“Not In Our Stars”

“The fault lies not in our stars, but in ourselves.”

Shakespeare wrote this some 400 years ago, where one of his characters proposes taking responsibility for his place in the world. That’s not bad advice today.

It’s easy to blame others. Some say the world economy is unbalanced because China exports too much. But China exports so much because the US doesn’t save enough. We need the Chinese to buy our bonds because we don’t have enough savings domestically. Should we blame the world’s third largest economy for the imbalances, or the largest?

Similarly in Europe, can their currency really be threatened by its 7th largest economy—Greece? Or is the problem with the large countries whose banks have loaned it 2/3rds of its debt without bothering to check on the finances?

The problems aren’t with the upstart, but with the leader. In Europe a statist banking system treats debt like a “gentleman’s agreement” rather than a business proposition. The solution for Greece is to reschedule the debt and have the IMF provide interim financing as the government adjusts to a balanced budget. Either that or sell off the Parthenon. But the “gentlemen” don’t want to hear about that.

In the US, we have a tax code that penalizes investment and subsidizes consumption. Is it any wonder we buy too much and save too little? If China’s surplus didn’t exist, we would have to invent it.

Not in our stars? The Bard sure got that right.

Douglas R. Tengdin, CFA
Chief Investment Officer
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