Assuming that governments in France and elsewhere agree to increase spending, deficits will increase. A significant portion of the increased spending will go to transfer payments, not investments. Growth rates will move only slightly. Inflation will increase. The Euro will decline in value relative to the dollar and remnibi.
European inflation may influence U.S. inflation. Therefore, it is prudent to shift into inflation-resistant investments, especially income-producing real estate, consumer goods stocks, railroads, and other companies that have big moats around their business model.
---
Some older news related to the ending of austerity in Europe:
Bundesbank’s Weidmann Says What No Politician Wants to Hear
http://www.bloomberg.com/news/2012-04-22/bundesbank-s-weidmann-says-what-no-eu-politician-wants-to-hear.html
Hollande Vows Not to Ratify Euro Pact, Auguring Merkel Clash
http://www.bloomberg.com/news/2012-04-25/hollande-says-france-won-t-ratify-euro-fiscal-pact-as-it-stands.html
Europe awaiting France to temper austerity: Hollande
http://www.reuters.com/article/2012/04/25/us-france-election-idUSBRE83I0EZ20120425
Thursday, May 17, 2012
Will Greece Be Ejected from the EU?
(As usual, I am looking for the objective observation. This is not a prescription for what I think should happen, it is observation of what is likely to happen. Failing to stay objective is a mistake that costs money.)
Voters in Greece are rejecting austerity. The newly-elected government failed to coalesce this week, so there will be new elections in June. Predictions are that more seats will go to left-leaning parties which will, of course, deliver policies requested by the Greek people.
Greece would like to remain within the euro zone. It benefits from the stability of the Euro. By comparison, returning to the drachma would likely result in inflation, and most Greeks believe that returning to the drachma would be a disaster.
If you are a Greek citizen, why would you vote for austerity? It causes a loss of Government jobs. And why would you vote to lose the Euro and switch to the drachma? You wouldn't. That would result in inflation. If you were in their shoes, you too would want to have your cake and eat it.
Therefore, Greece will ask the euro zone countries to continue supplying money while it suspends interest payments. Voters in other countries will reject this scenario. They will reject the additional taxes required to maintain this state, by voting out politicians if necessary. The politicians in these other countries will then need to make a choice: Leave the euro zone themselves, or request that the EU act as a unit to prevent Greece from using the Euro. This will lead to the EU pushing Greece out.
Germany will get 99% of the blame, even if the vote to expel is unanimous.
Stocks in U.S. markets are in a correction at present in anticipation of these events. The greatest part of the discount is from uncertainty over the method of Greece's exit and the ramifications for the rest of the euro zone. I have no way of calculating the correct discount. The greatest turbulence and discount in prices of stocks will be now, when there is a lot of uncertainty. Once the news of the separation occurs, stocks will rise as uncertainty recedes.
It has already been reported by various news services that banks in Greece have been preparing for several years for a possible return to the drachma. Greece's central bank owns the necessary printing presses for printing new drachmas, if it has to.
Over the past week Greeks have pulled nearly a trillion Euros from banks in Greece. This is capital flight, a run on the banks, confirming that the common expectation among voters themselves is that Greece will be departing from the euro zone.
Voters in Greece are rejecting austerity. The newly-elected government failed to coalesce this week, so there will be new elections in June. Predictions are that more seats will go to left-leaning parties which will, of course, deliver policies requested by the Greek people.
Greece would like to remain within the euro zone. It benefits from the stability of the Euro. By comparison, returning to the drachma would likely result in inflation, and most Greeks believe that returning to the drachma would be a disaster.
If you are a Greek citizen, why would you vote for austerity? It causes a loss of Government jobs. And why would you vote to lose the Euro and switch to the drachma? You wouldn't. That would result in inflation. If you were in their shoes, you too would want to have your cake and eat it.
Therefore, Greece will ask the euro zone countries to continue supplying money while it suspends interest payments. Voters in other countries will reject this scenario. They will reject the additional taxes required to maintain this state, by voting out politicians if necessary. The politicians in these other countries will then need to make a choice: Leave the euro zone themselves, or request that the EU act as a unit to prevent Greece from using the Euro. This will lead to the EU pushing Greece out.
Germany will get 99% of the blame, even if the vote to expel is unanimous.
