Its very interesting, sometimes with democratic societies, an external 'exogenous' negative factor has to come into play to push change.
In australia we had it during the early 1990's with the 'recession australia had to have'. It was painful at the time, but i believe over the longer term, it was positive for australia.
Could this be the recession greece had to have????
So, what is the so called 'exogenous' negative factor?
I know you wont agree with me here, as you don't yet grasp the commodities boom, nor even own commodity stocks and think it's a bubble. However I reckon the negative factor is the same factor effecting most western economies. Asia and specifically China has flogged off us a lot of our manufacturing wealth, as they work harder, smarter, and for less money. It's not coming back either.
Countries like Greece, who aren't particularly well endowed with commodity wealth like us, and have lots of inefficiencies in their economy, for example 12% of the workforce as subsidised farmers and a low retirement age etc, are in for a long downgrade in living standard.
What exactly is Greece going to do to sustain their services sector that's even bigger than ours? What do they manufacture? What do they export? They are in strife and I don't know how they will get out of it? Yet they still have services as 76% of their economy, thats even more than us.
Commodities have massive barriers to entry. You either have commodity wealth, or you don't. We have it, so we don't need manufacturing. Look at the western countries who have escaped the carnage, Australia, Canada, Norway. Commodity wealth and low populations. We can build houses over all the old industrial areas, turn our cities into service centres just serving the residents and producing nothing, and we can let in 300,000 immigrants a year, and all we need to do is keep increasing our coal and iron ore and gas exports.
What are the barriers to entry of manufacturing? You can do it anywhere, and it's who will do it the smartest and cheapest and with the least environmental restrictions. That's not Greece, nor us. Even Japan has trouble competing anymore.
What are the barriers to entry of financial services? Stuffed if I know. I reckon you could do it anywhere with a computer. Woop woop, or Bombay or Shanghai. Why is London the worlds financial capital? The worlds financial services centre could move anywhere, and it will, away from London anyway.
I reckon western countries without commodity wealth are in a bit of strife. The ones who are still good at making stuff will be fine. For example Germany. They make quality stuff. Germany exports more stuff the the US, with a way lower population. Japan still makes quality stuff. The US might be OK, They have commodity wealth, and are the worlds food basket, and they have quality companies such as boeing, john deere, caterpillar, Hewlett-packard, IBM, Intel, Microsoft, Macdonalds, coke, pfizer, and their aerospace and defence industries. It will take China a while to take market share of companies like these, but it will happen eventually.
As for Australia, we can't compete anymore in manufacturing, and it don't matter. It will matter when we run out of coal and iron ore and gas, and all our farmland is dug up, but I will be dead by then, so I'm not concerned, and neither is anyone else or so it seems to me. So until we run out of commodities, we can still support our massive services sector which gives us a great standard of living and we just export our dirt and rocks. Same as Canada and Norway.
China have massive commodity wealth too. Sometimes I think they are just using ours now and saving theirs for later. They are smart and thrifty, and we are dumb and greedy.
While we keep our population low, we will have wealth and the worlds highest standard of living. The US digs up 3 times as much coal as we do but they export hardly any, as with 15 times the population they burn it all themselves. We don't particularly have massive amounts of commodities, just a low population. Same for food exports. France grows a lot more wheat then we do but with 65 million people they eat most of it themselves.
I think whats happening in the world is a major turning point, not just a temporary blip or recession. It's Asia taking over from the spoilt lazy west.
See ya's.
