Enough with the bad news.
Let’s turn to the US. (No, this is not the introduction to a stand-up comedy routine.)
US Trust publishes a regular Investment Advisory Overview, and in the current issue (August 2011), after the obligatory macroeconomic analysis, they have Revisiting What’s Right With America, and it doesn’t hurt to look at what they have to say.
Yes, the S&P downgrade of Treasuries was bad news, but it was explicitly assignable to politics, not economics. It reflected weakened “effectiveness, stability, and predictability” of federal government policy-making, as S&P said.
Here’s the good news.
- The US is still the largest and most productive economy in the world.
We have 4.6% of the world’s population but 25%of global GDP and as much ($14.6-trillion) as the next three economies combined (Japan, China, and Germany).
- We’re still a leader in manufacturing.
Yep, believe it or not. Second only to China, which took the top spot from us only three years ago in 2008. Here’s our rank in global manufacturing (UN dsta, 2009 latest available): 2009: 18.4% of global output, 1990: 23%, 1980: 20%. So we’ve basically stayed at a 20% share of world manufacturing over the past 30 years, and for that entire period have exceeded the output of Japan and Germany combined. Moreover, China’s manufacturing “output” requires a big fat bold red footnote: Their numbers include output for mining and utilities as well as pure manufacturing, and have to be tremendously overstated, although to an unknowable degree.
- We’re the largest exporter of goods and services in the world.
The bad news is that the US has posted a trade deficit in goods every year since 1975. But when you combine goods and services, we export more in one month ($175-billion in May 2011) than what over 170 countries export in a full year.
- The US is the top destination for foreign direct investment (FDI).
From 2000 to 2010, FDI into the US totaled roughly $2-trillion (source: United Nations Conference on Trade and Development)
while the total for China during the same time span was $792-billion (40% of our total). Globally, our total share of FDI received was 16%, China’s 6%.Why our relative pre-eminence? A highly educated workforce (all things are relative, folks); a clear and transparent rule of law (let’s hear it for our profession), and an enormous domestic market.
- We’re home to many of the top global brands in the world.
Nearly half of the 100 most valuable global brands are American, including nine of the top 10 (source: BrandZ). This gives us international recognition.
- We’re still the world’s leader in technology.
And we’re the most innovative economy in the world. In terms of spending on IT hardware, software, and services, we’re the largest market in the world (Economic Intelligence Unit estimates) and of course totemic firms such as Google, Facebook, and Twitter are US born and bred.
- The top universities in the world are here.
In terms of higher education–setting aside for a moment the parlous state of public schooling–many of the leading universities in the world are here. According to the Institute of International Education, in 2010 690,923 foreign students were attending US universities, making us the top destination for international scholars, and teh Quacquarelli Symonds World Rankings locates 6 of the top 10 and 31 of the top 100 universities in the world in the US.
- The dollar is still the world’s reserve currency.
61% of global central bank reserves in the first quarter of 2011 were in US$ (IMF). The euro is second, at 27.8%. And the dollar remained strong, relatively speaking, throughout the heart of the financial crisis. Between the March 2008 collapse of Bear Stearns and the March 2009 market lows, the US dollar was the fourth best-performing currency in the world, trailing on ly the Argentine peso, Chinese renminbi, and Japanese yen.
- The Pentagon is a leading source of technological innovation.
Even if private firms in the US back off R&D, the military is extremely unlikely to follow suit. Many an argument has and will focus on the appropriate level of our overall military spending, but the reality is that it’s unlikely to substantially diminish any time soon, and advanced R&D remains at its core.
- We’re fourth in global competitiveness.
According to the World Economic Forum, we’ve been at or next to the top spot in world competitiveness almost every year since the WEF first released its annual report on this score in 2001. And while we fell two nothces in the 2010–2011 rankings thanks to macroeconomic weakness, we continue to stack up extremely well against our highly conspicuous competitors. In the same report, China ranked #27, India #51, and Brazil #58.
And to wrap up this particular column, here’s a stark contrast between US banks and those of leading countries in the Eurozone:
This shows tangible assets as a multiple of tangible common equity for domestic banks (Source: IMF, data as of August 2011). In other words, it shows leverage for the banking system, by country.
At the top, with a ratio of 32:1 is Germany, followed by Belgium (30:1), France (26:1), the Eurozone as a whole (26:1), the UK (24:1), Italy (18:1), and in last place the US at 13:1.
Does Germany’s 32:1 ratio ring a bell? It should, and it did for me. Lehman Brothers’ leverage shortly before it collapsed was 31:1. Granted, Lehman was funding its cash needs in the overnight market and presumably the German banks are not. Nevertheless, we’re just sayin’….
So all may not be so terrible here in the good old USA. Of course, we shall all see, shan’t we?
