Reality check: America has a pretty decent economy by mattsteinglass
October 6, 2008, 8:25 am
Filed under: Economics

The financial crisis is extremely scary and dangerous, and I’m waiting anxiously for the numbers to start coming out of NY this evening, my time, to see whether a total credit-system heart attack is about to cause the US’s banking system to collapse, as Nouriel Roubini is apparently now predicting. Nevertheless, in thinking about where one should invest one’s money in the long term, it quickly becomes apparent that the US can only fall so far before it becomes a very attractive prospect again. It’s far and away the world’s largest and richest consumer market. It has a transportation and telecom infrastructure which, while not the equal of Germany’s or South Korea’s, is certainly in the range of the world’s most developed societies. Its population is universally literate, and the upper half are as well-educated as those in Northern Europe or East Asia. It has a broad-based economy that’s  competitive in everything from software to high-tech manufacturing to agriculture.

Financial crises can be crippling things, but they tend to last a few years while the sector reorganizes itself and then go away. Mexico recovered from ’94, South Korea recovered from ’97. The key question is whether the country at issue can get a government in place with the technical capacity and political will to make responsible choices and put the economy back on a sound footing. I’m reasonably confident that this will happen in the US. Americans are prone to apocalyptic angst, but the collapse of the real-estate bubble of the early 2000s is not going to turn America into some kind of second-rate economy. Japan has suffered through the worst-case scenario of this crisis for over 15 years, yet it’s still the leading economy in East Asia.


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