Observations

When I first arrived in the US, I found New York somewhat disappointing. Some streets were dirty. Some people were poor and badly dressed. Everybody and everything looked quite average. I surprised myself thinking, “How could these people win the war?” I was brainwashed by the American propaganda machine in Europe.

It was too early for me to know about the amazing American work ethics and entrepreneurship, the immense resources and wealth of the country with few restrictions on what anyone could do. One more thing impressed me. Americans were working to pay the banks. The banks owned them.

Fast forward a few decades. Why do we have a crisis? Since winning WWII America has been the strongest, the wealthiest, the most powerful country in the world. Its resources and reach were immense, dictating what should, or should not, be done to the rest of the world. Its people were constantly reminded of this truth.

For decades, people were encouraged to enjoy their unique place in history. They believed all the clichés coming out of Washington. Growth was the name of the game. Growth, however, does not come from complacency. It comes from the capacity of producing goods efficiently.

It was much cheaper to buy goods from others. People have been lead to believe it was OK to “hire” underdeveloped countries to produce what we needed. To compensate for the eventual decline in economic growth, we had to leverage. We were brainwashed to do it because we are the strongest and most powerful. The kind of mindset GM had when it controlled more than 50% of the car market. Now it is skirting bankruptcy.

The solution is not to encourage more leverage. We need to concentrate on re-building our industrial base. Populist social programs only transfer wealth to the bureaucrats. The markets always win.

From California to New Jersey the states have to retreat from the lavish promises they made to their citizens. The markets will painfully force us in the right direction. The alternative is stagnation, the lukewarm growth plaguing Europe.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

To find out more about my in depth view of the markets and my strategy just visit our website https://www.peterdag.com/. You can review The Peter Dag Portfolio, free of charge of course. You can also call me at 1-800-833-2782 to discuss your specific money management needs.

George Dagnino, PhD