Stocks in U.S. markets are in a correction at present in anticipation of these events. The greatest part of the discount is from uncertainty over the method of Greece's exit and the ramifications for the rest of the euro zone. I have no way of calculating the correct discount. The greatest turbulence and discount in prices of stocks will be now, when there is a lot of uncertainty. Once the news of the separation occurs, stocks will rise as uncertainty recedes.
It has already been reported by various news services that banks in Greece have been preparing for several years for a possible return to the drachma. Greece's central bank owns the necessary printing presses for printing new drachmas, if it has to.
Over the past week Greeks have pulled nearly a trillion Euros from banks in Greece. This is capital flight, a run on the banks, confirming that the common expectation among voters themselves is that Greece will be departing from the euro zone.
Tuesday, May 15, 2012
Family Vacation or Budget Deficit?
In the Wall Street Journal Demetria Gallegos writes about taking a vacation with her four daughters without her husband. She wrote about differences of opinion over affordability and location (Los Angeles and Disney), but appears to have skipped many other issues. Issues like control (did he have any input into planning?), frequency of their Los Angeles trips (is this the fifth trip there?), proximity to relatives (hers?), style (shopping and Disney trinkets vs. history and culture), trip efficiency ($ per day), and budget (was money saved for this trip, or is it coming from credit cards?). The responses tended to be polarized, with perhaps half of the commentators castigating the husband, and the others supporting him. Several were quite harsh, suggesting the wife divorce the husband.
One of the dangers of frugality is that other people attack it. It is difficult enough for some of us to refrain from spending money we shouldn't spend. When we do, we are being sensible. Ben Franklin would be proud. A penny saved is a penny earned. When other people attack that frugality, it is much easier to give in to the criticism and resume overspending.
Something more than "good parenting" was at stake in this article. Most of us know that a good shared experience can pay dividends for the family for many years. Time passes, and you cannot get it back. Children grow up, and if you don't seize the initiative to travel with them, you won't get that opportunity later. It evaporates.
What was missing from the article, though the author implied that her husband did understand all of that, was any discussion about whether this trip would be a memorable trip. It is possible that the husband calculated that circumstances would result in a poor "memory" payoff for the cost involved. Certainly those commentators eager to attack him gave no consideration at all to this payoff calculation.
The bigger issue is the people dynamics. It is possible to be sensible and do the right thing about your finances, to be great at getting high returns from both expenses and investments, and still someone will come along and berate you for reasons that are emotional. You were happy, but now they are doing all they can to make you believe that you were wrong for being happy.
I have to wonder about some of those commentators. Did they really have other motives in making those comments? An over-spender may be anxious to force others to also overspend, as a way of justifying their behavior. Or it may be simple competitiveness: They want the husband to be as miserable and broke as they are. How dare he escape the vacation dilemma with money left over! Something tells me, however, that there is something even more sinister than that afoot.
One of the dangers of frugality is that other people attack it. It is difficult enough for some of us to refrain from spending money we shouldn't spend. When we do, we are being sensible. Ben Franklin would be proud. A penny saved is a penny earned. When other people attack that frugality, it is much easier to give in to the criticism and resume overspending.
Something more than "good parenting" was at stake in this article. Most of us know that a good shared experience can pay dividends for the family for many years. Time passes, and you cannot get it back. Children grow up, and if you don't seize the initiative to travel with them, you won't get that opportunity later. It evaporates.
What was missing from the article, though the author implied that her husband did understand all of that, was any discussion about whether this trip would be a memorable trip. It is possible that the husband calculated that circumstances would result in a poor "memory" payoff for the cost involved. Certainly those commentators eager to attack him gave no consideration at all to this payoff calculation.
The bigger issue is the people dynamics. It is possible to be sensible and do the right thing about your finances, to be great at getting high returns from both expenses and investments, and still someone will come along and berate you for reasons that are emotional. You were happy, but now they are doing all they can to make you believe that you were wrong for being happy.
I have to wonder about some of those commentators. Did they really have other motives in making those comments? An over-spender may be anxious to force others to also overspend, as a way of justifying their behavior. Or it may be simple competitiveness: They want the husband to be as miserable and broke as they are. How dare he escape the vacation dilemma with money left over! Something tells me, however, that there is something even more sinister than that afoot.
