At Arm's Length - A Daily Market Commentary - Before the Bell Rings Financial Commentary about Money, Investing, and How It Affects the Average Investor

At Arm's Length: 04.26.04
The question continues to beg to be asked: is the deficit bad for the economy? If we think that it is, then there needs to be clearer understanding of how a deficit interacts with growth.

Contrary to what you want to believe, the export of jobs is not a factor in economic stability. Neither is the import of goods, which in some folks minds equates to the use of labor overseas to create goods that we want. So which is it that we fear the most: the real loss of jobs, suddenly and more devastatingly relevant to white collar workers this time around, sharing the pain the former owners of manufacturing jobs or our continued need to spend.

A good many people have suggested that the flow of international dollars into this country in the form of investments in that debt will flee once they realize that we have overextended ourselves to the point of no return. While the debt can be a burden, it could be safe to assume that it is also beneficial as well. To see it from that perspective, which will require a good deal of reach on your part and is not the belief held by this writer, we must first wrap ourselves around the chicken and the egg. Or more frequently asked, which came first?

We export what we can't use largely because, under current labor conditions, we are able to make a few more things than can be sold here at home. That is not good news for the jobless recovery. If that proves to be the case, then the current workforce is adequate to produce not only what we need but what the world needs as well.

Conversely, much of what we import - excluding much of the low cost items that have made Wal-Mart a retailing giant - is equipment or money used for the creation of goods to export, and, some would argue, the creation of jobs.

The chicken in this scenario is the money inflows in the form of capital investment. The egg is the fruit of that nurturing cash that drives the engine of global commerce.

More importantly the success of that scenario relies on the blind need of consumers to continue to neglect asking and reacting to information about where the goods they buy were made. In fact, the world investment community relies, and this is scientific analysis of the highest level, that Americans are foolish enough to save far less for the future that they should. Ergo, they spend without discrimination and plan little for their futures.

This spending prompts the belief that we are confident which props up over extended markets, profit reports that are based against previous year's quarters that were anxiously awaiting war news, and the ability of the Fed to see this as clearly as the international bankers do.

If money spurs growth, under the current belief that an imbalance is good rather than bad does not fully realize that growing chickens larger does mean better eggs. In too many instances, we are left with eggs that won't hatch or jobs that won't come, money that won't be saved, and an economy that is recovering now only to falter in the future.

The previous week's articles.

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