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Spend or Save?

April 17, 2015

I was sitting with three smart friends this afternoon at a coffee shop by the Marina discussing the US economy. I have a section in my book on investing called Americanism. Of the three I was the only one that was 100% sold on the American economy. They asked me why I was so sure, after all there are many economists and commentators who believe the US economy is heading toward a 2015 recession (possibly every 7 years), depression (never again because of legislation) or  China economy leaving us behind. The year I wrote about Americanism Obama became president and the DJ was at 9000. Today the market is at 18000 and I made enough money to dance. How do I have the 100% confidence where to put my money that my friends don’t have? It’s simple, there are 2 underestimated documents written in human history that I studied to the hilt, almost at the level of understanding required by a PhD. One is the US Constitution because I was an immigrant (the second document I won’t tell you unless you give me a good reason you want to know). That American Constitution is so goddamn secure and permanent that any investor in the world knows that his money is 100% safe only in New York! My friends didn’t realize that China sells its products and services in the US to the tune of five trillion dollars! The Chinese take about 20% of the money to build infrastructure in China that employ Chinese workers and improves their standard of living and sent the rest of the money to buy stocks in American companies listed in NYSE. The companies can now use the extra cash to hire Americans to build great infrastructures! Furthermore, Americans are smart because they don’t save. They go to Chinese banks for the rest of the money that wasn’t sent to NYSE. They borrow that money for interest payments the Chinese can’t refuse and use the money to visit Shanghai and Paris and Hawaii and have a good time for peanuts. Now you know why Americans always have more money than other people. They borrow, invest, buy goods and services and in the process raise a great standard of living, while helping the Chinese do better too. Now, this wonderful process started happening in india and other countries but not in Japan! The poor Japanese, they can’t shake off their fear of taking risk. In Japan this great economic process of consumerism (spend all your savings) failed. Why? Because the Japanese, either by culture or pessimism,  love to save and hate to spend. In fact, in Japan you get punished by the government if you save too much! They know that growth means spending in general and exponential growth means spending on schools and infrastructure, but they can’t do it. They try to copy the Americans who never save, but they can’t. Why? Oh well, it is human nature that what is simple to do is the hardest to do –  to be simple!

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