Corruption Perception Indices in the Eurozone
I was wondering about correlations between the country scores in the Corruption Perception Index compiled by Transparency International (http://cpi.transparency.org/cpi2011/results/#CountryResults) and national budget deficits. Here are the Corruption Perception numbers for members of the Eurozone, with 1.0 indicating very high corruption and 10.0 indicating zero corruption:
Austria 7.8
Belgium 7.5
Cyprus 6.3
Estonia 6.4
Finland 9.4
France 7.0
Germany 8.0
Greece 3.4
Ireland 7.5
Italy 3.9
Luxembourg 8.5
Malta 5.6
Netherlands 8.9
Portugal 6.1
Slovakia 4.0
Slovenia 5.9
Spain 6.2
Three Nordic countries not in the Eurozone have very high scores:
Denmark 9.4
Sweden 9.3
Norway 9.0
For comparison, the United States scores a 7.1 on this scale, just slightly ahead of France, but well behind Germany, Finland, and the Netherlands.
Greece has the lowest score among all Eurozone countries. The only other countries that are close are Italy and Slovakia.
Austria 7.8
Belgium 7.5
Cyprus 6.3
Estonia 6.4
Finland 9.4
France 7.0
Germany 8.0
Greece 3.4
Ireland 7.5
Italy 3.9
Luxembourg 8.5
Malta 5.6
Netherlands 8.9
Portugal 6.1
Slovakia 4.0
Slovenia 5.9
Spain 6.2
Three Nordic countries not in the Eurozone have very high scores:
Denmark 9.4
Sweden 9.3
Norway 9.0
For comparison, the United States scores a 7.1 on this scale, just slightly ahead of France, but well behind Germany, Finland, and the Netherlands.
Greece has the lowest score among all Eurozone countries. The only other countries that are close are Italy and Slovakia.
Wednesday, May 2, 2012
Trading Psychology Revealed by Share Buybacks
Share buybacks by companies stir up the emotions of some traders. It is a telling sign. Why would something as mundane as a change in the denominator get traders so stirred up? Perhaps this is one way to tell the difference between an investor and a trader: The investor looks at the relative price to value, while the trader looks for various technical factors surrounding the transaction. As to whether share buybacks are good or bad, the trader will almost always label them as "bad," while the investor will ask about the price relative to book value or enterprise value.
The pseudonymous "Jaded Consumer" writing at Seeking Alpha seems to have caught Motley Fool's Rick Smith thinking like a trader:
http://seekingalpha.com/article/549621-why-american-capital-is-buying-american-capital
For reference, here is the original Fool article, which doesn't really make a valuation-based case for criticizing an American Capital Strategies share buyback:
http://www.fool.com/investing/general/2012/04/12/2-stocks-that-are-wasting-your-money.aspx
In this situation, we have what might look like a turnabout: The supposedly sensible Motley Fool writer has been found to be trading, while the pseudonymous "Jaded Consumer" is offering much clearer thinking, and better writing as well.
It is worth mentioning that none of my comments here are intended to reflect on the relative merits of investing in AAPL or ACAS.
The pseudonymous "Jaded Consumer" writing at Seeking Alpha seems to have caught Motley Fool's Rick Smith thinking like a trader:
http://seekingalpha.com/article/549621-why-american-capital-is-buying-american-capital
For reference, here is the original Fool article, which doesn't really make a valuation-based case for criticizing an American Capital Strategies share buyback:
http://www.fool.com/investing/general/2012/04/12/2-stocks-that-are-wasting-your-money.aspx
In this situation, we have what might look like a turnabout: The supposedly sensible Motley Fool writer has been found to be trading, while the pseudonymous "Jaded Consumer" is offering much clearer thinking, and better writing as well.
It is worth mentioning that none of my comments here are intended to reflect on the relative merits of investing in AAPL or ACAS.
Wednesday, April 25, 2012
The Coming French Credit Default
It was only about six weeks ago that the long, slow Greek credit default came to its tiny, whimpering conclusion. Recent prices of Spanish credit default swaps, and the clear French political posturing as a run-up to a "stand up to big bad Germany" meeting indicates that things are definitely not solved in the euro zone. If anything, tensions are as high as they have ever been.
The euro zone is headed for a dramatic, catastrophic dissolution.
When the EU was first announced, some wondered how such an entity, a collectivist agreement among individual, independent nations, would last. National norms vary enormously from EU state to EU state. The approaches to saving, spending, and investing, as cultural elements, are very different. Since the basis of a currency are the nation's collective ability to spend, save, and invest, as a unit, the prognosis, at least as I saw it, was for continual and enormous tensions that would tend to pull the union apart.
The creation of a monetary union and the lowering of tariffs created some growth that ameliorated the underlying tensions. But when that palliative is removed, the forces of dissolution are unchecked, except for diplomacy and time.
