Positive Implications of the Budget Sequestration (Sequester): Breathing Life to a Declining American Economy Contrary to some economic and financial analysts taking a negative view of the lingering impasse in the current standoff between the US Democrat President Obama and the Republican legislators in the US Congress debating agreed cuts in the US Government’s 2014 Budget, the enraging debate and the consequence of the ultimate outcome of such a debate would bode well for the US economy and the potential regain of trust in the US currency, i.e. the World’s de facto sole “Reserve Currency.” Granted, to begin with, that the US represents the ultimate in the Capitalists ethos of “Free Market Economy;” that the US, and ever its creation as a sovereign state placed the greatest emphasis on the sanctity of free enterprise and individual initiatives to a fault compared with the mixed economies (i.e. collaboration of private initiative and state government a la Keynesian), the following analysis very much predicates on these premises setting the US Economic System and judging its performance apart from the standard premises pertaining to West European mixed economies and the socialist economies of the Russian Federation and the Republic of China as the two major pillars in the higher growth economies of the economic grouping known as the “BRICK.” America’s economic ethos stem from the early formation of the United States of America founded by the spirit of “Enterprise” and individual’s “Entrepreneurial Spirit” dictated by both the vast possibilities in new discovered land; the diversity ant competitive interests of the founding Pilgrims and openers of the “New Frontiers.” Government & government intervention and controls, including expanding regulations and social welfare entitlements, are perceived in in the American business and capitalist culture as stifling impediments and run contrary to the Enterprising Entrepreneurial Spirit ethos that are well embedded in the ethos of that culture. They are perceived as a stick in the wheel of the spurring of economic growth and general economic prosperity. Conservative American Capitalists, foremost the polity of the Republican Party and US leading capitalist tycoons and corporate leaderships, staunchly adhere to the inherent beliefs of the “Survival of the Fittest.” Figuring that in the world of abundance and unlimited possibilities, slow growth businesses can let die and vanish as in a free market economy of unleashed creativities, new growth and higher value businesses ventures and economic sectors and sub-sectors come to existence to absorb and deploy more efficiently otherwise less competitively deployed human and physical resources. In a lecture by William H. Donaldson of the American financial services group of Donaldson, Lufkin & Jenrette (“DLJ”) that I attended at the Boston CFA Club in Boston in 1998, Mr. Donaldson highlighted the secret of “American” economic success is lying in the exceptional resilience the American economy enjoys in comparison with other industrialized economies in the redeployment of human resources (i.e. reference to the unhampered facility of laying off and redeployment of working manpower in more productive higher growth and higher value new economic sectors and economic sub-sectors). As I recall, and to be honest in relating the gist of Mr. Donaldson’s lecture, Mr. Donaldson figured that the abundance, size and ease of mobilization of “Venture Capital” feeding into new enterprising business and economic ventures in the US is unmatched anywhere in the rest of the industrialized countries of the world. Interestingly, rather paradoxically, and here where the irony of it all lies, it is the same conservative adherents of unbridled and unfettered capitalism, mostly right wing Republicans, are the most hawkish that while intent on preserving wealth they support military layouts and adventures that tend to squander that wealth. In matter of fact, as currently witnessed in the US (Read Noble Laureate Columbia University Professor Joseph Stiglitz book “The Price of Inequality” that I attended his lecture on the subject last May) and in the world at large, the accentuation of the concentration and disparity of wealth, the ever exponentially expanding gulf in the levels of income and wealth between the HAVEs and Have NOTs, it is the greater majority of the American population who are footing the bill of the Right Wing adventurists as the Capitalists continue to reap the benefits in all seasons. The ongoing battle between the Republican legislators in the US Congress and the US Government over the US Budget should be assuring for the control of Government spending; the inflation and the bolstering of the US Currency, the US Dollar. The US Dollar sprang anew to life as the uncontested “De Facto” “International Reserve Currency” by many important perennial factors, including: · The absence of a competing international currency conforming to a relatively homogeneous economic culture of the size and importance of the US Dollar in view of the recent debacle of the Euro and the not easily surmountable economic and fiscal challenges facing the EU’s member countries. · The relatively “Close” economies of the emerging economic superpowers of “India” and “China” beside the absence of well- developed Legal, regulatory and institutional frameworks and settings that are inviting to foreign and international investors. · The apparent lack of desire by the emerging new economic superpowers to catapult their national currencies to play the role of an “International Reserve Currencies” that carry serious legal, economic and instructional implications on their relatively closely protected and controlled local economies. · The relative size and dominance of the US Economy in terms of the GNP; the industrial base; scientific research and technological advances with the great number of leading learning institutions situated in the US. · The US enjoys very well developed and very well structured financial and capital markets with a huge diversity and variety of unmatched investment assets. · The size of the American public debt owed to the rest of the world rules against easy exit of creditors investors in US Treasury Instruments which renders the situation true of the old conventional wisdom/adage that: “Debtors and Creditors transform into “Partners” as debt levels grow where the sustenance of a financial enterprise entwines the fates of the debtor and the creditor into ONE.” Rajai Masri Wednesday October 9, 2013
Posted on: Wed, 09 Oct 2013 15:19:42 +0000
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