During the last fifty years or so, there have been at least three periods when the world's crystal ball gazers ( including some of the Americans themselves ) have been writing about the decline about the United States.This time after visiting New York after almost two years since my last visit in October 2011, I am even more convinced that these naysayers are wrong. United States is going to have another golden period similar to the fifties and sixties, driven by its shale oil and gas and its new manufacturing techniques.
The first time every one was talking about America's decline was in the early seventies when oil prices shot up from about three dollars to twelve dollars.This combined with President Jimmy Carter's fiasco in Tehran convinced everyone that it was the beginning of the end of America not just as economic power but as a super power. That was not the case. It restructured and bounced back.
Then in the late eighties the world started speculating that Japan was going to take over as the world largest economy. The Japanese banks and companies market values shot through the roof . The far sighted Americans insisted their children study Japanese. The world oohed and aah-ed about Japanese manufacturing technique and its just in time logistics. Looking back you would think how could the world have believed that this tiny nation without any natural resources, which had lost a war a few decades earlier could be the cock of the hill, but it was the general feeling. However that feel good feeling for the Japanese lasted about a decade.
The new century saw the emergence of another burgeoning world economic power,China. This was a more plausible candidate considering a couple of century ago they were the world's largest economy. While it is too early too start speculating that it too will follow the Japanese path, what is interesting to see that towards the end of the first decade of the new century, the Chinese state owned companies were among the world's largest . Now five years later, nine out of the top ten world companies are again American. Among the fifty largest companies in the world more than fifty percent are American.As has been written often enough the Chinese , in spite of its large population will have the same greying population. The leaders have been aware of this for some time , but appear to be unwilling to change their one child population. If this continues they will face the same issues as the Japanese where there will be a relatively smaller percentage of the population supporting the older generation.The difference is the Japanese will be wealthier on a individual basis than the Chinese even if the Chinese economies overtakes the United States.
Over the last five years the dynamics of the American economy seem to be undergoing a once in a lifetime change. After almost sixty years it has become energy independent. While New York might not be truly reflective of mainstream America, during my recent visit to New York it seemed that more than fifty percent of the vehicles on the road were either SUV's, vans or large limousines. Apparently some of the trucking companies have started switching to gas to fuel their fleets. I would assume that it is a matter of time before the car manufacturers start churning out cars running on natural gas as well.
At the risk of repeating what I had said two years ago, the cheap energy is pulling back not just some of the energy intensive industries such as fertilizers, steel, but according to the Boston Consulting Group, other basic industries such as toys,automobile parts, bags and utensils. The increase in Chinese labor cost is pushing the re-shoring of the manufacturing back to America.
In addition with the economic situation stabilizing in Mexico, it together with the United States and Canada will be the largest free trade zone in the world. With Mexico providing the cheap labor,Canada and the US cheap energy, its market for the products will once again provide the economic engine for the rest of the world.The latest immigration statistics from Mexico shows that the immigration from and to the United States is balanced.
The above together with its academic infrastructure and its impending immigration policies welcoming students with background in Science, Technology, Engineering, and Mathematics, will add to the further inflows of the best and the brightest from around the world.
Finally the catalyst to the growth is the availability of capital like no other in the world. The capital markets in the United States has deep pockets catering to different types of risks, funding social ventures.While the Wikipedia still ranks London as the top financial center, the Huffington Post quotes a study commissioned by the City of London and carried out by A/Yen Group,which ranks New York as number one.In my personal opinion, it will be some time before London regains its top spot,if ever.
In the meantime while the Republicans and the Democrats continue their one up-man ship, guised under political ideology, it is still the world's premier safe haven.United States Treasury securities continue to be the largest holdings of almost all the reserves of sovereign nations.
With this capital flow combined with the change in reduction of oil imports and manufactured goods,together with increased exports, and inflow of money finding a safe home, I would be betting on the American economy and the dollar in the long term.
New York Random Observations - September 2013
This time again I spent about two weeks in New York, of which I spent almost five days in bed due to an infection. However during the remaining period I walked the streets, read the newspapers, and generally observed New York, New York !! While I have always been a huge fan of London, I am in the process of switching my loyalties to New York.Perhaps this subliminally switching is happening because my daughter lives there and I have not been to London for a few years, but I think it is more than that.
New York is booming . The streets, the restaurants, the stores, the museums, the supermarkets were all as crowded as last time.Tickets to the Broadway shows were almost impossible to get unless you had booked weeks in advance. The Apple store was as full as last time. I do not think there is any city in the world has as many eating places or the variety of cuisines as New York. Hong Kong might match in restaurants per capita but not in terms of variety. As an example one evening some friends decided to get some take away from a Pakistani restaurant. Since my friend was raving about the food, I decided to go along. Putting my hand on my heart, I could say that if you moved that entire place, including the clientele, to a trucking stop in Punjab, India, it would fit right in. You would not have to make any change. The only thing which would stand out would be one of the Hispanic "chef", but even he could be mistaken for a north east Indian. In my personal opinion London falls behind.
On the real estate front having lagged behind other international cities such as London, Hong Kong, Singapore etc, on a relative basis , New York ( particularly Manhattan, and neighboring Brooklyn) is making up for lost time. Apartments put up for sale , particularly condominiums receive bids substantially more the asking price. Bidders are ready to pay cash rather than it be subject to availability of mortgage for fear of getting gazumped.In some parts of the city , prices appear to have gone up almost twenty-thirty percent in the last twelve to eighteen months. Put your money in New York !!
