The Great Crash of 2008
Foreign Affairs came up with their analysis of the Great Crash of 2008. I can see a few thesis being written around this and careers being molded. There’s nothing that much new in their analysis of the events. But there’s something that bugs me, and I would like to throw it out in the open and straighten the kinks out in the thinking somehow … because if you remember, the fundamental question for me is what is the nature of future demand? and from that will spring the other possible frameworks of future trade, human capital flow, etc…
Remember the first video was ‘Rise of the Rest’? But as Thomas Barnett pointed out, there is no such thing as an independent ‘Rise of the Rest’. China and India’s rise predicated on exports to the G3, especially USA. USA consumption is 70% consumer based, and for the past 10+ years with easy credit, mortage loans, credit card borrowings based on the inflated values of those houses … and it all comes crashing down, that has vanished. Juan Enriquez’s video at Poptech pointed out that with all the off balance payments to Social Security, two wars etc the US govt’s revenue would be exceeded by mandated payments by 2030, and by borrowing another trillion dollars for the crash, that day of reckoning has been brought forward by 15 years to 2015. That’s not very far away.
My question is, “Is this cyclical or structural?” If it’s cyclical, it’ll be back to normal after 3 years of digesting. China will lend the USA money in the hope the whole system continues and US demand continues to fuel China’s rise. If it’s structural, and US demand fundamentally changes nature, no more consumer led behavior, then what happens to China, India etc?
Michael Porter argues that as long as the USA maintains its core lead over six areas (entrepreneurship, VC market etc), it will continue to be a source of growth. And I see comments from R Florida’s Creative Class blog that employment data shows non-creative class jobs being cut drastically, while so far creative class jobs are largely unaffected. Is the creative class enough to fuel growth?
So right now where I am is I don’t have a handle on how it might branch out here, consumer led consumption comes back? entrepreneurship+technology led growth continues? Just some thoughts rattling around.