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The
Bible says “There is nothing new under the sun,” and the
older I get, the more I am sure that the Bible is right.
I can
remember in the 1970s that the common wisdom was that
the world would end as we know it because of
overpopulation and overuse of chemicals. When, 30 years
later, the century ended and mankind was still thriving,
we came up with a new “end-of-the-world” scenario:
global warming.
However,
end-of-the-world scenarios are not limited to the
environment. “Experts” have been forecasting a worldwide
depression since the late 1980s, and again we are still
plodding along, apparently unaware that we should be
back in the economic Stone Age. When oil first sextupled
in price from $3 to $18 dollars a barrel, the rhetoric
was the same as we hear now with prices bouncing off
$100.
It is
fascinating to look back at all the gloom and doom
predictions from 10, 20 years ago. With the permanent
memory of the Internet, it is impossible for these
forecasts to simply disappear. I came across a very
scholarly dissertation written in 1995 that assured the
world that by the 21st century, China would be unable to
feed itself and would literally be importing all the
world’s grain supply, especially if its economic growth
continued.
Well,
China’s economic growth not only continued but also
accelerated, and China does feed itself.
The one
thing that I have noticed over the years about these
doomsday forecasts is that none of them ever came to
pass. Now, that might seem a bit silly to say, but it is
important to state the obvious. Once you realize that
the world is pretty much the same today as it was when
the predictions were made, then you must examine why the
dismal forecasts were wrong.
Never
have I found any of these predictions that proved wrong
to have been followed up and explained by the original
author. Why hasn’t the ozone layer continued to
deteriorate? Why hasn’t a worldwide depression hit? Why
hasn’t overpopulation reduced us to a pre-Industrial
Revolution lifestyle?
Virtually all of the factors that were in place when the
predictions were made are still there. Yet, the dire
consequences have not come to pass. Why?
The
“experts” always seem to forget the incredible and
amazing ability of people to adjust, adapt to and
eventually control the situation.
Look at
the current headlines: Dollar is collapsing. Gold
reaching historic highs. Foreign countries hold massive
US debt. US economy on verge of collapse. US credit and
banking crisis.
These
are almost exactly the same headlines we saw in the
mid-1980s.
If it is
true, at least in part, that history repeats itself,
then it is also true that the catastrophes that the
world avoided in the past will again be avoided. Never
underestimate the ability of people to learn from past
mistakes—at least a little.
China
is the Japan of the 1980s. Look at the similarities.
Against the background of raging price increases in
gold, crude oil and a collapsing dollar, Japan’s stock
market was booming, reaching 40,000 in 1990.
Japan
enjoyed a huge trade surplus with the
US.
It was also financing a huge buildup of
US
government debt. The US economy was reeling from savings
and loan crises and an economic slowdown. Japan was
awash with excess cash sourced primarily from its
exports to the US.
Fast-forward 20 years and you see a similar situation
today, except that Japan is replaced by China.
Following this boom period,
Japan
fell into decades of economic stagnation, accompanied by
a crashing stock and real-estate market.
I am
sure soon we will see some “experts” catch the
similarities and forecast gloom and doom for
China.
But it will not happen, like most of the doomsday
scenarios.
Japan
poured its extra money back into the
US, buying US companies and real estate at virtually any price.
Real-estate prices in
Hawaii,
for example, a favorite Japanese tourist destination,
rose fivefold. As other US trading partners like South
Korea cut into Japan’s export income a few years later,
Japan sold out its US holdings at a substantial loss and
went home.
China
learned that lesson, and its excess cash is not going
into the US but into other countries like the
Philippines. Completely ignored by foreign investors in
the late 20th century, the Philippines is becoming
somewhat of an investment darling of this decade.
Take
note of this from Korea Times newspaper: “About 2,500
Korean companies, wholly owned or in a partnership with
local firms, registered under the Board of Investments
and Philippine Economic Zone Authority as of the end of
2006, while some 1,970 companies were listed with the
Securities and Exchange Commission.”
In the
’80s and ’90s, the world was inclined to put all its
eggs in the US basket. Somewhat of a big mistake, that
will not be repeated this time around.
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