Boom Times Are Back

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This article is a good reason that everyone should have a diversified mutual fund portfolio that includes asian and latin american holdings.

The U.S. non-urban K-12 school system is doing fine and produces the necessary number of college candidates. U.S. universities are the best in the world. So what is the problem? What was once one of America's greatest assets is now an anchor around the neck of the country. That deadly anchor I refer to is Congress. Congress no longer acts in the best interests of the country. Congress is controlled by special interest groups whose only concern is themselves...to hell with the rest of us. Combine a corrupt Congress with the most incompetent president of all time (Bush the decider...he was really Bush the destroyer of wealth) and add to the mix Alan Greenspan who kept interest rates too low for too long and you have the recipe on how to destroy the American economy. Congressmen like Chris Dodd and Barney Franks are a plague cast on the U.S. Until this country starts sending people who put country first and not themselves, we will continue to decline. With reference to the emerging economies, it is good to see countries move from abject poverty toward a more humane standard of living. But make no mistake, the other economies are still doing well only because we continue to hire their cheap labor and buy their products. If the U.S. erected economic barriers (of which I am not advocating, just making a point), those emerging economies, which you so proudly refer to, would without a doubt collapse.

I think that the problem of the United States of America is not about their debts but about their citizens who have no morale and morals anymore.How many youths in America are still conscious about their grades? How many adults in America are acting like adults in their workplaces? In China their people are equipping themselves in science and technology, in languages, and even in politics. It's really the Americans who are putting America down because they have turned away from the God of their forefathers.

I believe that the problem is much more twisted than the writer points out. Even if we were still at the top of the heap economically, our system(more like our renegade supposed representatives) seems predisposed to not look at our economic position as something that is prized. Simply, when we are flush with capital as well as when we are scraping for more , the powers that we elect unilaterally decide to go "world economy" or "equal the playing field" in every way immaginable! If we see Mexico is in some sort of dilema either finacial or sociological, there goes our cash! There seems to be little or no care as to maintaining our well earned positions and allowing others to recieve their just deserts for whatever lack of attention to detail they exercised. Kinda like, insurance companies, banks, car companies, mortgage defaulters, drug addicts, general unemployables but not the majority of hard working dependable American taxpayer! Today America is so mired in special interest that the majority is screwed and the failure prone are rewarded!

I agree with Zakaria's conclusions but not his premise.

Our fundamental problem is that the United States is now being managed by an Administration that can think ten miles wide but only one inch deep. When their strategies are implemented, healthcare will be rationed, we will still have one on the worse K-12 systems in the industrialized world, and wind and solar power will meet less thant 5% of our energy needs. And there will be no green jobs.

In the meantime, the industries that make America great, coal, natural gas, oil, nuclear power, pharmaceuticals, medicine, financial services, are all under assault by our own government.

Untimately, America's decline will result from the continuing dumbing of America, not external factors. SAT scores peaked in 1964 and have fallen ever since. In the last election, fully 30% of the people who voted for the winning candidate cannot read at the eighth grade level. And our colleges are filled with students with below average IQ's.

The end game will come when 50% of the people will soon be paying taxes for the other 50%. This result will be higher taxes to meet the demand for more free services, and all of the oxygen will be sucked out of the private sector. The great job creation engine will come to a halt as will our standing as a world power.

So Zakaria is right but for the wrong reasons.

I say buy stock in Chindia and buy shares in Ford stock in the US!

That last sentence is rather meaningless "Unless the United States gets its act together, and fast, the ground will continue to shift beneath its feet, slowly but surely."

What does he mean, get its act together? Isn't everything that can be done being done? Does he have any suggestions?

Like the previous poster has said- the US where most of the consumption has happened has been the force behind the growth in those other countries and unless that resumes, what are India and China going to do with their exports- send them to each other?

Aren't exports the primary driver for Chinese growth? And aren't the bulk of the exports coming to the US? So how can China continue to 'boom' if the exports reduce, and given that the US economy isn't doing too well and consumers are, well, not consuming, how can China sustain its growth?
And I don't see where he gets that bit about India's currency doing better against the dollar- it was 39 rupees to the dollar at the beginning of last year and it's at 48 now.

