Thread: Developing nations challenge USA

Developing nations poised to challenge USA as king of the hill
Posted 2/8/2007





By David J. Lynch, USA TODAY
Globalization long has been regarded as a made-in-America phenomenon, driven by Silicon Valley's technology, Hollywood's movies and Wall Street's cash. But suddenly, countries formerly on the periphery of world events seem poised to challenge American dominance of this age of global integration.

It's not only that developing countries are proving to be white-hot investment opportunities, though they are: the Morgan Stanley Emerging Markets index gained 242% the past four years. It's also that emerging markets, once known dismissively as the Third World, are now central to Americans' lives.
Not long ago, these countries were of interest only to the Peace Corps. Now, everything from the financial lifeline that makes possible the modern American lifestyle to the identity of your next boss, customer, competitor or cultural trendsetter likely can be found in the developing world.

"We're in the middle of the biggest shift in 200 years — since the Industrial Revolution. It's really that big," said Antoine van Agtmael, the investment manager credited with coining the term "emerging markets" in 1981.

The new prominence of emerging markets represents a sharp departure from the flurry of financial crises that tore through Mexico, Asia and Russia in the 1990s. Since then, scores of developing countries have cleaned up their balance sheets, slashed inflation rates and accumulated enormous stockpiles of hard-currency reserves. China alone sits atop a $1 trillion mountain of cash. Russia, Mexico, India and South Korea also are swiftly building their cash hoards, according to Treasury Department data.

Developing nations have gone from beggar to banker. The U.S. must borrow enormous sums each day to finance the gap between its anemic national savings rate and its consumption. Increasingly, those funds — largely raised by selling Treasury securities — come from poorer nations.

Through November, the most recent data available, more than 29% of the $806 billion in net securities purchases came from developing countries compared with just 5% in 1998, according to Bank of America. The river of capital flowing into the U.S. economy enables Americans to continue consuming beyond their means. But some analysts find it worrisome that the world's wealthiest nation now depends on loans from some of the globe's poorest countries.
"The average American doesn't realize where this liquidity comes from. Capital is supposed to flow from rich to the poor," says Joseph Quinlan, chief market strategist for Bank of America.

For the USA, the danger is that an unexpected development could cause emerging nations to retrench on purchases of dollar-denominated assets. What could trigger such a pullback? A sustained oil price decline that pinches Middle Eastern oil producers, a global economic slump or an outbreak of protectionism in the USA, says Quinlan.

Consequences in the USA

For more than half a century, Americans could take for granted that the world economy would orbit around them. No longer. The USA today produces about 30% of world output at market prices. That figure already is down significantly from about 46% in the aftermath of World War II, when European and Japanese factories lay in ruins. And it is headed lower still as China and India continue their ascent.

Over the next generation, fast-growing developing nations are expected to see a significant uptick in their share of world output from 23% today to about 33% in 2030, according to a recent World Bank study.

That shift has enormous consequences for Corporate America. "The change is from globalization going one way to globalization going every way. It's as much about what developing countries are doing as developed countries," said Mark Foster, a London-based Accenture consultant.

Assuming continued economic growth in the developing world, the ranks of the global middle class are expected to triple by 2030 to 1.2 billion, according to the World Bank. Today, a bit more than half of that free-spending group resides in developing countries. By 2030, almost all of it, 92%, will call the developing world home.

For multinational corporations, that means paying ever more attention to what's happening outside the United States and especially in Asia, Latin America, parts of the Middle East and Africa. Procter & Gamble (PG) CEO A.G. Lafley said in a Jan. 30 conference call that in the past several years, the company has "added about 1 billion consumers" to the ranks of those who have ever used or purchased its products. "We think we can add another 1 billion consumers over the next three to five years, and most of them are going to come from developing markets," Lafley added.

In the most recent quarter, P&G's developing-country sales outpaced its overall 8% sales growth. Examples: Sales of Crest toothpaste rose more than 10% in Russia, while Duracell batteries posted a 20% gain in Latin America.

Likewise, at PepsiCo (PEP), two-thirds of revenue growth is coming from the company's international operations and 60% of that from emerging markets, says Michael White, chief executive of PepsiCo International. "We've seen a real, material change in the performance of our emerging markets, and I expect it to continue," White told a recent panel at the World Economic Forum in Davos, Switzerland.

Those aren't isolated examples. FedEx (FDX), Manpower (MAN) and Caterpillar (CAT) all report impressive growth in their developing-world business. By 2010, GE wants emerging markets to account for 30% of its sales, twice the current level. "America is realizing for the first time that globalization is a two-way traffic," says Azim Premji, the billionaire chairman of Indian software firm Wipro.

Trends from China?

