National debt is something to be proud of…
Posted on January 30, 2007 by Richard Beddard
Filed Under Investing, Reading list |
Another one for the reading list: Growth and Welfare in America’s Past by Douglass C. North. It’s an economic history book written in 1966, but carried within it is a message that can inspire a winnable bet in today’s stock market, according to Ken Fisher. That message is mercantilism, encouraging exports and restricting imports, is bad policy for economies and stock markets. The proof is the US and UK, which since the early 1980’s have run escalating budget and trade deficits to the alarm of pundits. Meanwhile Japan and Germany ran surpluses.
Which country do you want to be? Asks Fisher. Pointing out that over the last twenty-five years or so GDP increased 3% a year on average in the US (marginally less in the UK) and the stock market returned an annualised 13% in both countries. Germany and Japan, on the other hand, experienced sluggish growth and lagging markets.
The winnable bet is that the twin deficits are the natural result of economic growth and our indebtedness is not a sell signal, but a buy signal for the stock market. He says:
You should fear any effort to force a reversal in these deficits a la mercantilism - usually from senators. And you should fear surpluses.
It’s one of many observations in his new book, The Only Three Questions That Count, that challenge conventional views of the markets.
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lame