The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150.
To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior.
It's going to be a long time before some other country takes over the "reserve currency/investment market of last resort" position the US currently has. No other market is even close to providing the deep liquidity and rule of law the US market has over a wide variety of instruments.
Sure, someone will eventually take over that role, but there are no candidates today. And, to your point: it was clear by the late 19th century that the US dollar would displace Sterling, but it took another half a century for that to happen. On the scale of current human lifespan, you can assume it won't happen at all.
So, the US doing extremely well 100 years from now vs. the US doing very badly 100 years from now could have a non-trivial impact on the perceived value of US assets. I suspect that the large uncertainty about what the world will look like in 100 years means there is just some sort of seldom changing value baked into assets to account for this, but it nonetheless exists, and could change if there was some huge geopolitical shift.
And before you mention anyone on earth would be dead in 150 years, yes that's true, however you can always sell it to someone later on who will be alive in 150 years (or sell it to someone who can later sell it to someone etc. etc.).
It’s like food. Food in 100 years does not help the need for food now.
If there was a futures market in foodstuffs that basically keep forever and is cheap to store (honey?) you would see that the expected price of that food in 100 years would have some effect on the current price.
Those 50 years are part of the next 150, and are no easier to forecast. Most market projections are for numbers ~7% annually, but periods worse than that would drastically alter investing plans, and hence social infrastructure planning.
Another similar and popular US-data-only tool that is fun to play with is cFIREsim: https://www.cfiresim.com/
(Edit: of course, US companies have non-US revenues - helps out a bit)
Too lazy to web search for an answer, but are those real returns? (i.e. inflation-adjusted).
With a gradual decline in exposure to equities over time.
https://www.google.com/search?q=what+asset+allocation+should...
"Accordingly, as the results support, for those looking to maximize their level of sustainable retirement income, and/or to reduce the potential magnitude of any shortfalls in adverse scenarios, portfolios that start off in the vicinity of 20% to 40% in equities and rise to the level of 60% to 80% in equities generally perform better than static rebalanced portfolios or declining equity glidepaths. Though as the results also reveal, in particular scenarios where the equity risk premium is depressed, the optimal glidepath includes less equity, and in scenarios where the goal is to withdraw at a level that stresses the portfolio and its expected growth rate, higher overall levels of equity are necessary; with such high-risk goals, having a relatively high-risk portfolio, with the danger that entails, is still the optimal solution (and for clients who cannot tolerate that level of risk, the ideal solution is to choose not a less risky portfolio, but a less risky and aggressive goal). Nonetheless, for everyone else looking to maximize a sustainable income level, or determine the amount of assets to support a (reasonable) target income level, rising equity glidepaths appear to both maximize the likelihood of success and sustainable income and reduce the magnitude of shortfalls when they occur."
There is a a lot of discussion of this here: https://www.bogleheads.org/index.php. Also, this article: https://www.kitces.com/blog/should-equity-exposure-decrease-....
Why would you want to be more exposed to riskier equities (a la they are down 20% in the past year) when you are 65 years old and have no income other than dividends/bond yields?
I get what you are saying, but your math here is a bit off.
50+18 = 68.
People generally can live longer than 68 years old, If we go out on longevity and assume people can live to 100 or 120, then it's more like 100 years.
Your next thought is, but people will retire before/around 68, fair enough, but they stay invested generally the entire rest of their lives.
So if the US dominance ends in the next 100 years, then today's teenagers might need to care about it. People in their 30's or 40's probably don't though.
The next 150 years, you are right todays teenagers might not need to care, unless many/all of our aspirational longer living goals happen.
Yes you probably want some bonds, but you still need some equities.
The default answer is something around 20% to 60% equities in retirement.
Bonds are like buying future cash-flow, stocks are about future growth.
i.e. if you buy a bond that's paying you $25k/yr, then you will get that $25k/yr regardless of what happens to the NAV until maturity(and/or bankruptcy obviously).
Obviously you default temporarily enough times and people will stop thinking your promise is worth anything. So far that hasn't happened, let's hope it doesn't.
If you just want bonds, then LTT may not be the best move, it just depends. BND would be a better general bond portfolio. i.e. I dunno what I want, I just know I want bonds, then buy something like BND, since it aims to just own all the bonds.
Managed bond funds have more cost than something like TLT or BND, since they are index based. You have to pay someone to actively manage the bond ownership. Is the cost worth it? Only you can make that decision, generally speaking after fees active management doesn't usually earn extra income vs an index. The average return of active management after fees is usually under-performance relative to a benchmark index.
I think it's important to think of bonds by what they return(yearly cash flow), not by the NAV. i.e. if you buy a bond(or fund) yielding 5%/yr with $10k. That's a $500/yr income you just bought yourself. It doesn't really matter what the price of the bond(NAV) does, you will still get your $500/yr (until maturity and/or bankruptcy). Bonds are a cash-flow investment. If you want $500/yr then you buy $10k worth of 5%/yr yielding bonds.
If you want $25k/yr in income and the yield is 4%, then you need about $630k worth of those bonds(or bond fund). Buy the cash-flow not the yield or NAV. On existing bonds, the yield can't change, so the NAV/price does change. On new bonds the yield changes instead.
It's the same difference. Think about you as a person buying bonds. You have 2 choices:
* Old bond paying 5% * New bond paying 10%
Which would you rather buy? well the new bond of course, so if the person with the old bond wants to sell, what do they have to do to incentivize you to buy it instead? lower the price, so that when you buy it, you are getting around 10%/yr yield to match the new bond yield.
This is how bond markets work, in a few sentences.
Bonds are just converting today's money to future cashflow.
