Asian Tigers vs American Economies

The stock markets of the world moved in near lock step with the DJI early this week and have continued the same for the most part. The chart above compares the value of Real Estate Investment Trusts of North America and Asia. The Asian and Pacific REIT remain at a higher level that those of North America. However, note that the trends are almost identical. Thus, we find the movement of each is in concert with the other similar to that of the stock markets.

There is little doubt that we are experiencing a interlocked world economy. The Asian economies are growing at a more rapid rate than ours here in America, but I suspect that all will move together. All are based upon the vast liquidity produced by the central banks of the world. In such a situation growth in terms of the Gross National Product of each nation comes from the inflated money supply and is measured by the total of the currency spend in each economy. There is little concern with the fact that the resulting price inflation has artificially created the reported "growth."

In a free market economy, which does not exist in the world today, produces economic use of scarce resources to ever more efficiently utilize the resources to improve standards of living at lower prices. In other words, true economic growth is evident in an actual increase in the wealth of a nation. In such an economy, there is no need to inflate the money supply to "produce" growth, it is a natural result of the free market.

Politicians and citizens educated in Keynesian Economics fear the free market. They see that the free market punishes producers who fail to supply the consumers' needs at the best quality and price. The unprofitable producers either change their ways, produce better less expensive products or services, find another product or service, or go bankrupt. The bankrupt business leaves the market place, because it did not make the most efficient use of scarce resources. Observers see the "loss" of a business, the tax income therefrom, and the loss of jobs. However, the workers will find secure employment in the more efficient businesses. Perhaps, some will become the efficient entrepreneurs with their own businesses. This is all part of the "invisible hand" of the free market as Adam Smith wrote long ago in The Wealth of Nations.

Back to the Markets: Gold is above $900 hitting almost $925 earlier this morning and is now at $912.70. Silver pushed $16.60 and is now at $16.37. Both have recovered quite rapidly as the dollar is under more pressure with the Fed's panic cut in interest rate.

The DJI are almost even on the day at 12371+, down about 9. The general market has been highly volatile as have the precious and base metals. The S&P 500 is down about 1.50 to 1350.52.

Though we are experiencing dangerous times in all markets, they remain interesting and exciting. I believe it is time to get out of debt, accumulate some cash for emergencies and emphasize precious metals, mining stocks, and resource stocks for preservation of capital. It is interesting that the energy stocks are currently down. Possibly, this is a warning that recessions are here or on the way. After all, in recessions, there is likely to be less need for energy, and for that matter, base metals, as well. I believe we are in recession already.

Praise that Lord that He cares for His people. It is also wonderful that He even blesses those who are not His through the blessings He has for His own. We are to share the light of His word and become the salt that seasons the world.

Best to each, Doug