No. of Recommendations: 3
What happens if $100 billion a month in incremental net new foreign capital turns into (say) merely $80 billion a month?
Just based on the rather uneducated seat of my own pants, it doesn't feel to me like this is going to happen. Primarily, while the current mishegas will shake things up, there are pretty good reasons to believe that the US economy could be enhanced in performance over the next few years. Plus, paradoxically, I suspect that the world reaction to the chaos created by the current administration might be an enhanced flight to safety which may still be realized as investing in the US. Admittedly we don't have a lot of data yet, but so far warnings of recessions and inflations and loss of reserve currency status seem to have been greatly exaggerated. And when you think: where else are you going to put your money, what do you come up with?
Meanwhile, the OMB has consistently underestimated the value of lower taxes and lower regulation in increasing the growth rate of the American economy. And what are the chances that the seemingly gigantic wave of AI productivity that is about to crash over primarily the US economy are completely wrong? Maybe it doesn't seem like US surviving and thriving no matter what the government does is not a great plan, does that actually mean it is not the most likely outcome?
Jim, your pulling out of the US months ago had more influence over how I think about what is going on than, ... I don't know, almost anything else I can think of. But on reflection, I realized as a natural US citizen, I felt no real risk in investing in either US stocks or US government debt, although it seemed insane to me that any US leader should ever even want to play chicken with the bullet train that carries all that foreign money into the US every month. NO ONE ELSE has silicon valley. NO ONE ELSE has the magnificent 7 or whatever euphemism we use for the technical leadership of the world these days. And despite the Chinese doing perhaps better than expected, NO ONE ELSE has AI leadership.
Yes I wish things were different, and I sort of expect we are going to have to pay some price for the tragically disgusting turns in our leadership. But I'm sort of thinking that we will have to pay a material ECONOMIC price for any of this.
IDK,
R:/