TIPS are inflation adjusted bonds, so you can get a real return > 0% with bonds, guaranteed by the US govt. For baseline retirement expenses, it's hard to beat. Right now they are up over 3%/yr real. You can't buy inflation adjusted annuities anymore, basically Social Security is it.
If one has 50X expenses invested, it doesn't really matter what they do, they would be hard pressed to screw it up so badly as to run out.
If one only has 20X yearly expenses invested, they need to be a lot more careful, as they might not make it, especially if they get a bad sequence of returns.
It all depends on your personal financial situation, it's hard to make general rules that can apply to everyone. It's called personal finance for a reason.
Bonds are just a great default tool, but like all tools, they are not perfect.
It's entirely reasonable that we could enter a period of long, slow decline across the board. Especially as we continue to push the limits of natural resources and global supply chains.
For example suppose the US continues to move its push to return chip manufacturing to the US. This might mean both that US chip manufactures have a more healthy future than other more fragile tech companies and that they shrink in size. We could see a return of manufacturing to the US which leads to continued employment in US labor for while also meaning that labor force gets paid much less.
We're already starting to see evidence of this happening.
The concerning thing is that I'm not at all sure that our incredibly debt dependent global economy, which assumes future growth, can really handle a gradual contraction to a more sustainable economic structure.
Either way, assuming up is the only way for the market to go is a very naive assumption, but one nobody is happy questioning.
Interesting! Why is it happening? Shouldn’t labor earn more in this scenario?
Though I suspect there is more need for such labor than people who can do the job. Hard to say, but there are a lot of things we haven't automated yet.
Why do you assume that it requires a contraction to reach a sustainable economic structure?
What prevents the economy from growing for the foreseeable future while also becoming more sustainable at the same time?
Our current economic structure, due to its reliance on credit, requires perpetual growth and development in order to pay off today's debts. Debt in all forms has been growing increasingly and rapidly in recent years.
Infinite growth is not possible on a finite planet.
In many areas we are already seeing the limits of growth, from strains on oil supplies to global population growth starting to slow down. This is already, today, putting a strain on our economic systems.
Since our current way of life can only be sustained by future growth, it is by definition not sustainable unless you sincerely believe growth to be without limit (this would require near term interplanetary travel and energy advances such as fusion). As mentioned, we are already seeing system strain suggesting we are hitting limits.
Contraction is the preferable path of the two realistic alternatives, the other is complete collapse.
How do you propose the economy growth for the foreseeable future and becoming more sustainable?
Also, the US stock market, US Dollar and US economy/gdp aren't hard linked to one another these days. The companies listed can be selling to non US markets, employing internationally, founded internationally. They're just listing on the US stock market because well.. that's where the stock market is. The US could, in theory, become more or less popular a stock market regardless of its currency's popularity.
Meanwhile, both the Euro and RMB have similar size markets backing their currency. Neither one is currently trying to displace the USD. I think the importance of owning the international currency is somewhat speculative.
Is there anything stopping the NYSE, Nasdaq or CME/CBOT from handling trades in another currency?
It would reduce liquidity. Equity prices would fluctuate not only on buy/sell basis but exchange rates. Sure, computers could figure all that out these days but what's the advantage? Overwhelmingly, equity buyers and sellers (not "traders") buy in their local currency because they use the money to live in a local economy.
Companies list in other countries for access to those countries' buyers. What would be the point of Shell listing in Euro on the NYSE? They want to list in dollars. Nobody outside Nigeria lists on its exchange but local companies do because local people understand the companies and everything (both their operations and their stock) is in naira.
So if you want to be an exchange in a different currency, just buy a local exchange. NASDAQ did try to buy the London Stock Exchange, though I think it fell through.
If countries then acquire dollar surpluses by running trade surpluses with the US, the US by contrast has a trade deficit. This is equivalent to having a capital surplus for the US. It means excess capital is funneled back into the US into the capital markets buying stocks and bonds.
This is maybe a chicken and egg phenomenon..is it the demand to invest in the US creating a capital surplus that creates the dynamic whereby the $ becomes reserve currency and the US runs increasingly large trade deficits? Is it the military/political power that creates all of the rest? Probably all of above. But in any case the reserve currency system has at its core the financial markets of the US that the rest of world invests their surplus into, incentivizing them to produce in excess and trade real goods and work with US in exchange for paper IOU's that they can invest into the US markets.
A big aspect of this $ financial/trade system isn't just the $ as currency itself but the unique and important position of US treasury debt as the premier reserve asset that countries store their surplus and forex reserve in, and which is the center piece of the eurodollar[0] lending markets.
The policies you describe as "idiotic" are rationally imposed. The assumption is that they will weaken Russia's war effort, and that the cost, while high, is much lower than fighting a hot war down the road if Russia is allowed to continue to invade its neighbours.
You can argue that the policies aren't working, but while looks like that in the headlines, if you look at what's going on inside Russia all the lines are pointing down, even if the government's own figures claim otherwise. You could argue that a slightly different class of restrictions could be more effective.
But the only basis for "idiotic" is if you think it's none of the EU's business if Russia chooses to invade and try to conquer one of their neighbors.
Unlike the chicken/egg situation we know precisely when this system was born: the Bretton Woods Conference, 1944.
To some degree of course it recognized what was happening anyway (uh oh, chicken/egg is back) but rather than letting things evolve it built upon emerging practice to build the modern global financial system (basically still in place despite further evolution, like floating currencies).
If you’ve been alive long enough you’ve realize the “end of US dominance” has been in headlines since the 60’s.
2. It is implausible that the US will ever pay back its foreign debts in real terms. Anyone who lends to them will end up with less stuff in total.
