Tired of that Kicking the Can thingy

Okay, I have used the phrase several times myself, but I am sick and tired of everyone referring to economic strategy around the world as kicking the can down the road. I have read it a hundred times this month. It is driving me crazy. Not because it is being repeated so much, but because it is true.

We all know where this will end up. If you do not, let me link here a nice discussion of it by John Mauldin - or you can buy his book on it.

http://seekingalpha.com/article/287238-europe-unraveling-u-s-on-the-edge-of-yet-another-recession

He seems to know what he is talking about. Let me point out what I think is one of the more meaningful aspects of his article; another, perhaps worse, recession is coming and virtually inevitable, but no one can say exactly when. As he points out, Japan dealt with a similar - though internal - situation and was able to kick the can for a couple of decades so far. But the current problem for the U.S. is international and interconnected and none of the other affected countries have the savings rate of the Japanese, so I would not expect decades to elapse before we catch up to this can. Indeed, it could well happen this year and I will be surprised if we do not get there by the end of 2012. Nonetheless, there is no way to time this too well. Just know it is coming, for largely the reasons I have noted here and summarized in John Mauldin's linked article.

Blame it on China - Not

There has been a good bit of China bashing over the past few years and many are pointing to China as a source of some of our economic woes. After all, they stole all our jobs - right? Well I read a study yesterday in the L.A. Times noting that a whopping 2.7% of our personal comsuption spending in the U.S. is on Chinese made goods. Virtually all we spend, as in over 88%, is domestic in origin. So get over it.

http://www.reuters.com/article/2011/08/16/us-markets-global-idUSTRE7725BC20110816?feedType=RSS&feedName=topNews&rpc=71

Moreoever, as noted in John Mauldin's article linked above, China has been allowing its currency to increase in value, which helps us, the EU and other struggling economies, while at the same time achieving the goal there of cooling its economy a tad. Short story, China is a part of the puzzle but not as big as some might think in terms of what has caused our problems.

Disclosures: None