Photo: NASA. Source: Flikr.
That’s a line from one of Shakespeare’s plays, when a character tells another that it’s their own responsibility for what’s happening in the world. That’s not a bad perspective to have.
It’s easy to blame others. Some say the world economy is unbalanced because China exports too much. But China exports so much because we in the US buy their stuff. And we need the Chinese to finance our deficit and buy Treasury bonds because we don’t have enough savings domestically. Should we blame the world’s second largest economy for the imbalances we have in the largest economy?
In Europe, is their currency in trouble because Greece and Italy can’t balance their books? Or is the issue with the countries with crummy banks, where the loans are politically controlled and they keep kicking cans down the road?
The problems aren’t with the upstarts, but with the leaders. In Europe a statist banking system treats debt like a “gentleman’s agreement” rather than a business proposition. The solution is for Greece and Italy to reschedule their debt and have the other countries adjust. Either that, or sell off the Parthenon and Coliseum. But the other worthies in the EU don’t want to hear about that.
In the US, we have a tax code that penalizes investment and subsidizes consumption. Should we be surprised that we buy too much and save too little? If China’s surplus didn’t exist, we would have to invent it.
Are these problems in our stars or in us? Shakespeare sure got that right.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”