3. We live in an age of computers and pervasive digital communication; things can happen a lot more quickly these days than in the 50s.
4. There is a consistent trend of dropping energy security in Western countries.
This is no time to be forecasting assuming things will happen at a comfortable pace. People should have contingencies ready in case something unprecedented happens. It is tense out there.
> Money in mattress?
The response to every crisis the US has had for the last 3 decades is to print and borrow increasingly large amounts money. And they are probably the most responsible fiscal controller around at the moment.
If you see that changing for some reason then sure, maybe money under the mattress could help. I don't expect that strategy to change myself, and the last thing I'd want under my mattress is money.
> Gold is something people often make an argument for in this case but it's historical returns are pretty bad.
I don't follow, gold has been making pretty reasonable returns for about 20 years now and has been a far superior option to cash. What don't you like about it?
> What kind of contingencies? Money in mattress?
The right to live in multiple countries on a permanent basis (foreign permanent residence and/or passports) and investments that automatically balance as world markets shift over time (e.g. the worldwide equivalent of VTI: VT)
Down ~20% from peak. That is not a country drowning in cheap energy, that is a coming under a lot of pressure. Not a time to be going "eh, long term trends take a while to kick in". The long term trends have been around for a while, we're well in to the part where we start reaching tipping points and step changes.
What is going to happen? Who knows. But it could happen quite quickly.
I can imagine how that could be a second order effect of energy insecurity, but there are other explanations that seem more likely, like:
* The move from incandescent to LED lighting
* Improved insulation and heating technology
* Energy efficient appliances
* Removal of inefficient vehicles in favor of more efficient vehicles
You're going to have to do better than "per capita energy use is dropping" to convince me there's a looming threat to US energy supplies.
20% is like having no energy on half of Saturday and all of Sunday. The improvements you listed are not comparable.
Energy security is not about how much energy we do spend, but rather about how much energy we could spend, if we wanted. On this count, OP is right and the situation is still better than it used to be.
On average, we have cheap power [1]. If you're power hungry, we have some of the cheapest power on the planet [2].
The fact that coal-burning China pays more for power [3] than American industry should drive home our massive geostrategic advantage.
[1] https://www.statista.com/statistics/263492/electricity-price...
[2] https://www.eia.gov/electricity/monthly/update/end-use.php
[3] https://www.globalpetrolprices.com/China/electricity_prices/
And the US having access cheap oil is a good argument for why there might be a sudden step change in their economy - there are a lot of people with a serious interest in breaking the US dollar oil trade. Now including Russia and possibly China if they can read the writing on the wall. The US can't fight them both at once so China is in a pretty good position to get away with stuff right now if their regime survives COVID.
Cheap oil in the US has been extinct for more than a decade.
America produces more oil than ever [1]. (We also produce more energy than we consume [2].)
Your argument that waste equals production is flawed because energy doesn’t turn into production at a fixed rate [3]. The fact that per capita energy intensity falls while per capita real production rises means the economy is becoming more efficient.
> cheap oil in the US has been extinct for more than a decade
American crude is among the cheapest in the world [4]. (Bonus: look at Canadian and Mexican crude prices. Cheaper still.) Production costs aren’t Arab, but it’s way cheaper than what China pays, even before transport [5].
What makes this fantasy particularly stupid, beyond being trivially fact checkable, is that it mistakes China’s strategic weakness for America’s. The weakness that pushed Japan to bomb Pearl Harbor: their energy comes in from abroad, mostly by sea. The United States can strangle their economy from thousands of miles away by interfering with their shipments of seaborne coal and crude.
This is why the South China Sea is militarising. This is where Belt & Road comes from. The Russia dependency. It makes sense. It’s a weakness Beijing is working to buttress. One which America doesn’t suffer from on account of its geography and geology.
[1] https://tradingeconomics.com/united-states/crude-oil-product...
[2] https://www.eia.gov/energyexplained/us-energy-facts/
[3] https://en.m.wikipedia.org/wiki/Energy_intensity
[4] https://oilprice.com/oil-price-charts/
[5] https://www.statista.com/statistics/748207/breakeven-prices-...
It is hard to say exactly what that entails. Maybe the world gets lucky with a fission/fusion breakthrough of some sort - maybe even a political breakthrough to let us use proven-good nuclear tech. But in the interim it isn't easy to say that the US stock market will mirror its performance in an era where it had unchallenged dominance of a global network of easily available oil shipments. And it certainly isn't safe to say things will happen slowly. Things could start breaking and move quickly.
You keep saying this despite it being wrong. America hasn’t run out of cheap oil. Americans pay less for oil because we produce oil cheaper than most others, and that will be true relative to e.g. China for fundamental, structural reasons. All while the economy uses less oil [1], year after year, per person and unit of production. (Adjusted for inflation, WTI is about where it was in the 1980s, and lower than it was in the 1970s and most of last decade [2].)
Unless your argument is now peak oil. That we’re running out of oil, as a planet, i.e. that oil will cost more as we extract less. Something we’ve known for decades and are actively re-structuring our economy for. If that’s the case, then your comparisons to Southeast Asia don’t make sense—they pay more for oil, are less productive with it and thus will experience price increases more painfully than America will.
> Domestic consumption of energy showing signs of serious stress
This is a brand new plot point that is also entirely wrong. Total energy consumption is at an all-time high [3]. We’ve even recovered from the pandemic [4].
[1] https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...
[2] https://inflationdata.com/articles/inflation-adjusted-prices...
[3] https://www.eia.gov/energyexplained/use-of-energy/
[4] https://usafacts.org/state-of-the-union/energy-environment/
2. Just a few hours ago you referenced a link [0] showing that China has electricity prices sitting at half the US's. India too.