It seems that the euro zone is running out of both at this moment. Germany is seen as the evil, successful, mean daddy with all the money, who pushes around and bullies all of the less successful little states, like Paul Krugman, whose head believes it is a state all to itself. Germany, as always a stickler for the rule of law, points out the requirements of the union, while the other governments, one by one find that they cannot get re-elected if they follow the austerity policies they agreed to in their "weaker" moments.
A side comment in an April 23 article on CNBC:
"The problem is that governments across the euro zone are finding it very difficult to live up to commitments on austerity and stay elected."
http://finance.yahoo.com/news/happens-plan-usterity-fails-132827914.html
Exactly. Let's work out the conclusions that naturally follow.
The people don't want austerity, hence they soon will get lack of austerity. Governments will begin to spend on infrastructure, unemployment, and other benefits. The resulting pressure on the Euro will be to cause inflation, but only if Germany allows it. Germany, with a cultural abhorrence of inflation borne from a very real portion of its history not so long ago, will logically resist the inflation at first. Of course, events of the past two years could very well be said to already have been Germany's resistance to inflation, so Germany may itself not have much patience left for tolerating the blows it will need to absorb to preserve monetary stability.
What happens next is entirely up to Germany. For decades later, people in Spain, Greece, France, and many other euro zone countries will find fault, scapegoat, and lie in order to convince themselves that someone else (Germany) is to blame, and not themselves. But what will happen is this:
Germany will leave the euro zone and go back to the Deutsche-mark.
It will do this strictly from a sense of self-preservation. The alternative is to "donate" through inflation and other corrosion of its finances 20%, 30%, or even 70% of its annual GDP to the union as the other members spend far, far ahead of their ability to actually produce goods and services. After all of the years of a divided Germany, the trials of reunification, and the sacrifices made on behalf of the EU the past several years, Germany will not be able to withstand the thousand cuts of all the favors and supports asked of it by its neighbors.
I have picked on Germany here only because it is the obvious country to break from the union in order to avoid its own death, but there are other countries that could leave the monetary union first, as they would be less visible and suffer fewer consequences from their actions.
The Euro will lose value against other currencies, especially the dollar. Expect high inflation in Italy, Spain, Greece, and France. Expect rates of inflation high enough that current sovereign debt and bonds of companies are eroded significantly in value over the next three to five years. In short, this is a very poor time to be buying European debt, and an excellent time to sell. U.S. Treasury bonds are not a good investment either, but not for the same reason. With European inflation raging, expect a new avalanche of imports into the U.S. from euro zone countries, with prices for European luxury goods dropping, in some cases. No doubt there will be a certain amount of price gouging of American consumers, so watch Euro-dollar exchange rates closely and negotiate hard with your local wine and cheese shop for better rates on Bordeaux and Manchego. Want a BMW or Mercedes? No need to wait, as if Germany drops the Euro, you would be exchanging dollars for Deutsche-marks, and that exchange rate is not going to suffer like the Euro will, so you won't be getting any discounts there.
[updated 4/30/12]
The euro zone is headed for a dramatic, catastrophic dissolution.
When the EU was first announced, some wondered how such an entity, a collectivist agreement among individual, independent nations, would last. National norms vary enormously from EU state to EU state. The approaches to saving, spending, and investing, as cultural elements, are very different. Since the basis of a currency are the nation's collective ability to spend, save, and invest, as a unit, the prognosis, at least as I saw it, was for continual and enormous tensions that would tend to pull the union apart.
The creation of a monetary union and the lowering of tariffs created some growth that ameliorated the underlying tensions. But when that palliative is removed, the forces of dissolution are unchecked, except for diplomacy and time.
It seems that the euro zone is running out of both at this moment. Germany is seen as the evil, successful, mean daddy with all the money, who pushes around and bullies all of the less successful little states, like Paul Krugman, whose head believes it is a state all to itself. Germany, as always a stickler for the rule of law, points out the requirements of the union, while the other governments, one by one find that they cannot get re-elected if they follow the austerity policies they agreed to in their "weaker" moments.
A side comment in an April 23 article on CNBC:
"The problem is that governments across the euro zone are finding it very difficult to live up to commitments on austerity and stay elected."
http://finance.yahoo.com/news/happens-plan-usterity-fails-132827914.html
Exactly. Let's work out the conclusions that naturally follow.