As the developing world's purchasing power grows, it is likely to exercise greater influence over global tastes. To date, U.S. brands such as McDonald's (MCD), Nike (NKE) or Apple (AAPL) mesmerize overseas consumers. By 2030, when the World Bank estimates that the number of middle-class consumers in China will exceed the entire U.S. population, Americans might be on the receiving end of as many trends as they start. Zhang Yimou, not Clint Eastwood, might direct the world's most-popular movies. Fast-food dumplings might rival burgers and fries. "New fashions, new trends … are just as likely, indeed more likely, to start in China and India or Brazil as they are today (to start) in Europe or the United States," says Uri Dadush, director of the World Bank's international trade department.

That's in the future. But already, Americans are being affected by the rise of multinational corporations based in the developing world. Once regarded as second-tier manufacturers of shoddy goods, companies in the most mature developing countries are making their presence felt by acquiring companies in the developed world. From computer research centers in North Carolina to steel mills in Oklahoma, American workers are finding their new boss often hails from far, far away.
Among the best-known acquisitions: Chinese computer maker Lenovo's 2005 purchase of IBM's (IBM) personal computer business. But there have been plenty of other deals.

Last month, Mexican bank Banorte bought UniTeller, a U.S.-based remittances company. That deal came two months after Banorte snapped up INB Financial of McAllen, Texas. Russia's Evraz coal and steel producer in January completed its takeover of Oregon Steel Mills of Portland, Ore. And in June, Brazil's Gerdau Group acquired Sheffield Steel of Sand Springs, Okla. European companies, too, are in the cross hairs: India's Tata Steel earlier this month purchased London-based Corus.
The dealmaking is among the first visible signs of the growing clout of emerging-market multinationals. In his new book, The Emerging Markets Century, van Agtmael profiles 25 companies — such as Mexican cement maker Cemex, whose U.S. operations produce more cement in the USA than any other company, and Indian generic-drug maker Ranbaxy — that qualify as genuine global powers.
To many Americans, the notion of innovative, market-leading companies based in areas where widespread poverty and disease still hold sway might seem extraordinary. But van Agtmael notes that, in fact, it was the Western world's 20th-century economic dominance that was unusual.

For centuries, trade and commerce were rooted, not in the USA or Europe, but in more distant parts of the globe. In 1820, for example, today's "developing" countries were the acknowledged economic powers, accounting for 68% of the world economy, according to economic historian Angus Maddison. As late as 1870, the Chinese economy was almost twice as large as that of the United States.

Viewed from this vantage point, the contemporary emergence of countries such as China or Brazil represents less a new phenomenon than a reversion to history's norm.

"We still hold onto notions that are dear to us but wrong," says van Agtmael. "We will not always be the center of the world."

http://americaneconomicalert.org/news_i ... ID=2479359

Russia is now rebuilding its military, china has a bigger military than the US. Many of the former third world countries have control over America's oil. china has control over America's treasury. Illegals are controlling America's jobs, food industry, construction industry, and have many jobs on military bases and in federal government. DHS hires illegals. DOJ believes drug smugglers over border agents and lies to congress. Our President gives away America rights in free trade agreements and allowing anyone to break our laws (or yes Americans cannot break the law). We have politicians that believe the Air Force is just a commuter airline for them, their families, and their friends. The Army is forced to defend a country divided in civil war. We spend billions in foreign aid to have countries receiving the aid just laugh at us. America like Rome did is beginning its downfall.

Lets stop all handouts, it does us no good. Let's secretly stash our money, pretend that we are poor and let other countries take care of us for a while. Not only do we give money through our taxpayer dollars but we are also a generous nation who gives freely of our time and money in other ways. Let's see other countries do that.

Originally Posted by Neese

Lets stop all handouts, it does us no good. Let's secretly stash our money, pretend that we are poor and let other countries take care of us for a while. Not only do we give money through our taxpayer dollars but we are also a generous nation who gives freely of our time and money in other ways. Let's see other countries do that.

I have a feeling Americans will stop a lot of overseas charity, as our government keeps giving Billions to them.....I can only speak for myself, but my charity belong to the USA from now on!

Originally Posted by moosetracks

Originally Posted by Neese

Lets stop all handouts, it does us no good. Let's secretly stash our money, pretend that we are poor and let other countries take care of us for a while. Not only do we give money through our taxpayer dollars but we are also a generous nation who gives freely of our time and money in other ways. Let's see other countries do that.

I have a feeling Americans will stop a lot of overseas charity, as our government keeps giving Billions to them.....I can only speak for myself, but my charity belong to the USA from now on!

