I’m waiting for the market to open in Asia tonight, the first trading day after the Friday night downgrade of America’s debt by S&P. If Sunday’s open of trading on Israel’s Tel Aviv Stock Exchange is any indication, Monday will more than likely not be a pleasant day for equities in the U.S. and Europe. Today, trading in Tel Aviv was temporarily halted after share prices fell six percent at the open on news of the S&P credit rating downgrade. This market reaction from Tel Aviv is not a good indicator of where Asian equities may open in a few hours, or Monday morning where the markets in Europe or America open.
More important than what happens with the markets this week, is what the long-term prospects for America are. I’d like to be optimistic, but I’m not.
In today’s New York Times, Thomas Friedman stated:
In the wake of the hugely disappointing budget deal and the S.& P.’s debt downgrade, maybe we need to hang a new sign in the immigration arrival halls at all U.S. ports and airports. It could simply read: “Welcome. You are entering the United States of America. Past performance is not necessarily indicative of future returns.”
Because our country is now finding itself in the worst kind of decline — a slow decline, just slow enough for us to keep deluding ourselves that nothing really fundamental needs to change if our future is to match our past.”
Over the years Friedman has taken a global perspective in his books, columns and television appearances. But today’s column is not one of optimism for America’s future, but instead a very pessimistic view. (Check out his full column at http://www.nytimes.com/2011/08/07/opinion/sunday/Friedman-win-together-or-lose-together.html?ref=opinion.
Those that believe that America will succeed in resolving its economic problems because of a position that “America is America,” have to also deal with today’s reality. America is on borrowed time. America’s continuing to place its future and that of its children in the hands of foreign holders of government debt is a disaster waiting to happen. America’s foreign debt is held by many governments who resent the role of the U.S. dollar as a reserve currency, and for that matter what America stands for and America’s way of life. The implications are clear. The role of the U.S. dollar as a reserve currency will diminish over time.
Let’s hope that Washington will wake up to ”change you can believe in” having to become, “change that must happen now.”
Author: Jeffrey Friedland
Filed under: American Dream, Global Economy, Finance and Investments, Global Finance, Reserve Currency, S&P, Standard & Poor's, Thomas Friedman, U.S. Economy, US Dollar