The people don't want austerity, hence they soon will get lack of austerity. Governments will begin to spend on infrastructure, unemployment, and other benefits. The resulting pressure on the Euro will be to cause inflation, but only if Germany allows it. Germany, with a cultural abhorrence of inflation borne from a very real portion of its history not so long ago, will logically resist the inflation at first. Of course, events of the past two years could very well be said to already have been Germany's resistance to inflation, so Germany may itself not have much patience left for tolerating the blows it will need to absorb to preserve monetary stability.
What happens next is entirely up to Germany. For decades later, people in Spain, Greece, France, and many other euro zone countries will find fault, scapegoat, and lie in order to convince themselves that someone else (Germany) is to blame, and not themselves. But what will happen is this:
Germany will leave the euro zone and go back to the Deutsche-mark.
It will do this strictly from a sense of self-preservation. The alternative is to "donate" through inflation and other corrosion of its finances 20%, 30%, or even 70% of its annual GDP to the union as the other members spend far, far ahead of their ability to actually produce goods and services. After all of the years of a divided Germany, the trials of reunification, and the sacrifices made on behalf of the EU the past several years, Germany will not be able to withstand the thousand cuts of all the favors and supports asked of it by its neighbors.
I have picked on Germany here only because it is the obvious country to break from the union in order to avoid its own death, but there are other countries that could leave the monetary union first, as they would be less visible and suffer fewer consequences from their actions.
The Euro will lose value against other currencies, especially the dollar. Expect high inflation in Italy, Spain, Greece, and France. Expect rates of inflation high enough that current sovereign debt and bonds of companies are eroded significantly in value over the next three to five years. In short, this is a very poor time to be buying European debt, and an excellent time to sell. U.S. Treasury bonds are not a good investment either, but not for the same reason. With European inflation raging, expect a new avalanche of imports into the U.S. from euro zone countries, with prices for European luxury goods dropping, in some cases. No doubt there will be a certain amount of price gouging of American consumers, so watch Euro-dollar exchange rates closely and negotiate hard with your local wine and cheese shop for better rates on Bordeaux and Manchego. Want a BMW or Mercedes? No need to wait, as if Germany drops the Euro, you would be exchanging dollars for Deutsche-marks, and that exchange rate is not going to suffer like the Euro will, so you won't be getting any discounts there.
[updated 4/30/12]
Wednesday, December 21, 2011
100% Profit on Small Investments
Some of the best investments are not stocks or bonds. In the spirit of the holidays, here are some investments for $15 and under that promise great returns in convenience, time saved, and value. All of these these ideas are from Reddit users in response to the question
Reddit, what are some not well known products, $15 or less, that have made your life incredibly more enjoyable/easier?
Magic Eraser
Rain-X
Zip-It
Styptic Pencils
gaffers tape
A headlamp.
knife honing steel
Bodyglide
Gold bond powder
Dr. Bronner's soap, especially the lavender kind.
Mattress sheet clips.
Noise and light blocking curtains
Bengay
SOS tuner
Magic hair remover
Goo Gone
head massager
A meat thermometer!
F.lux
Vaseline
Jar Opener Rubber
A roll of Glad "Press n' Seal".
small cast iron skillet
little pen-shaped, battery-powered hair trimmers
Bagel guillotine
10mW green laser pointer
Tongue Scraper
rice cooker
Kitchen scale
Drop Stop
Staedtler Mars Plastic Eraser
Utili-Key 6-in-1 Tool
Oxo can opener
Baby wipes
DivaCup
Distilled white vinegar
Body Pillows
hard drive enclosure
HDMI cords
Grandma's Lye Soap
flask
There are even more in the Reddit thread. More than half the fun is in reading the dialog commenting on these suggestions, so go check it out.
Reddit, what are some not well known products, $15 or less, that have made your life incredibly more enjoyable/easier?
Magic Eraser
Rain-X
Zip-It
Styptic Pencils
gaffers tape
A headlamp.
knife honing steel
Bodyglide
Gold bond powder
Dr. Bronner's soap, especially the lavender kind.
Mattress sheet clips.
Noise and light blocking curtains
Bengay
SOS tuner
Magic hair remover
Goo Gone
head massager
A meat thermometer!
