Time to Rebalance
The Prescription. The next chapter in the global narrative may be called Rebalancing Consumption, Entitlement and Leverage, From West to East. Watch as the protagonists change places in the next 20 years: Eastern consumers will be ascending, while we need to buy less, eat less and study more to stay in the game. And it will be Western societies that will be subject to more government, especially to the as-yet un-proven ability of our public institutions to address excessive structural debt and entitlements. Think about the irony here: Post-Maoist China has no social entitlements and needs to implement some to draw out domestic consumption, while the United States in on a path toward more intervention in markets and inevitably curtailing entitlements. It should be interesting to see where the matrix of leverage, consumption, regulation and entitlement ultimately stabilizes in the East and West. Will the penitence for our generationâs borrowing and spending be our kidsâ taxes and frugality?
Government Comes to a Market Near You
What ever the outcome, itâs time for us investors to gear up for a protracted period of markets taking a back seat to politics as the main influence in our lives. Political risk is everywhere, and sound investment positioning is no match for the heavy, unpredictable hand of government. The future is Americaâs reÂshuffling of car creditor priorities; Australiaâs confiscatory 40% mining tax; Germanyâs criminalization of short selling; and countless interventions to come. If youâre a rich person or industry, government wants you. At least itâs still legal to own gold.