The US has lost access to a cheap form of energy and is likely going to be forced to rely on electricity going forward. I put it to you that it is by no means certain that the US market is going to be in a position where it can sustain even relative out-performance, let alone objectively good performance in line with historic figures. Depending on how optimistic we are about the communists continuing to adopt sane policies, it may even be unlikely based on the current trends.
Fortunately those trends will likely change as the squeeze the US is going through right now gets more pronounced. But the conditions we see now are simply not the conditions of the past 60 years, putting strategies based on the last ~150 years of data into a suspect light.
> America hasn’t run out of cheap oil ... all while the economy uses less oil, year after year
So cheap you can't afford to use it? I don't want to be exposed to your version of cheap.
[0] https://www.globalpetrolprices.com/China/electricity_prices/
Why would I? Everyone knows this. It’s just not a catastrophe for America.
> few hours ago you referenced a link [0] showing that China has electricity prices sitting at half the US's. India too
How did you misread “China pays more for power than American industry” as China pays less?! Look at the national price for business in China. Now look at our states’ industrial prices. Lots of variation, because e.g. New York has different policy preferences than Texas.
> US has lost access to a cheap form of energy and is likely going to be forced to rely on electricity going forward. I put it to you that it is by no means certain that the US market is going to be in a position where it can sustain even relative out-performance
This is a real argument. Thank you.
I agree it’s uncertain. The point, however, is that this won’t happen to America in a vacuum. And as it happens, it hurts others worse and first. I’d also challenge the assumption that we’re out of cheap energy [1], but that’s a separate discussion. My point is that in a world running out of oil, nobody is better positioned than America, with its domestic reserves, co-located industry and cheap electricity.
> cheap you can't afford to use it
You really can’t think of another reason we won’t use our fossil fuels?
Hint: it’s the same reason Chinese and Indian power prices are anomalously close to America’s.
[1] https://en.m.wikipedia.org/wiki/Cost_of_electricity_by_sourc...
I don't see individual states.
> You really can’t think of another reason we won’t use our fossil fuels?
The price rockets upwards and people start using less of the stuff. There are a lot of possible explanations beyond that, but it is safe to assume the obvious one that is most likely.
I'm sure you already know about https://en.wikipedia.org/wiki/Jevons_paradox but I'll link to it anyway.
> price rockets upwards
Again, where is this happening? I’ve provided numerous data points refuting this faulty hypothesis, yet you keep circling back to it.
Across the West, fossil fuels are being shifted away from for environmental reasons. India and China burn coal. That’s why Indian and Chinese power prices are even in America’s ballpark. Surprisingly, we’re finding some of the new generation methods, e.g. wind but increasingly also solar, to be even cheaper than coal and oil.
[1] https://www.eia.gov/electricity/monthly/update/end-use.php
Then use the national figures. Still cheaper.
And China won’t, not for oil. Oil is cheap in Texas because it’s pumped in Texas. China’s closest analogs are Russian pipeline terminals and seaports. The former, in aggregate, is less than a third of Texas aline’s oil production. The latter vulnerable. (Chinese electricity is cheaper in its mining provinces.)
> seem from the other link you posted that average Chinese business has much better access to electricity than the average US one. India too.
America is ridiculously more electrified than either country, so “better access” is the wrong phrase. I think you mean cheaper?
Short answer, mostly no. New York City adds power tariffs because they don’t want power-intensive industry in the city. If you’re doing energy-intensive work, you go upstate, where the tariffs are intentionally cheaper.
Will a shop in San Francisco pay more for power than one in Delhi? Sure. But now the energy intensity comes back to bite, because that shop in San Francisco is doing a better job turning energy into production. That means the fraction of income going towards power is smaller.
In any case, those are policies voters chose to impose on themselves. They could any day choose to prioritise cheaper power over environmental concerns and pay what Wyoming does. We’re comparing retail prices, after all, not generation costs.
How are you getting from that to "China pays more for power than American industry"? Could you do a summary in one place? Your links seems to support the opposite conclusion but maybe you've got something going on across a few comments that I've missed.
I also went to look at the absolute numbers out of interest and China produces 8 PWh total and the US 4 PWh total according to [2] and playing around with the "Electricity production by source" graph. Although obviously that means per-capita the US is still a way ahead.
[0] https://www.globalpetrolprices.com/China/electricity_prices/ & https://www.statista.com/statistics/263492/electricity-price...
[1] https://www.eia.gov/electricity/monthly/update/end-use.php
The median American pays more for everything than the median Chinese. Including power. For electricity, particularly for households, the difference is largely taxes.
The median kWh purchased in America, however, is bought for less than it is in China because power-hungry industry happens where it is cheap. This cost difference is partly because China underproduces energy by a third [1]. It’s partly because we make power more cheaply [2]. The first gives us security. The second economic advantage. (It’s also why ditching coal and oil is easier for America than it currently is for China.)
Also, fun fact: electricity is getting cheaper in America, and has been for at least forty years [3]. (Those are household figures. No ready source for industry, but same tale, you can deflate historic prices using the PPI.)
[1] https://en.m.wikipedia.org/wiki/List_of_countries_by_total_p...
[2] https://www.iea.org/reports/projected-costs-of-generating-el...
[3] https://www.usinflationcalculator.com/inflation/electricity-...
Only if they plan on doing something akin to starting a war against Ukraine.
Based on the credit rating of the US government, they will certainly not end up with less in nominal terms.
2. No sovereign government debt is paid down in real terms over the very long run (this doesn't have to be so, but the data). So why should a non-national buy it?
