tag:blogger.com,1999:blog-9004054568791616577.post2412439869697393284..comments2024-03-15T15:43:44.292+01:00Comments on Random Comments: Contra-Contrarian; is the US Doomed, or about to BoomDaniel Robertshttp://www.blogger.com/profile/01018311656329333870noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-9004054568791616577.post-28913465622890107442017-08-20T02:11:29.703+02:002017-08-20T02:11:29.703+02:00The US economy's primary engine is consumption...The US economy's primary engine is consumption by consumers. Growth in the consumer portion of GDP clearly illustrates where the boom has been anchored. So the most likely cause of a 'bust' cycle could come from a rapid drop in consumer confidence. That, of course, could be caused by all sorts of things but, fundamentally, confidence rests on jobs, social stability, and rising expectations. <br /><br />So, your ponderings on the real state of jobs is very appropriate. If there are no jobs then consumer confidence will fall, bust will follow. I think other consumer-centered issues (such as social stability) are a bigger short-term threat to consumer confidence though. <br /><br />At the million-foot level, society is not a market. The American model of treating it as such (especially in a consumer-centric economy) means collapse will come. <br /><br />Looking at the other elements of GDP (change in GDP being a traditional measure of boom/bust), Government spending and systemic Investment have barely changed through the last boom cycle so you'd expect any bust-risk there would be a sharp decrease in either. For example, one dropping from Administration decisions not to spend and the other from a drop in business confidence. However, both are easily catered for if you have sufficient system-wide credit. That's how the GFC in 2008 was addressed. System credit hinges on the enthusiasm of others to lend to you - and that seems astonishingly buoyant. <br /><br />Export and Import change have also been reasonable contributors to the boom cycle of recent times. <br /><br />US exports are dominated by sales of planes, vehicles, pharmaceuticals, and petroleum products which, you'd think, will retain solid demand - unless the American government steadily annoyed the governments of buyer-nations... So, a rapid decline in exports would certainly be a trigger for loss of jobs and business/consumer confidence. That would rapidly devolve into bust. Rising exports could, conversely, trigger more boom. But it hinges on the US retaining willing customers. There is real risk with that assumption right now.<br /><br />And, finally, imports. Imports have risen sharply through the boom which is, of course, what you'd expect. Those happy consumers will spend some of their confidence on imports. So any deterioration in imports actually raises risk in some alarming places. Most notably, those exact same consumers - unless jobs arrive as domestic capacity replaces the imports. The timing for those sorts of scenarios is, of course, never going to work. Plus, the US's top imports mirror its exports. So slashing imports through trade-wars or increasing prices via tariffs is also likely to severely impact the US export engine. If you won't buy my cars then I'm not buying yours. It's pretty basic. <br /><br />And it's also going to annoy an awful lot of consumers who won't have their choice of cars, clothes, phones, and myriad other things. Their confidence will be damaged on many fronts, bust will follow. <br /><br />So, jobs matter. But so, among many things, does the balance of trade, the confidence of consumers (measured across many aspects), and the ready availability of credit to keep things running smoothly. Tamper with any one of those and the risk of trouble soars. But finessed right, the boom could continue for quite a while. <br /><br />So, perhaps the best measures of whether boom or bust occurs next relate to what the people who guide consumer confidence, who manage trade positions, and who provide the confidence for creditors actually do next. <br /><br />And based on the track-record of the US political system and the US Government in recent times, buying a few Chinese-made hard-hats might be a good investment...Andrew NZhttps://www.blogger.com/profile/00961126056513136337noreply@blogger.com