Elite Inside Trader

Let’s begin this commentary by asking exactly what specific “Lehman Bros” type crisis recently occurred or will occur which justifies this nasty global equities decline and its continuation, which would then be called the 2011-2012 crisis? We can quickly dismiss the idea that it was S&P’s credit downgrade of the U.S. I mean come on folks, it has been beyond obvious that global credit markets are awash in debt and therefore higher risk. Things were known bad before the downgrade and the same known bad after the downgrade. The credit downgrade was a message to Washington, in that respect long overdue, but has probably done more to soil S&P’s reputation than anything else as we remember them for infamously rating junk sub-prime as AAA a few years back. So let’s move on to more substantive issues to identify what is terribly wrong with world economics right now.

Can we say it was the recent “realization” that Washington bankers and politicians have been pillaging the financial system greedily? No, the reality of those issues has been baked in ever since. We are far beyond any hope that those in power, I easily hesitate to call them leaders, in Washington or on Wall Street will do the right thing of the people, by the people or for the people; be they bankers or politicians they will never shoot themselves in the foot for the good of the country. Rich people just don’t do that sort of thing, reminding us why a wise biblical figure named Jesus quipped one day about it being easier for a camel to pass through the eye of a needle…indeed. They will instead follow the values of any otherwise worthy seafaring captain and go down with the ship.

Moving to the withdrawal of Bernanke’s QE, should that cause a fresh crisis of sorts and why? Because corporate publicly held companies are doing so poorly in terms of profits and income that the stock market is now wildly overvalued? Hmm, that’s a tough sell, no? How about the fact that interest rates are at and going to remain near zero? Doesn’t that support flow into the risk assets like stocks? In fact doesn’t a stock portfolio of reasonably priced, financially sound dividend paying companies, MLP’s, REITs, and other such vehicles sound like a superbly good idea right about now? Isn’t it true that global companies like P&G, Yums and hundreds of others will by the nature of their economic position across the globe have their shares priced in balance with any currency fluctuations and inflation?

If not any of the above issues, then it must be those few trillions of USD being pumped into the system, right? Nonsense I say, what’s a few trillions amongst crooks and the citizens of the world; more money supply means inflation of goods and services. It does not necessarily mean hyperinflation. The sharply reduced purchasing power of the USD and other currencies across the past four decades is nothing new under the sun as so many intelligent analysts have well pointed out and we have confirmation that it will continue along with global expansion. Now let’s rise up and argue that “we” can’t afford such higher prices. But we must stop and ask who is “we” who can’t afford it.

Then let’s turn to the U.S. real estate debacle. Yes, this is really horrible; the 100 million lower and middle income families of America are ruined, including being upside down in their homes and now moving toward a rental society. BUT, this group of people is NOT the world economy! This group of people is ruined, but there are another 150 million Americans living out there whose lives are more stable and good and wealthier than ever. They have jobs, high-paying jobs, their kids are in college, the companies they work for are not going out of business anytime soon. Am I wrong?

It’s easy to understand why Americans and Europeans living in America and Europe narrowly see doomsday with all of its related horrors. After all, the closer you are to the pain of others, the worse it seems and the more you feel it However, shall we be reminded that the world is not composed only of the declining United States lower and middle class sector. I think this pain, this very real pain, has caused a terrible distortion in the American view of the state of global affairs.

I am forced, sitting here embracing the view from my Shanghai perch, to remind all of us that the lives of 150 million Americans are better than ever, that stock valuations are not outrageous, that the rise of Asia led by China and the rise of BRIC countries is a long-term multi-decade reality as was the rise of post WW America, that the global tech and net driven shifts transforming the world we live in, are each and all together powerful trends which we all should pray may have the power and influence to more than offset the shameful shenanigans of the Washington and Wall Street elites who have disgraced the meaning of the word leaders. Make no mistake that America’s biggest problem is its leadership across the government, financial, defense, insurance, lobby and legal sectors. There is your identified cross section of the core problem.

America’s second biggest problem is that it is confused about its identity. It doesn’t know that it simply isn’t America anymore. This is where the true and sad delusion lies. (read Give Me Liberty by Naomi Wolf for an insightful understanding, meaning and ideology of the word America) Even adding in Europe’s similar sovereign debt excesses, that still doesn’t spell out an over-generalized doomsday siren across the world. Because the American economy, financial and political system has broken down to varying degrees, this will definitely put a drag on other emerging growth across the globe, but it does not spell out an over-generalized doomsday siren. Those billions who are poor have always struggled and so there is not so much change for them while the increasing ranks of declining middle class Americans is more than offset by the increasing ranks of rising middle class Chinese and Indians and others. That does not make any struggling, angry American feel better though, nor should it. But what it should do is revive the true, original American spirit to act, to fight, to move forward, to move on in the name of liberty and happiness.

Though these broader global socio-economic trends will be playing out over many future years across the globe, the situation is reasonably described as a period of unprecedented societal, economic and technology-driven shifts and transformations. I easily acknowledge that this more positive, broader picture which I present is being threatened by one of the most disgraceful periods in American political and financial history.

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Tags: 2011 Financial Crisis, Ben Bernanke, Credit Downgrade, Hyperinflation, Inflation, Interest Rates, Quantitive Easing, S&P Downgrade, United States, USD