If you buy US debt you get an asset that is supremely liquid and extremely unlikely to default. Over shorter terms from right now it appears likely to outperform other sovereign assets.
In very short terms at various times you can make money trading marginal countries' debt (even Argentinian!). But you take on a big risk premium for that!
3. There is so much analysis of technological advances of the 20th century that I won't even bother to try an summarize. WWII began with horse drawn artillery and ended with jet aircraft and ICBMs. My own grandmother was alive from kitty hawk to moon landings and robots spread out through the solar system. Things move frustratingly (for me) slowly these days.
4. Arrant nonsense, with the trend pointing the other way.
No, I think the question is more subtle ...
Will the relative power and influence of the US grow similarly.
... and I think that may be a very good bet.
The three closest "competitors" - the Eurozone, China and Japan - are, in their own unique ways, dysfunctional basket cases:
Europe's northern savers and taxpayers have to pay for southern workers to retire at 60 ... and southern workers need to eat benefit losses to avoid further (br)exits. This is a not-insignificant economic and cultural mismatch and the results of even minor adjustments are riots in the streets[1] ... or boring, orderly referenda[2].
It is unknown whether the CCP can survive any meaningful slowdown in growth and whether much of the growth of the last 10-15 years (enormous empty cities) was substantive or useful at all.
Japan is undergoing civilizational and cultural collapse.
So ... while there is much dysfunction - both economically and politically - in the United States, it is an enormous, resource rich country that can exist wholly independently from the rest of the world.
It also enjoys absolute control of the worlds oceans and brutally dictates economic and geo politics[3].
In a world of troubled and fraught investments, the US is probably the least troubled and fraught.
[1] https://en.wikipedia.org/wiki/Yellow_vests_protests
[2] https://en.wikipedia.org/wiki/Dutch_withdrawal_from_the_Euro...
[3] https://en.wikipedia.org/wiki/2022_Nord_Stream_pipeline_sabo...
Europe's problems are not unlike the U.S. internal problems where the tech and financial centers mainly on the coasts subsidize the rest of the country. The difference of course is that the states of the EU can exit, where the American states cannot. I'm not sure which situation is preferable.
China is a black box, but so far recent history has indicated the populace will go along with a lot of pain to avoid chaos.
US wealth distribution is much flatter than European. The GDP/capita ratio between Mississippi and Connecticut is less than 1:2, while for Germany to Hungary it's more like 1:4.
China is... China. You can't call yourself the Communist Party and run the global financial system. The world can only tolerate so much contradiction.
The open question now is whether the dollar can be dethroned by nothing: can a basket of currencies become the default reserve?
My guess is the world can tolerate it as long as everybody is making money off it. When that stops, the contradiction might seem intolerable.
The world needs a default reserve that's not tied to any single central bank. For all the upsides there are also real downsides for the US having its currency as the default reserve.
Perhaps, but you could as easily make the argument that the interior subsidizes the stomachs of the coasts. That seems more like a symbiotic relationship than the parasitic one you seem to be implying.
Are you implying that US sabotaged Nord Stream?
It was a Keyser Soze move that basically destroyed Russias bargaining position.
At the same time, it was an enormous fuck you to EU citizens and, in particular, Germany: "Oh yes you will buy our gas ..."
It appears to be panning out in a non-destructive way for the EU citizenry as they muddle through this winter but it was not obvious that would be the case and this (relatively) benign outcome could not have been predicted.
If I were an EU citizen (particularly a German) I would be upset. Even as an American I am disturbed ...
EDIT: You know that thing ... that crazy thing that Dick Cheney said in that interview[1] ? About how there is no reality and reality is whatever we say it is:
"We're an empire now, and when we act, we create our own reality."
... every day that goes by I become more and more convinced that he could be right. NS2 sabotage makes it hard to argue with him.
[1] https://www.theatlantic.com/daily-dish/archive/2009/04/were-...
There is an argument going on in the thread about empires size and distance from the capital.
The person who makes out the US is an empire which controls a bulk of the globe is getting down voted - I think you are needed there.
It kind of reminds me of the polonium poisoning that has become a Russian signature move. Despite not taking credit, the number of actors who have the capability to do it is so limited that it's basically outing them regardless.
Everyone just forgot that happened. Strange.
[1]https://www.nytimes.com/2022/02/22/business/nord-stream-pipe...
[2]https://www.whitehouse.gov/briefing-room/statements-releases...
Yes, France retires at 62 but that'll change very soon...
Writing that the "north pays for the south" by looking at the GDP per capita instead of the GDP is... naive. [2]
[1] https://en.wikipedia.org/wiki/Retirement_in_Europe [2] https://en.wikipedia.org/wiki/List_of_sovereign_states_in_Eu...
What will happen (by design or not) is PRC demographics is being "strategically optimized" with the greatest demographic uplift/upgrade in recorded history. Roughly replacing 2 low skilled, under-educated workers with 1 skilled worker with additional automation. Every ~10 years for the next few decades, PRC will be upgrading / swapping the human capita potential of 1 Nigeria for 1 Japan, it's less people, but much more productive people. With PRC pop base effect this is still multiple more educated labour pool per year than US or other blocs can generate with immigration, and 100s of million more in net talent. Less people also alleviates import dependency, PRC with 1B (400M less) people would have substantially more strategic space to operate. It works towards close relative power potential. CCP wants to smooth out the pyramid with more births for better managed transition, which structurally/culturally PRC with some of the highest house hold savings rate and minimal expectation for safety net is positioned to weather, but long term PRC comprehensive national power is best improved by having less net people, with more % skilled people.