The above is based on my observations as a lay man without any serious research expect for reading newspapers and an occasional stab at Wikipedia. I last visited New York almost two years ago in October 2011.After my visits I wrote two blogs based on my observations.( See (1) http://avib-randomthoughts.blogspot.in/2011/12/rumors-about-slow-death-of-united.html (2) http://avib-randomthoughts.blogspot.in/2011/11/new-york-random-observations.html )
The first time every one was talking about America's decline was in the early seventies when oil prices shot up from about three dollars to twelve dollars.This combined with President Jimmy Carter's fiasco in Tehran convinced everyone that it was the beginning of the end of America not just as economic power but as a super power. That was not the case. It restructured and bounced back.
Then in the late eighties the world started speculating that Japan was going to take over as the world largest economy. The Japanese banks and companies market values shot through the roof . The far sighted Americans insisted their children study Japanese. The world oohed and aah-ed about Japanese manufacturing technique and its just in time logistics. Looking back you would think how could the world have believed that this tiny nation without any natural resources, which had lost a war a few decades earlier could be the cock of the hill, but it was the general feeling. However that feel good feeling for the Japanese lasted about a decade.
The new century saw the emergence of another burgeoning world economic power,China. This was a more plausible candidate considering a couple of century ago they were the world's largest economy. While it is too early too start speculating that it too will follow the Japanese path, what is interesting to see that towards the end of the first decade of the new century, the Chinese state owned companies were among the world's largest . Now five years later, nine out of the top ten world companies are again American. Among the fifty largest companies in the world more than fifty percent are American.As has been written often enough the Chinese , in spite of its large population will have the same greying population. The leaders have been aware of this for some time , but appear to be unwilling to change their one child population. If this continues they will face the same issues as the Japanese where there will be a relatively smaller percentage of the population supporting the older generation.The difference is the Japanese will be wealthier on a individual basis than the Chinese even if the Chinese economies overtakes the United States.
Over the last five years the dynamics of the American economy seem to be undergoing a once in a lifetime change. After almost sixty years it has become energy independent. While New York might not be truly reflective of mainstream America, during my recent visit to New York it seemed that more than fifty percent of the vehicles on the road were either SUV's, vans or large limousines. Apparently some of the trucking companies have started switching to gas to fuel their fleets. I would assume that it is a matter of time before the car manufacturers start churning out cars running on natural gas as well.
At the risk of repeating what I had said two years ago, the cheap energy is pulling back not just some of the energy intensive industries such as fertilizers, steel, but according to the Boston Consulting Group, other basic industries such as toys,automobile parts, bags and utensils. The increase in Chinese labor cost is pushing the re-shoring of the manufacturing back to America.
In addition with the economic situation stabilizing in Mexico, it together with the United States and Canada will be the largest free trade zone in the world. With Mexico providing the cheap labor,Canada and the US cheap energy, its market for the products will once again provide the economic engine for the rest of the world.The latest immigration statistics from Mexico shows that the immigration from and to the United States is balanced.
The above together with its academic infrastructure and its impending immigration policies welcoming students with background in Science, Technology, Engineering, and Mathematics, will add to the further inflows of the best and the brightest from around the world.
Finally the catalyst to the growth is the availability of capital like no other in the world. The capital markets in the United States has deep pockets catering to different types of risks, funding social ventures.While the Wikipedia still ranks London as the top financial center, the Huffington Post quotes a study commissioned by the City of London and carried out by A/Yen Group,which ranks New York as number one.In my personal opinion, it will be some time before London regains its top spot,if ever.
In the meantime while the Republicans and the Democrats continue their one up-man ship, guised under political ideology, it is still the world's premier safe haven.United States Treasury securities continue to be the largest holdings of almost all the reserves of sovereign nations.
With this capital flow combined with the change in reduction of oil imports and manufactured goods,together with increased exports, and inflow of money finding a safe home, I would be betting on the American economy and the dollar in the long term.
New York Random Observations - September 2013
This time again I spent about two weeks in New York, of which I spent almost five days in bed due to an infection. However during the remaining period I walked the streets, read the newspapers, and generally observed New York, New York !! While I have always been a huge fan of London, I am in the process of switching my loyalties to New York.Perhaps this subliminally switching is happening because my daughter lives there and I have not been to London for a few years, but I think it is more than that.
New York is booming . The streets, the restaurants, the stores, the museums, the supermarkets were all as crowded as last time.Tickets to the Broadway shows were almost impossible to get unless you had booked weeks in advance. The Apple store was as full as last time. I do not think there is any city in the world has as many eating places or the variety of cuisines as New York. Hong Kong might match in restaurants per capita but not in terms of variety. As an example one evening some friends decided to get some take away from a Pakistani restaurant. Since my friend was raving about the food, I decided to go along. Putting my hand on my heart, I could say that if you moved that entire place, including the clientele, to a trucking stop in Punjab, India, it would fit right in. You would not have to make any change. The only thing which would stand out would be one of the Hispanic "chef", but even he could be mistaken for a north east Indian. In my personal opinion London falls behind.
On the real estate front having lagged behind other international cities such as London, Hong Kong, Singapore etc, on a relative basis , New York ( particularly Manhattan, and neighboring Brooklyn) is making up for lost time. Apartments put up for sale , particularly condominiums receive bids substantially more the asking price. Bidders are ready to pay cash rather than it be subject to availability of mortgage for fear of getting gazumped.In some parts of the city , prices appear to have gone up almost twenty-thirty percent in the last twelve to eighteen months. Put your money in New York !!
The above is based on my observations as a lay man without any serious research expect for reading newspapers and an occasional stab at Wikipedia. I last visited New York almost two years ago in October 2011.After my visits I wrote two blogs based on my observations.( See (1) http://avib-randomthoughts.blogspot.in/2011/12/rumors-about-slow-death-of-united.html (2) http://avib-randomthoughts.blogspot.in/2011/11/new-york-random-observations.html )
