CautiousInvestor

Clarifying America's No-Win Economic Dilemma

A great article with many well informed comments.

Some of the developments taking place in India and China can be attributed to our outsourcing employment to those countries, contributing in part to the emergence of their respective middle classes.

Knowing the US consumer is down and out, from a policy perspective we should be doing everything possible to exploit these global developments by developing an export policy which would support current value-added exporters (Boeing, BASF, ADM, CAT, GE, 3M) and others positioned to best mine the new wealth being created in emerging markets. An excellent starting point would be to streamline export controls imposed by the State Department and other agencies to protect technologies and components critical to national security.

Because of bureaucratic overlap and poorly written guidelines, many companies find it difficult to obtain export licenses and rightly argue that the US is crippling its own export industry.

China and Emerging Market Investing: Real Basis

We all know that Chin's exports have nosedived but spending on factories and properties surged 30.5 percent in the first four months from a year earlier. Money supply grew by a record and new loans have exceeded a 5 trillion yuan government target for the whole year.

As the author notes, China’s credit boom is hurting banks’ profit margins and is starting to add more bad loans to balance sheets. But this is where East meets West, with both hoping banks can earn their way out of this mess

The government is betting that the boost to the economy from increased lending will offset the cost of bad loans in the future. But, like in the US, if the recovery stumbles and/or banks prove incapable of earning and retaining sufficient capital to offset growing loan losses, we are back to square one.

As different as we are, we share the same foibles.