Yes the Chinese population is becoming more skilled, but I think you're underestimating how much of a drag on the economy and aging population is. Old people don't innovate and require much more healthcare spending. They also cause heavy burdens on their children/grandchildren who must take care of them (see the 4-2-1 family structure).
There's also a lot less juice to squeeze out of urbanizing the population which is what drove a lot of GDP growth in the past few decades. About 65 percent of the population is urban now and the rate is starting to level off.
> pretty hard to make the case
It's easy when drastic decline in population leaves behind a still massive country, with more productive potential and less security vunerabilities - PRC's future strategic posture will improve with respect to US relative to where PRC is now. PRC pop projection is 1.4B to 800M by 2100 in geography can barely sustain current 1.4B (1/3 of country is desert, 1/3 is plateau), with central gov working over drive to free agricultural resources in crowded 1/3 that's left. 800M is still an incredible amount of people for internal market and global competition. If higher % of population becomes educated/skilled over generations that in aggregate PRC will have more skilled labour pool with 800M than current 1.4B, then IMO she would be significantly better positioned geopolitically. It's still 200M more brains / bodies than US pop projection in 2100. 800M with current electrification efforts is PRC with feasible energy and calorie security, and combined with hammering automation at current rate, much more productive capacity.
>underestimating, urbanization
First important to recognize PRC currently has 600M+ of excess, relatively unproductive mouths that's taking up already scarce resources. Cohort skews old, are undereducated, unskilled - the ones left behind by modernization. The PRC demographic decline narrative vastly overestimates how much innovation / productivity this cohort of aging out demographics were / are capable of. ~600M in informal economy making subsistent tier ~2000 USD per year, bluntly they're excess people that doesn't substantively contribute to development let alone drag on economy by being even less productive when they retire, assuming they can. 100s of millions are already economic drag by merely living - part of reason why SOEs are so inefficient, or Chinese agriculture so labour intensive (200M+ farmers) when PRC only really needs 1/50th that amount with mechanized equipment, is to maintain 100Ms of make work jobs for folks that simply can't be integrated into modern economy. They're being replaced by new gens who can. Since 2000s education reforms, PRC has been generating 10-20 years worth of pre 2000 talent per year. They're the one's doing the high tier innovating and growth. Really look at SKR, JP, TW, all have grown developed to advanced economies while having terminal tier TFR simply by new generations being disproportionatedly educated / skilled. Even the economic case for integrating / urbanizing these unproductive corhorts are poor, urbanization drives growth when you're clustering productive people. Real reason to herd them into cities is short / medium term, state needs to consolidate land to improve food security, because again, too many mouths.
> healthcare, dependency ratios,
PRC has one of the highest home ownership / house hold savings rates, elders from poverty era culturally know they need to largely support themselves and there's little expectation for comprehensive safety net. Western analysis seems to project expectation that PRC would be crushed by welfare burdens like currently in west with typically onerous welfare systems with increasingly poor long term prospects, the reality is, most Chinese will simply make do with very little state support. Like most of humanity throughout history. PRC will have to accept life expectancy in high 70s (about US level) vs pouring in resources to reach low / mid 80s. Old also knows how to "eat bitter". That said there's plenty of room to up current 6% of GDP healthcare spending.
Sizable % of single kids will get dragged into support family, but this is where income disparity mitigates issue because burdens between rich (educated/skilled) and poor will be different. Folks doing strategic / important work that advances country up value chain and make decent money likely got their because they're priveleged and likely receiving end of support, or they weren't which means their high income will stretch far assisting family back in tier 3/4+ cities. These folks aren't going to be quitting fancy jobs to caretake. They'll pay for help or if it's anything like hollowed out country side where youth left, old people take care of each other. PRC still has lot of communal cultural elements that makes these kind of grass root social systems possible (also see how people organized for zero covid). Burden is going to be disproportionately shifted on that massive underclass, who again bluntly, don't substantively contribute to development / or the components that will increase national power. Really not too different from west. 1% does very well, top few quartiles do well, rest struggles. There's also considerations like when the 4-2 dies, multiple inheritences will go to the 1, and there's prediction of consumption and baby boom when resources eventually concentrate, which will be in the already affluent, talented and productive cohorts. Big reason PRC is having problem pivoting into consumption economy is savings redirected for nest eggs.
Trend last few years is PRC closing gap and approaching parity in indicators like GDP (already exceeded by PPP), % of global gdp / trade, science and innovation indexes, value chain upgrades etc. Even PRC military development and diplomacy is sufficient to get countries hedge / not commit to US alignment, which was unthinkable 10+ years ago. IMO US will find it difficult to maintain relative "lead" when, in the words of state department, "China is the only country with the economic, diplomatic, military, and technological power to seriously challenge" US order. That said, I think US has headroom via dictating economic and geopolitics within her relatively wealthy bloc and grow at the expense of others.
>It is unknown whether the CCP can survive any meaningful slowdown in growth and whether much of the growth of the last 10-15 years (enormous empty cities) was substantive or useful at all.
Western fixation with PRC real estate waste as proxy indicator of China (econ) collapse is particularly stupid. It's like suggesting US who spends ~20% of GDP on healthcare (approximately PRC real estate) with suboptimal result is spinning development wheels. Same with PRC wasting a few trillion in suboptimal real estate when significant (majority) resources being invested to bring up other (above) indictators that has substantively contributed more to PRC "comprehensive national power". Like US isn't initiating unprecented PRC containment policies because of a bunch of empty of housing units.
Certainly doesn't seem this way when you visit Japan. Sure, they haven't experienced wildly growing excessive consumption like some American states in the past couple decades, but their society is far from undergoing any sort of collapse.
