Journal - Meltdown of World Stock Markets

The volatility of the world’s stock markets over the long weekend has taught me some important lessons in world economy:

>>> The emerging economies (India, China especially; less so are the developed economies) are still dependent on Americans’ spending - despite whoever told you otherwise. Therefore, their governments have been so willing to subsidize Americans’ borrowing habits in the past. The prospect of American recession has given them a rude shock and awakening.

>>> People in China or Japan are earning more than what they spend (they are countries of savers.) Their economies are cushioned by rich cash reserves and can withstand recessions. Americans are spending more than what they earn. American economy is driven entirely by borrowing and consumption; and when the credit lines dry up, Americans stop consuming, and the economy goes into a recession.

>>> America is run by “market capitalism” trumped by Wall Street financial wizards and Corporate America, while China or Arab oil countries are run by state-planned “national capitalism”. In times of duress, America will be available for sale.

>>> A nation which doesn’t produce its own goods or services for its citizens is on thin ice. A country which lives on credit (or the whims of their financial gurus) runs the risk of self-deception.

>>> George Soro was right on with his long-range economic predictions:
- Re-regulation of American financial/banking industries is needed to fix America’s subprime mess.
- FED’s lowering its key lending interest rate can only fix the problems temporarily. American recession is inevitable and cannot be solved quickly or painlessly.
- Asian economy is still healthy, and has more room to grow their own demand. Emerging economies will learn from this lesson and move on to do the right thing.

>>> It’s not so bad that the world weans itself from American economy. It’s not so bad that America cedes its economic power to other countries.

>>> The Republicans have no economic policy:
- The only thing they know is tax-cut.