Posted tagged ‘USA’

Divergence is around the corner

July 29, 2017

IMG_0212It is a good time now to update where the global trends are leading us to – how far can we see from here is the question. The one big change that seems to gain more strength is the political and economic divergence in interests of the USA and the EU. A couple of samples show this nicely: the German Chancellor Mrs. Merker has stated that Europe has to take its destiny into its own hands; the German minister of finance Mr. Schäuble stated that the joint European Army will be established at the latest by 2029; and the latest comes this week from Germany and the EU – Mrs. Merkel and Commission President Mr. Juncker announced that the EU will watch very carefully what kind of sanctions the US House of Representatives is setting on Russia, and if they violate unilaterally European firms in environmental or energy sector, the EU will not accept those and will retaliate – the earlier sanctions have caused EU companies around 90 billion Euros less exports to Russia that is more than US companies have suffered. The Trump administration has definitely given Europeans a wake-up call that has changed the thinking in Brussels and Berlin quite a bit. The economic super power EU will now bild up its military capabilities and definitely take more European stance on world affairs. The statement from Mr. Juncker was like this: Trump’s “America First” -policy cannot mean “Europe the Last”. On top of this the EU, Japan and China are forcing the global Free Trade and oppose the Trump administration’s aim at bilateral deals and protectionism which could lead even to isolationism of the USA down the road. My prediction remains the same as before – the power of Europe is underestimated, and when adding a very strong military and space capability to the economical power, it has already, Europe will become the major political, economical and military player on the global arena over the next 25 years, and might take the Western leadership role from the USA even faster. My hope was in tighter North-Atlantic relationships, but that has not happened, and it seems to be that now it is already too late for that – the USA is driving to another direction. There are large issues in the USA to be resolved from US National Debt of almost $20 trillion that equals $61.4 k per citizen,  US Foreign Debt of $6 trillion, growing Medic Aid spending already at over $1.1 trillion, increasing total taxation (Federal, State, City, Community) to the 15 % of population living below the poverty level. It might be that the USA has to focus on internal issues and will anyhow, independently of the Trump administration,  be playing a minor role on world affairs in the future.

 

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USA economy can only grow now

January 15, 2017

made-in-usaNow it is a good time to review how things have evolved. The US economy has been growing since 2008 and there is no sign that the speed would halt during 2017. The unemployment is on a historically low level at 4,9%. The baby boomers are retiring and more young adults are studying than in the past, so I don’t see this as a problem for the USA. There are more vacant jobs everywhere now. Some improvement is certainly needed for those who would like to work but are not looking for a job, and the labor force participation degree is thereby low. In my expectation I see a shortage of qualified employees to remain and even getting stronger what should actually lead to higher salaries and at the end to inflation, too.

The USA presidential election resulted in a situation that has brought the stock market up and made the dollar stronger. The former benefited investors, however, the latter one makes US exports more difficult unless the hit is eaten up by lower profits from overseas. For the rest of the US economy it means higher purchasing power that feels good and pushed against the inflation. This is a very interesting situation, and when the intention of the President elect is to force or at least target more factory jobs to remain and return to the USA, the employment market just improves over he coming years.  The shortage of skilled workers and even white collar employees is evident. This will on the other hand help young adults to enter the working labor force, what gives hope to many.

Now we land to my favorite topic: Manufacturing in he USA. The trend of returning manufacturing jobs from overseas is getting stronger, and it will get intensified by the actions the President elect will do. This leads to a re-birth of manufacturing in the USA and communities that start to thrive again. It is almost written into stars that the government will find a way to force foreign entities of US corporations to return their earnings from overseas, and this will happen through tax laws. When jobs are returning for the middle class and some income gets repatriated from overseas, the US economy will get a booster I have predicted for many years now – new infrastructure, new jobs and higher tax income, and a wealthier and healthier society.