Using the yellow vests as representative of "southern workers" makes me doubt how well you've researched this answer. Paris is hardly in "southern Europe", and the rest of the southern European countries have retirement ages comparable to those of the "northern savers".
I don't think anyone who has seen the development in China over the last 10-15 years first-hand would say this.
There has been massive development in nearly every area, both in quantity and quality. Just to give one example, anyone who follows the scientific literature in just about any field will be aware of the massive increase in high-quality publications coming out of China over the last decade.
There are one or two examples of "ghost cities" (though most supposed "ghost cities" actually become populated over time), but that doesn't negate the massive, real development that is visible everywhere in China.
Hmmmm immigration. That's how fast growing powers have always done it.
This is where America wins. There is no American ethnicity. There may be, historically. But mythologically: no.
Even still, the US is much less homogenous than germany. A variety of cultures is not a problem.
Sad that nobody has been able to come up with something better that doesn't involve "infinite growth".
https://old.reddit.com/r/politics/comments/104vin7/discussio...
To assume logic will prevail in a system with a substantial emotional component is a dangerous assumption.
Coca Cola has made and kept its fortune by successfully associating a syrup that is bad for you with Pure Happiness.
Marketing, media exposure, and subliminal messaging both turned Americans completely against weed from the 70s-2000s and then also now completely in support of weed legalization in the past decade.
Similarly, as we’re seeing play out today, the right has found success marketing the “danger” of drag queens to turn political opinion against the LGBTQ community, which itself gained overwhelmingly acceptance in the face of once-overwhelming disapproval by powerful self-determination and taking control of how they were portrayed in the media.
The same forces that convince people en masse to buy a certain brand can just as easily be used to affect how we view any political issue.
Companies in the S&P500 index are based in the U.S., but most of them earn revenues internationally as well.
"Roughly 40% of S&P 500 revenues are generated outside of the U.S., and about 58% of Information Technology company sales were sourced from abroad."
Source: https://www.globalxetfs.com/sector-views-sp-500-sensitivity-...
So, the performance of the U.S. stock market in the next 150 years will not rely solely on U.S. specific economic growth.
I know Apple does this https://en.wikipedia.org/wiki/Double_Irish_arrangement#:~:te....
I just wonder, can they really not find a more favorable country to route the gross of their revenue through?
The number one way that Apple benefits from this is giving shares to employees as compensation, right?
They aren't commonly "financing" projects with stock as far as I understand it. aka, they aren't diluting existing shareholders by issuing fresh shares to take advantage of the share price.
Since they aren't doing that, how do they benefit financially from their share price?
Compare this to some partnership or other private structure where owners may be unable to exit unless they can force the company to liquidate some assets to buy them out. Companies and investors who work that way can face liquidity hazards compared to a similar-sized stock corporation.
There are a lot of benefits of being incorporated in USA / Delaware.
2. Mature financial system
3. Investment dollars
4. Talent/where talent wants to move to
5. Aligned values with California home base
6. USA represents their largest market for their products
7. The cost of moving
8. Cultural connection to where a company started
9. Existing investment in headquarters/infrastructure around the country
10. Political clout that being a US company provides
11. Network economics of being near other big tech in Silicon Valley/Austin/New York campuses
Singapore is pretty much the only option in SE Asia and the money keeps flowing in.
But the advantages have be very large for this to be worth it. The U.S. is a great place to do business in many ways. And as you noted above, U.S. companies can still get a lot of "foreign" tax benefits by shifting assets around between foreign subsidiaries (Apple's Irish trick for instance).
There are also emotional complications. A company like Apple is not just headquartered in the U.S., it is tightly coupled with the U.S. cultural identity. Moving out of the U.S. would break some of those ties, with resulting harsh consequences for Apple in politics, culture, retail sales, maybe even employees. You can look up what happened after Burger King moved... people were pissed.
So the short answer is, they started in the U.S. and staying here has a lot of benefits, while moving would come with high costs and somewhat unpredictable risks.
https://www.sec.gov/Archives/edgar/data/320193/0000320193180...
Apple Computer Trading (Shanghai) Co., Ltd. China
Apple Distribution International Ireland
Apple Europe Limited United Kingdom
Apple Japan, Inc. Japan
Apple Operations Ireland
Apple Operations Europe Ireland
Apple Operations International Ireland
Apple Sales International Ireland
Braeburn Capital, Inc. Nevada, U.S.
It gets confusing to me as somebody "not in the know" on domestic/international business law/practices.
https://archive.nytimes.com/www.nytimes.com/interactive/2013...
> According to a report by a Congressional panel, Apple has avoided billions in taxes through the use of international subsidiaries.
> Apple has subsidiaries in Ireland where the company has negotiated a special tax rate of 2 percent. These units contract with manufacturers to assemble Apple products, sell the products to other subsidiaries for distribution, and return the profits up the chain of companies in the form of dividends. But some of these subsidiaries do not have a stated tax residence and pay no taxes at all.
This is from 2013 so I'm sure it's out of date-ish.
> These 3 subsidiaries are incorporated in Ireland, but have no country of tax residence
Looks like what I'm looking for is "country of incorporation and tax residence"
Seems like companies can choose to "file/create" their corporation in any country, then have miniature "subsidiaries" (is this the right word) in various other little countries.
It does not need to . What matters is how much profits large companies are earning. There is no indication that profits are slowing. Even if GDP only grows at 2%/year, if multinationals generate 10% annual profit margins, that is $ that must still go to investors even if GDP growth is much lower.
When you compare foreign markets to the US, the US still comes out ahead by almost every metric. There is little indication to suggest this will change. Every problem that the US has, other countries have worse. So relatively speaking ,the US still will be ahead.