I have done the same, and I am even much more skeptical of giving here in the US. The last time that I gave to the Red Cross, you know at the end where it flashes the confirmation that the transaction went through? It had the word "Pakistan" in it for some reason. I wasn't donating to Pakistan. Between that, and the Red Cross sticking their nose in the Gitmo deal, they are off my list.

Neese,

The Red Cross was always off our list....seems something happened in Vietnam that turned my husband and most vets against the Red Cross....he hates them.

We Americans have always been so good to give when a disaster hits another Country, but I really have a feeling American worker's compassion has worn thin...I know mine has.

When foreign leaders, such in Mexico, won't help their own, but want us to change our laws to help them....nope...I've lost my compassion.

Originally Posted by moosetracks

Originally Posted by Neese

Lets stop all handouts, it does us no good. Let's secretly stash our money, pretend that we are poor and let other countries take care of us for a while. Not only do we give money through our taxpayer dollars but we are also a generous nation who gives freely of our time and money in other ways. Let's see other countries do that.

I have a feeling Americans will stop a lot of overseas charity, as our government keeps giving Billions to them.....I can only speak for myself, but my charity belong to the USA from now on!

But this is where the lack of understanding of the nature of our monetary and debt system confuses most people. Because our "money" is not predicated on actual value, but rather upon IOUs, we aren't really giving anything; we are merely entrapping other parties with our debt.

Allow me to explain.

Let's say that you have five dollars in your pocket, but your next door neighbor and everyone else in the neighborhood thinks you have money. Your neighbor asks to borrow some money, so you convince him to take a marker (an IOU) that "everyone" knows you're good for. So you write out an IOU for $100 (or maybe ten IOUs for $10 each) with the stipulation that he has to pay you back out of his paycheck within a year, plus $10 extra for your trouble.

Your neighbor passes the IOUs around and at the end of a year he gives you $110. Since all you ever had was $5, you just made out like a bandit.

Now the worst thing that could happen is that one or another of the people who got paid with one of your IOUs comes back to you and asks for actual payment of the IOU. Even if you had to shell out real value for all of the $100 worth of IUOs, you still started out with $5 and ended up with $15. The deal has worked so well that you do it again. And again.

Pretty soon the area is so flooded with your IOUs that they represent the majority of the "money" being circulated. So you institute some new stipulations. First, repayment to you of your original IOUs must be made with actual money or equivalent value in precious metals. Second, you are not required to issue equivalent value to people who are paid with your IOUs. Pretty soon, you have all the real money and gold and silver, and everyone else is having to trade worthless paper. At that point it doesn't matter whether people are able to repay the full amounts that they borrow from you because it doesn't cost you anything to write out fresh IOUs which you never have to settle.

This all works well until you start trying to trade with someone from another neighborhood who uses that neighborhood's money. If you have so many of your own IOUs flying around that they are easy to come by, their value decreases relative to that of the notes from the next neighborhood. So you have one of two options. You can either settle for having a very high exchange rate of your IOUs against their notes or you can try to get more people to take your notes so that demand is higher and relative exchange value stays high. Get it? Since most prosperous neighborhoods don't need your IOUs, you get the poor neighborhoods to take them. After all, where else are they going to get cash that can actually be spent? Oh sure, those guys are a risk and they probably will repay only a small amount of the amount borrowed, but since you just wrote those IOUs out of thin air, it doesn't matter. You're just trying to create demand for your notes and to increase their share of the overall market for currency. Because those poor neighborhoods do business with the wealthier neighborhoods, your notes begin to infiltrate those neighborhoods as well. See how that works?

What I have described is the fraudulent system by which the Federal Reserve and its phony money operate. When the Federal reserve was first created, we still had and were supposed to continue to have real money in the form of gold coins, silver coins, backed gold notes and backed silver notes. Within fifteen years, the lenders of the phony IOUs had gained control of virtually all of the gold and gold notes. Within fifty years they also owned most of the silver and silver notes, which is why your coins are worthless junk metal slugs. Pennies aren't even copper any more. There are no backed paper notes, just IOUs carrying interest, wich means that they are steadily devaluating at such a rate that they cannot mathematically be repaid. Nice, eh?

Because the global bankers understand how our fiat system and that of other countries work, the value of a nation's notes are predicated on control. The more economies are entrapped by our debt, the more debt we are allowed. The problem is that we are starting to run out of new customers.

But this is where the lack of understanding of the nature of our monetary and debt system confuses most people. Because our "money" is not predicated on actual value, but rather upon IOUs, we aren't really giving anything; we are merely entrapping other parties with our debt.

You're right Crocket, the US is in over their heads financially. I would not be surprised if China took us over before the NAU. But in the meantime...
if anybody would like to entrap me with their debt, please send all donations to:

Neese
c/o ALIPAC
PO Box 30966
Raleigh, NC 27622

Have a nice day.