@ McLovinB,
First, the pygmy generalization was just that- they are a very admirable, innovative and competent people in what they do best- desert survival skills. And to a large degree, they have developed and maintained a much more harmonised way of life. However, advanced technologies (the analogy) are not their forte. The racist card is so irrevelevant and overplayed it's tiring. I suppose if a pygmy was writing about dropping an American in the desert, giving him a stone and told to live a week- that pygmy would be racist!? And war mongering- what the hell are you talking about!!??

More to the relevant topic- please name an advance technology that was developed by China, India, et al. that was not copied or reversed engineered? And the real kicker here is that the top experts in the fields of tech, financial, manufacturing, etc. were predominantly educated in the US, Europe, Japan- exported know how.

@ Dasbobby2002- Exactly what financial system in the world (that is even remotely relevant) hasn't been copied from the US? And more than that, is currently not absolutely being held in panic switch limbo by our every move? Ask the Chinese how comfortable they are with their own financial independence.

China's two trillion foreign cash reserves will be of little value, if the dollar collapses. The whole world is a financial network, at least the international nations which constitute this network, are a network. South Africa, in the African continent, is the visible face of this network in Africa. Also, in my opinion, the number "5.8%", which signifies the growth rate of India's economy, is a smaller estimate, than the real growth. If resources are not being used in the developed world, then they are being diverted to the economies, who are showing significant growth. Wealth is stored, where it is usually generated. Perhaps, it is easier for the wealth to be stored and utilized in the regions where it is being generated. There is less competition, between the developed world and the developing world, for resources, to the advantage of the developing world. The main hindrance to the developing world, is that all the currency reserves are mainly dependent on the currency of the developed world. We might see the higher valuation and assertion of the currency of the developing world, as compared to the developed world. Japan stands to do well, if it interacts much more, and in a better manner with her Asian counterparts. Japan is a part of Asia, and may find it easier to do business with Asia.

Good article except that the blank check you gave for the Indian banks is probably not accurate. "As many 19 Indian co-operative banks collapsed for the 12 months ended March 2009 against 44 American entities failing during the same period."
http://economictimes.indiatimes.com/articleshow/4371251.cms

There are couple differences between China and 30-years back Japan.
1. Japan put stakes on producing high quality products using their own capital - China uses foreign capital to produce relatively low quality goods. This is long run disadvantage for China.

2. Japan has much lower population, so its working class got richer (and less attractive for employers) pretty fast. China, on the contrary, has so many potential emploees, that it will be attractive for investors (becouse of low salaries) for decades ahead. It is good prospect for China. At the same time, it creates a lot of social problems, including danger of new Revolution or coming back to socialism.

In 10 years China in best case will be no better than Japan now.

One things seems to be ignored, which simply can't be ignored in any rational discussion of future growth. With several large nations like India and China expanding production, commodity prices will very soon overshadow labor prices, which have been one of China's and India's primary advantages. The world is changing for everyone, and to say that the people benefiting before the change will continue to do so afterwards is speculative at best. Combine rising wages with a strengthening currency and tell me what that does for a country's international trade prospects.

The result is simple, many of these nations that have historically been exporters will see vast swings in their trade balances. Rising commodity prices, particularly oil, will make long distance trade considerably more expensive compared to local production. People who think booms are going to continue in other places are the same people who thought the boom would continue in the US. Booms are intrinsically unsustainable.

Dino

It could be argued that the foundation for this shift in economic levels was the move to free trade with significantly reduced barriers. This facilitated the move to a global equalization of living conditions. The so called" rich" nations with only a portion of the earths population is now falling back to the new world level. The so called "poor or developing" nations with the majority of the world population are now moving to a higher economic level. From a world population perspective, this would seem appropriate. The wanderer.

Excellent observation, as always. Unfortunately your warnings and good advice will fall on too many deaf ears in the U.S. I'm afraid America still has a long way to go and a lot to learn. The election of Obama shows that there is hope. But it is still a long and perilous journey ahead to correct our mistakes and live up to our full potential. This crisis has not necessarily been a bad thing. It has forced many needed changes. Yet there are still many more changes needed. If we can make those changes we will excel. If not, well then, we get what we deserve.