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| Two Views from Europe |
Dear Reader, “Should Europe Save the U.S.?” was the subject line of my article in this Tuesday’s IDE edition. It was a hopeful – maybe even whimsical – title. It hinted that Europe was in the position to save the U.S. And that it might even want to. WHAT WAS I THINKING? Maybe that Europe is our closest ally. Maybe that with so much cross-trade and mutual investment linking our economies, it would be in Europe’s interest not to let the U.S. drown in its own economic mismanagement. Maybe that Europe doesn’t want the U.S. dollar to fall too far, lest it sabotage Europe’s ability to export. Or maybe I was just thinking of my first trip to Europe back in the day. It was Christmas vacation, 1973. I hit Paris, Vienna, Florence, Barcelona, and then Ibiza. Apart from the good citizens of Paris making fun of my high-school French (and I don’t blame them), people were good natured and had mostly good things to say about Americans. Alright, that’s in the ancient past. Bernhard (it seems that he’s from Austria from his email address) wants to set me straight on why Europe isn’t anxious to lend the U.S. a helping hand. He says, “At normal times of the Europe-US relationship, Europe would be inclined to do something. But now with George W Bush at the helm in the US? He is probably the most universally despised man in Europe...” Heck, it doesn’t matter anyway, according to Christophe. Europe in the position to save the U.S.? It’s gone way beyond that. Writing from France, he says that “this time it is different; it will not be a minor recession. It is a power shift from the US to Asia and the huge US deficits and the dollar slide make it impossible for the US to change this course of events.” Hey, Christophe, you hit the nail right on the head. You guys don’t mind if I quote an American for a little change of pace, do you? Here’s a passage from a recent report I wrote called, “Ten Trends Shaping Our Investment World”. Asia is emerging as the center of manufacturing and economic growth. While we’re sweating bullets trying to resuscitate our economy, the Asian economies are taking the current slowdown in stride… Behind their growth are exports and inbound investment. Intel is building a big plant in Vietnam. Renault is building an auto plant in India. So are other Western auto companies. Philadelphia-based Crown Holdings is opening an aluminum can factory in Cambodia. Auto-parts supplier American Axle & Manufacturing Holdings Inc. is opening new plants in China, Thailand and India. And Caterpillar is building a huge manufacturing plant in China. Private-equity firms are prowling the cities and towns of Asian countries looking for companies to invest in. And everybody with money to invest is looking at China. And why not? Chinese IPOs of bank, solar, and energy companies are taking in record amounts. Yes, Christophe, you’re right. The power shift is happening right now. But these kinds of seismic shifts don’t happen overnight. And in the meantime, the U.S. still has the most powerful economy in the world (I also wrote about that in this report) … no thanks to recent moves by the Fed or, for that matter, the European Central Bank. Good Investing, Andrew Gordon P.S. To let me know what you thought of today's article, send an e-mail to: feedback@investorsdailyedge.com.
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