Ponder this, please:

[rhodie]

All things being equal, let's assume that Globalization continues. Many macroeconomists view this as the great "leveling of the playing field", in the sense that America will experience dramatic wealth deflation to a level around the average of the rest of the world.
This means wages will go down. So too will the cost of living, but not at the same proportion as wages will. Deflation is a mother.

So vision an America, maybe 15 years from now, where all of us are working in the new "adjusted" economy, making less money and buying less stuff.

My question: What happens to those people, who upon reaching retirement age need to sell stock for retirement funds? Those people have expected that their portfolio will be worth x% more at retirement age than when they initally invested. If Americans at large are making less money, who in the world will be there to purchase the stock at an inflated price required by the sellers?

Please correct me here, but it looks as if the stock market is a futile place to invest for retirement. Foreign investment in this country won't last forever. Those investment dollars will move to other countries where wealth is being inflated, not deflated.

*

http://www.imf.org/external/pubs/ft/def/2003/eng/043003.htm*

I would really like to read your thoughts on the matter.

 

[swertel]

Alan Greenspan will not let deflation occur. It is detrimental to not only the US's local economy, but the worlds also. If anything, the US will not see inflation or deflation. Rather, our wages will stagnate and although retirees will not have X% more than they expected, they won't have much less either. Also, the US has shifted industries many times in the past. That is essentially what is happening here. First factory workers went overseas, not technical programs are. The US is just redefining its major industries and it will take a while for the economy and unemployment rate to catch up.

Have no fear, American arrogance works in our favor, that's why we allow it to happen. We will not allow ourselves to be less than number 1 in world power. (Now before I get flamed, there is a reasonable observation as to why I say these things, but the full explanation is much too long and would still leave confusion unless spoken in person. I can try to elaborate to those who request it, but please don't flame me for these remarks.)

--Scott

For some pleasure reading, the Round Table recommends FAQ731-376

 

[pablo02]

Ol' Al won't be around another 15 years -- and I suspect we'll get someone who grew up in the '80's in his place who lacks and does not appreciate the experiences gained from the '30's, the late '40's, the late '50's or the mid '70's...

I heartily agree with rhodie -- I predicted 10 years ago that the middle class in the US will eventually disappear as those with money continue to tear apart the living standard we used to have... (they continue to be adversely affected by their greed)

 

[pablo02]

I once read that there are only 5 activities that create wealth -- all the others will just redistribute that wealth -- those being: farming, fishing, lumber, mining, & manufacturing -- the US was blessed with abundant resources and capable minds to utilize all of these activities (albeit to some detriment to the environment) -- so, as these activities continue to be shipped elsewhere, the wealth of this nation will decline for the vast majority of us...

 

[Binary]

The retirement thing is very concerning to me. All of us with 401k's have been sold a "bill of goods" as companies have moved away from defined benefit pensions to 401k's. My brother-in-law is a firefighter who will retire, with medical bennies, at 90% of his highest salary. That ain't never gonna happen with a 401k.

Without something like a 8-15% compounded return, you'll never be able to save enough to live off of. For those of us who're going to get screwed out of SS, there's going to be a huge problem.

All that said, it seems like the multinational corporations will continue to be profitable because they are creating new markets as they create new wealth in the 3rd world. So, there should be some big companies that at least pay dividends to their stockholders.

I don't think they'll be able to sustain the stock prices as they are. Of course, I'm *still* in the market because I'm forced to gamble on a high return, just in case.

Rhodie, I think I'm going to stop reading your threads! Ok, not really but they do freak me out and sometimes I feel like I'd rather be an ostrich 'cuz I don't really see what to do about it.

 

[rhodie]

Binary:

I know exactly how you feel. I get so engrossed in the problems of the state of the world, I periodically just shut everything down and ignore any new information. But then, I start thinking about the stuff I've already learned/read, and it festers in my brain and I end up thinking about it anyway.

I'd venture to reason:
Rule No. 1: Ignorance IS bliss!
Rule No. 2: Permanent bliss is unattainable. (viscerally or physically)

Therefore: Permanent Ignorance is unattainable.

I'd really not like to think so pessimistically, but I really can't help it.

All of your comments on the above topic are appreciated.

------------------------------
swertel:

Also, the US has shifted industries many times in the past.

But never like this. A "shift" never displaced 4 million jobs in five years. (That rate is quickening, too.)
Industry had better come up with another cash cow quick!
We've never been tasked to weather anything resembling the scope of this problem before.

We will not allow ourselves to be less than number 1 in world power.

That echoes the attitude of ancient Rome many centuries ago.

 

[DJKeng]

By the logic in the first thread one could spread out their 401k investment more-or-less eavenly throughout US and global markets and expect to have a good return over time.

Also, many companys are now multinationals already. This means that their current value will only go up as the rest of the thrid-world and second-world become consumers of their products.

i.e. spread out investment now if you truley believe this globalization will happen.

 

[rhodie]

DJKeng

Stock is only worth what people are willing to pay for it.

If people are unwilling or unable to pay for your retirement portfolio, then all you own is an asset in an extremely unliquid form.

 

[DJKeng]

I think I see what your point is.

A miniature example of the process of globalization that you're describing might be a comparison of Germany before, during and after reunification. Would you agree?

I don't know to much about how the reunification went except that the West Germans disliked (fiscally) the immediate results. But in the end havn't all the boats risen?

A more extreme example might be when and if N & S Korea merge. There would definetly be a period of adjustment for the S Koreans.