What I still miss, is the weakening dollar. Unfortunately, I might have to wait longer then a stronger economy usually improves the value of dollar. The independence of foreign oil and gas gives US a huge economic play field and strength that most of the nations of this world don’t have. The steadily increasing military build up globally will boost US economy on that front, too. Then there is the growing healthcare sector, life sciences, high tech incl. robotics and nanotechnology, online world, herbal/botanical sector, and aerospace industry etc. Even in a case the gl0bal free trade would see some limitations, the US economy will grow. The population growth is also an advantage for the USA as well.

What could go wrong? There are risks that are obvious: stock market and housing market crash in China, a deeper trade war between EU and the USA and or between USA and China, non-ratification of EU-USA free trade agreement, Canada and Mexico tightening economies with the EU against the USA etc. There there are risks of terror attacks and even wars in Europe with Russia and China in Asia. What happens with North-Korea and will it lead to a military confrontation. Will Russia start using nuclear weapons in middle range missiles and deploy them in Europe? Will EU build up the military to match with Russia or even on the long run with the USA? And last but not least: the nature catastrophes might have more influence than the man – rising sea level, tsunamis, earth quakes, meteorite hit, vulcan eruptions, hurricanes, tornadoes, massive snow falls or rains etc. One doesn’t have to be a prophet to make a statement that something of these will hit for sure. Then it is only a question of the strength. Whatever it is, the USA is in a quite good position to overcome the obstacle, but certainly more preparation is needed on state, city and district level. Let’s grow in 2017!

 

Sniffing economic winds in the US

April 18, 2009

I came to NYC to get a feel for the impact of economic downfall on the big apple. However I couldn’t avoid reading the latest on the whole nation: cities and counties are reporting a sharp increase in homeless families! In NYC shelter beds have kept the number of people living on the street or in their cars low. The report on consumer loans (home, car, credit card) is also alarming – 4% of them are in default, which means that consumers are paying late or not at all.The unemployment rate is at 8,5% according to Labor Department. More than 2 million jobs have been cut in 2009 totaling 5,1 million since the recession began. And CEO’s are still getting extraordinary perks in form of bonuses, stock options etc. compensation. This is pretty much interesting then in Japan CEOs are cutting their own salaries, too,  when cutting for the people they lead. I bring this up, because I have cut my own salary by 25% this year as well. In my opinion this is well in line with shareholders’ interest as well. Certainly companies have to fire and lay off employees and workers as needed, but why that would not impact CEO pay? If the company does well and is making profits and keeps on growing, the perks are ok, but if the net result is not positive and growing (after all CEO compensation) there is no reason whatsoever to give extraordinary perks to CEOs. One way to increase profits is to do more on-line and in home offices.

In the big apple stores are laying off and closing – only few are opening. There are spaces for rent in good locations. Most of the shoppers look and sound like foreign tourists. Property values have dropped. The city is still better than it has been some years ago, but it might turn worse soon. Restaurants are having customers in Little Italy and cafes are more or less full at the Time Square. People in Central Park look happy and are excercising. The subways and public transportation are busy with people.

Despite of these facts I don’t see any soon ending for recession neither in NYC or in the US overall. My personal understanding is that the turn might begin late in 2009 or spring 2010. The bottom line result will be a huge number of people staying without income for a long period of times. Values for homes will not gain back their previous levels for years. People who have lost their investments in 401k, 529, or stocks etc. have to work longer, look for something else and when having something left to trust in stocks again in order to gain some of their losses back. The ride will be bumpy however. There are still two major questions left: the level of interest rates and the exchange rate. When interest rates remain low some activity in investment field will begin sooner or later, but printing of dollars will bring the value of greenback down and that is in the interest of the USA – less imports and more exports. Also paying foreign debt (taken in USD) with dollars having a lower value is easier after all. Also an inflation is healthy, if it is not out of control. That latter might happen only when Japan, China and Arabs start to sell their dollars at once. The best medicine now is to remain calm, consider investing carefully, and act with determination.