TV clips can be so fast that its a miracle you get any complete thoughts out sometimes. My point that was not finished on Fast Money tonight was that western world over-consumption and then retrenchment, has triggered the global recession. And this new reduced level of consumption is likely to continue for several years.
To think that emerging markets can somehow pick up the slack in world demand because they have a few billion people walking about is to miss the point about consumption. It is not just about population; it is about marginal propensity to consume per unit (human). US consumers have until recently been consuming 10X more goods per person than those in Chindia. This means that 300 million American consumers at full tilt were the equivalent consumption of about 3 billion people from China and India. And then we have the world's other great over-consumers, the Europeans and Brits, also batting down the hatches. Considering pretty much all western consumers have now retrenched to build savings, world GDP will feel this loss acutely and for some time.
So after costs have been cut and estimates have been slashed, business will find its way back to profit (at least the ones that can survive) but it will be based on considerably lower revenue in most cases. This is the new normal. And given that the US is still,on average, relatively more wealthy than most places in the world and given that America has considerable natural geographical advantage and given that they hit the wall first in this crisis and have responded bigger and faster than most, it is likely that Amercia will survive bettter and recover faster than much of the world.
And in case you missed it (as another example) here is what is happening in Spain right now. Spain is the country that was most heavily levered to the UK housing bubble. Brits were buying vacation properties in Spain in the boom, levered off their over-valued properties in the UK. Spain was to the UK what Florida was to America. Now they too are paying the price.
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