Our country is experiencing what some financial sages termed economic unthinkable times. The way global wealth is distributed and how it manages itself is realigning. An unthinkable Europe, an unthinkable United States, an unthinkable global economy is emerging. The world’s economies are filled with many “impossibles” that have never been written or told about. Unless our nations learn to think forward, learn the new rules, some economies will fail completely and initiate a global recession. The paradigms that shape how we invest, how we use our monies is far different from where they were just a few decades ago. Who could have thought that the elite congress of the Eurozone would be seeking to borrow from China, a country that ranks 99th in the world for income per capita? Who would predict that Germany, led by her first female leader Angela Merkel, would be drawing up plans for the realignment of a new Europe? Just one generation ago Germany was a divided country, reuniting itself while seeking economic and political parity in the world.
Though now facing a looming fragmentation, the Eurozone is dependent upon new fiscal decisions that may be their only hope of restoring their economies. The new realities are that Eurozone countries have evolved to finance dependent sovereigns; without the power to inflate or grow themselves out of debt. It is suffering the throes of failing solvency and the absence of liquidity. Looking beyond Europe to China for its monetization, who has surpassed Japan in its achievement of becoming the second largest economy in the world. In just a few short decades China will overtake the United States.
The structural and fiscal global calamities that are tearing apart the fundamental economic survival of countries are creating teachable moments. The relocations of accumulating wealth are shifting the paradigms of global power. Unless we move to change how we think therefore how we invest for our future, the ride to solvency will be long and rough; perhaps unattainable.
Institutional economists remain so mired in the old constructs of economics, that they are unable to recognize the fundamental new norm; of how the world is changing its wants versus its abilities to fulfill. We’re not paying attention to the fact that there is a fundamental neuroscience that is changing the way our brains are responding to how we manage business and personal wealth. This absence of forward thinking amongst our policy makers and drivers of fiscal institutions is causing global social upheavals that are signaling the need to recognize these new norms. This economic tsunami will carry in its wake societal transformations. The United States’ success in maintaining its global leadership will depend on how well we navigate this wave.
Like any evolving organism there are paradigms that must be present in order to intelligently judge whether an economy will survive.
- Has it the capability of growth? When faced with financial indebtedness a country must have the ability and agility to grow out of its debt. The engine must have a sound monetary policy to move. Instituting too severe austerity measures will only stall the process.
- Can it grow strength in its institutions? Policy makers and politicians must understand that the creation of a fiscally strong country requires new thought processes. Fiscal policies must be agile enough to grow into the new norm.
- Has it created strong banking institutions? The biggest part of Europe’s crises is its lack of solvency. This is a watershed moment that the United States’ has yet to face; yet many economists fear the likelihood is not far away.
- Does the country have the ability to distinguish the difference between having liquidity and lacking solvency?
- Will a country understand the importance of building firewalls to insure that in the short term technocrats will not sabotage growth?
Social advents like Occupy Wall Street has impacted how the financial markets think then behave. The outcome of how we trade, buy and sell our markets is no longer predictable; using the same standards. Unlikelihood is used more in calculating economic outcomes and is rapidly becoming the norm; multiplying and penetrating deeper into our systems.
Though we struggle under a morass of mounting debt, the United States is not a cash poor country. We do not lack the resources to successfully participate in the global wealth realignment.
French President Sarkozy stated in a recent address that Europe must be “refounded”. The same holds true for the United States. We need a national awakening moment as well; whereby we may resurrect for ourselves a common vision with a common purpose to propel us forward.