The global media don’t help us understand the relative importance of things very much.
In a recent movie, a food critic asks the waiter at a much-hyped restaurant for a little perspective. “You supply the food, and I’ll supply the perspective,” he notes, dryly. It seems like that with many of the biggest news stories these days. Egypt is unquestionably important, but how many people know that this country of 85 million people only has an economy a little bigger than New Hampshire?
It’s the same way with the US economy. State and Local government layoffs are an important part of the employment picture, but did you know that they’ve only fallen by some 200 thousand in the last year? In an economy with 150 million workers, that’s hardly even a rounding error.
A lack of perspective seems to infect everything. China is frequently touted as having 1.3 billion consumers, when about 90% of the population still lives in a subsistence economy, mostly eating and wearing what they can produce with their own labor. Similarly, it is frequently noted that if the past 10 years’ growth rates are extrapolated, China’s economy will be larger than the US economy in about 15 years. But at that time per capita income in the US will still be five times that of China, even assuming growth trends continue, which is itself questionable.
It’s a fact of life: big numbers sell stories, and putting them into context takes work. It doesn’t help that a lot of folks are just innumerate, struggling over basic mathematical relationships. But the fact remains—a fact without a context is more likely to misinform than to inform.
Douglas R. Tengdin, CFA
Chief Investment Officer
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