F.lux
Vaseline
Jar Opener Rubber
A roll of Glad "Press n' Seal".
small cast iron skillet
little pen-shaped, battery-powered hair trimmers
Bagel guillotine
10mW green laser pointer
Tongue Scraper
rice cooker
Kitchen scale
Drop Stop
Staedtler Mars Plastic Eraser
Utili-Key 6-in-1 Tool
Oxo can opener
Baby wipes
DivaCup
Distilled white vinegar
Body Pillows
hard drive enclosure
HDMI cords
Grandma's Lye Soap
flask
There are even more in the Reddit thread. More than half the fun is in reading the dialog commenting on these suggestions, so go check it out.
Friday, December 16, 2011
Separated by Miles
U.S. consumers are ebullient.
http://www.conference-board.org/data/consumerconfidence.cfm
Paul Krugman is depressed.
http://www.nytimes.com/2011/12/12/opinion/krugman-depression-and-democracy.html?_r=3&pagewanted=all
Millions of people, vs. Krugman. Hmmm, who is right?
(9:07amET edit: This could also have been titled: "Harbinger: economists trying to set normative policy" because writing political articles like Krugman's is a sign of desperation and the need to control.)
http://www.conference-board.org/data/consumerconfidence.cfm
Paul Krugman is depressed.
http://www.nytimes.com/2011/12/12/opinion/krugman-depression-and-democracy.html?_r=3&pagewanted=all
Millions of people, vs. Krugman. Hmmm, who is right?
(9:07amET edit: This could also have been titled: "Harbinger: economists trying to set normative policy" because writing political articles like Krugman's is a sign of desperation and the need to control.)
Harbingers: Financial Engines
I recently received free advice from Financial Engines that implied strongly I should re-balance my portfolio to decrease my weighting of equities and increase my weighting of bonds. Considering coming inflationary pressures from a U.S. expansion and continuing high oil prices, the need to raise U.S. interest rates, and the incentive for the Federal Reserve to inflate domestic real estate prices, we think that Financial Engines' advice is dead wrong.
We suggest taking a contrary position and decreasing holdings of safe debt securities and increasing your weighting of small- and mid-cap stocks. This is not a short-term suggestion. Gains will occur over the next 24 to 36 months.
We suggest taking a contrary position and decreasing holdings of safe debt securities and increasing your weighting of small- and mid-cap stocks. This is not a short-term suggestion. Gains will occur over the next 24 to 36 months.
Wednesday, December 14, 2011
A Short List of New Trends
I will try to keep this short, sweet, and therefore highly informed by subconscious perception.
Germany is the new, unstoppable economic leader of Europe. Harbingers: Michael Lewis envious shit article in Vanity Fair, hand-wringing by France and United Kingdom over the 1990 unification, Germany's low unemployment despite Europe's fragile economics in 2011, Poland's and Russia's stated interest in seeing Germany continue to lead, Greece's need for German cash handouts to fill in their deficits*, and of course the burgeoning of articles like this one where the authors point out Germany's recent economic success.
China's undeclared global cyber war is about to become reciprocal. U.S. government and industry leaders, both Republican and Democrat, civil and military, are in 100% agreement about the need to stop deep infiltration of U.S. information technology infrastructure by China state-sponsored hacking. This rare unanimous agreement will make for some very interesting counterattacks. Side effect: sales of computer parts made in countries other than China will increase at the expense of China-made parts; or prices of China-made parts will decrease.
The U.S. economy is poised for a surprising upturn. Growth in tax receipts is above reported income growth, indicating that strong retail sales are not coming at the expense of savings. EU angst over Greek, Italian, Spanish, and even French deficits, sovereign credit ratings, and the resulting spikes in sovereign borrowing rates has cast a pall over the world economy for much of 2011, holding U.S. growth back as well. Despite this and the lingering issues from the bursting of the housing bubble and consequential banking crises in 2008 and 2009, negative forces are being used up. U.S. corporate cash hordes are the largest they have ever been. Even a small increase in capital spending by U.S. business would result in an economic resurgence.
U.S. manufacturing growth will begin to come at the expense of China. Already there are small signs of manufacturing coming back to the U.S. As wage inflation in China and "probity loss" weighs on the China cost advantage, some kinds of manufacturing will become more efficient in the U.S. than China. The waves and waves of consumer products from China are widely perceived as sold by Wal-Mart, made of cheap plastic, and don't last. In contrast, the consumer product reputations of U.S., Japan, and German-made products is top-notch. Consumers have experienced austerity in 2009-2011 and want to spend precious dollars on products that last. They are willing to skip cheap "plasticky" products that have been proven to contain poor quality control and design.
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