I don't think that's required. Most of these analyses use US stock data because it's so easy to gather compared to international data. The do trends hold internationally, but the magnitudes are reduced. So if you think the US will regress closer to the international mean (and I'd agree) then you can use things like the shape of the bell curve, just not the height. And indeed, this bears out if you look at the markets of the UK or most of the EU. Pretty much any reputable adviser will tell you that that's the consensus, that future returns will probably be lower for the next few decades than they were for the last few. (Usually you see this in the media amplified to a more ridiculous version but that's modern clickbait reporting for you.)
There are other possibilities like we could stagnate for 3 decades like Japan. But yes, that's investing, that's the nature of the bets you're taking.
I'm having trouble finding the quotes but around the turn of last century British economists were looking at the US's explosive economic growth compared to the UK and attributed it to the US having the equivalent of a sudden injection of capital in the form of a whole continent full of free real estate. That is, they reasoned that the UK's growth was limited to what they could do on their existing, mostly already owned and developed land but the US had more physical space for the balloon to expand into. They reasoned that soon that would happen though and the US would grow to fill that space and eventually its economic growth would slow down closer to the UK's. That clearly didn't happen then. I don't think the lesson is the US is exceptional and will continue to outpace the world forever, but I do think that a lesson is that predicting this stuff is hard and reasonable-sounding ad hoc hypothesis don't always bear out.
Over the next 150 years I have no idea. But over the next 30-50 then almost certainly. No other country is even close and most seem quite comfortable with the global state of affairs all things considered. USA hegemony has created a stable world where the vast majority of people are far better off than their ancestors. It isn't perfect of course but there's no reason to think anyone else would do better. Especially when compared to the previous tenant, Europe.
Of course the whole world could go into a multi-decades-long recession, but then we’ll have much more serious problems anyway.
If the world did go into a multi-decade recession, what “more serious” problems would you have then your investments doing poorly?
You might answer things like “ buying food due to shortages” or something, but surely whatever problem you name, being more rich is going to solve it?
Now you can invest on the thesis that this isn’t going to happen, but to argue that the whole concept of investment is useless if it does seems very suspect to me.
Being rich only matters as long as your investments/assets hold any value. If truly serious problems around your investments go to 0, your assets are only worth something as long as you can maintain control of them (police won't be around, nor will judges be) and even then your car will be worthless without gas.
It all depends on what meaning a person assigns to "serious" in this context. Personally as long as being rich solves my Problems I wouldn't describe any situation as serious.
Also, as long as poorer people are not after you and your properties (and your life, even) through a revolution, which revolution could be caused by world-wide economical and societal crisis (if not a revolution then maybe a civil-war where the rich are of the wrong ethnicity etc)
> To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior.
This is why it's suggested that unthinking mechanical investors invest globally, not just in the US. For example, VT, a single set and forget index fund has 40% international exposure. That's to speak nothing of the S&P 500 companies that do business internationally.
As an example that supports your point, the Japan stock market (Nikkei) peaked in 1989 and STILL has not returned to that high.
However, even if you were incredible unlucky and had bought in at the 1989 peak in Japan, if you had an internationally diversified portfolio, you would be OK. E.g. a 30/30/20/20 Jp Stocks/Intl Stocks/Jp Bonds/Intl Bonds portfolio purchased in 1989 at the Nikkei peak would have more than doubled by 2014 (see here: https://www.bogleheads.org/forum/viewtopic.php?t=265807 and also https://www.afrugaldoctor.com/home/japans-lost-decades-30-ye...).
Also, the FTSE 100 has been almost flat since the financial crisis, so basically just a little over 10 years. It was at about 6300 in the first half of 2013, it's at ~7700 now, a ~22% return over 10 years is nothing to write home about. For comparison the SP500 was at ~2300 in the first half of 2013 vs ~3800 now, a 66% return. And that's after last year's 23% decline.
The S&P 500 is not everything there is to be had...
Stock market success depends entirely on when in history you got in and got out. When it comes to US dominance over the next century - who knows. I do trust in Fed interventionism and willingness to print money - so that certainly favors stock market investment.
Personally I find stock market is too high a variance and I prefer not speculate with money I can't afford to lose.
Buffet himself said their biggest peak to trough was 50%. Fine if you're already rich and investing a fund. Not so great if it's kiddos college money.
There is probably more at play too. The number of banks, for example, has been declining steadily over time [1] as has the internet allowed single corporations connect to more buyers (nationally and internationally). Just think of all the local stores that Amazon has displaced.
[1]: https://www.stlouisfed.org/on-the-economy/2021/december/stea...
If things go badly then the money I would have from not investing "mechanically" would probably be as useless as the investments. If everything is going to decline continually it seems the greater reward will almost always be in the investment. This also assumes you only invest in the current world superpower, seeking global diversification would probably be wise if you see a major change in polarity.
I really think millenials should consider hedging their bet, maybe even spend 100% of their income.
Maybe, but this describes the investment strategy of pretty much every index-based fund and they've been the big winners over a long time frame. Why do you care what happens to a market 100+ or even 50 years from now?
If some other superpower does come around you could just try to find a foreign index fund and adjust your investments.
[1] Actually, is this literally true?
Would also be good to compare to CPI to understand real returns. Or whatever other number seems to be a truer measure of inflation (house prices, for example).
And even then, you don’t have to be the dominant superpower to see a rising stock market. Plenty of examples of smaller countries who have seen substantial market gains.
I’m sure given an investment in Argentina’s stock market in 1900, it would have now been lost many times over.
For example, Spotify is a Swedish company listed on the NYSE.
The qualities of the U.S. that helped it become a superpower, also help it have a high-performing domestic economy.