USA’S LEADERSHIP HAD EVAPORATED, WHY OUGHT STOCK MARKETS FOLLOW?

Erle Frayne D. Argonza


Good day fellow global citizens!

It’s late afternoon here in the Philippines, daylight is still around though quite faded a bit. The time of the day seems to be delivering the message that there is still some light in the global economy, and that is a feel-good ambience.

Light there may be for the global economy, but that light no longer comes from the Western economies. Definitely no longer from the once mighty ‘economic superpower’ USA that had lost the leadership leverage this decade when it suffered two (2) successive recessions within a short span.

I’ve already treated the matter of declining Western techno-economic power and hegemony over the rest of the globe in many articles. There is hardly any serious, highly-informed analyst in the world today who doesn’t share the same view, a view that Western (Caucasian) social forecasters do likewise hold even as they forewarned the West of the catastrophes that will confront them.

Stock markets across the globe, however, just couldn’t adjust to the new reality soon enough. They still behave like old hush puppies that look up to Wall Street for precedence in setting the trends of local bourses. That renders the local bourses as laughing stock dinosaurs that need to retool quickly, and the quickest that such retooling will be translated into practice, the better will it be for their respective stock trades and financial-monetary markets.

To reminisce a bit, America was the unchallenged global leader after World War II as it contributed 40% to the Gross World Product or GWP. Its European & Japan partners contributed another 20% to GWP, so that empowered the USA & partners’ (OECD) 60% contribution to GWP to exercise hegemony in all regions of the planet.

Today, the economic landscape had entirely changed. The USA’s $13+ Trillion GDP is down 22% of world income, while the entire EU’s $13+ Trillion is another 22%. EU + USA/Canada + Japan put together couldn’t even amount to 50% of Gross World Product, so the old partners may just have to metamorphose out of their old identities and retool quickly. They no longer hold the planet’s collective purse and should desist from bullying other nations with their economic clout that is pathetically a non-clout today.

Herd behavior, of course, is the least that we can make of the behavior of plummeting bourses. “Follow the leader” mindset of cave dwellers is still in, a mindset that is a messy sticking point for retooling purposes.

Why should local bourses refuse to see the new reality and dis-engage from the antiquated herd instinct? After all, stock markets are the exclusive games of the big corporate boys and consummate traders who have been addicted to the casino economy of antiquity. They hardly matter for the real economy sectors, such as those of Asia’s that have effectively built firewalls between the real economy and casino stock markets.

If to serve a bit of relevance to domestic growth at all, local bourses ought to look at the health of their own domestic physical economies and financial-monetary wellness.

Take a look at East Asia. The region has been driving the global economy beyond doubt, its average investments and savings rates are high, gross international reserves are equally high, and the physical economy as a whole has shown the way to high value-added production. Stock markets should better follow the lead of the healthy conditions of their domestic economies rather than look up to an offshore global leader that is now a chimera.

Or, if they can’t resist looking at offshore patterns, then they should look at their very own regional backyards for such models. Regional integration has been the strategy of the day, so why get fixated to a dinosaur fiction (USA as leader) when there are regional economic patterns that can show the lead.

USA’s lead will never ever return, this is a foregone conclusion. And Europe ought to rethink its integration efforts, as the Eurozone is now hotly burning, so Europe better not behave like a global hero that can fill up the vacuum left by the USA. A continent that is perennially flat on its back and is now burning in financial-monetary flames can never fill up such a vacuum.

As already articulated by me in previous articles, the Western markets will decline progressively across time. Consumption from 2007 through 2015 will decline by as much as 30% of their pre-recession levels. In contrast, Asia’s consumption will more than double during the same period, thus rendering Asia the unquestioned driver of the global economy in terms of (a) technological cutting edge, (b) production levels of the real economy, and (c) consumption levels.

In closing, just like the pattern for mega-cities where no one mega-city can be considered a global center today, so is it with national economies. Economic leadership has already been de-centered, global hegemony had been erased, and there can only be inter-dependence between markets as the most viable option. That interdependence should find translations in the bourses and currency markets.

[Philippines, 13 August 2010]


[See: IKONOKLAST: http://erleargonza.blogspot.com,
UNLADTAU: http://unladtau.wordpress.com,
COSMICBUHAY: http://cosmicbuhay.blogspot.com,
BRIGHTWORLD: http://erlefraynebrightworld.wordpress.com, ARTBLOG: http://erleargonza.wordpress.com,
ARGONZAPOEM: http://argonzapoem.blogspot.com]