Friday, June 6, 2008

Business and Economies

Here is a recent reply to a friend that is an avid Ron Paul supporter and feels that the U.S. economy is going to fail soon due to the large amount of debt that America has amassed. Although I believe him somewhat, I also believe the following:

Business is what keeps economies running and efficient. You have to realize that people in general and people running these companies adapt as they encounter problems. If there are problems, changes occur until they are solved. If a company has problems, it finds ways to fix them. If they aren't fixed they get acquired or go bankrupt. They are then absorbed into other companies or a new company is created that is more efficient than before if there is still value in that particular business. This is good, it takes inefficiency out of the system. Being that we have the most knowledgeable and educated population in the world currently we have a significant advantage here. We will seek out these problems and adapt.

Many US companies are global, therefore generating revenues from many sources of the world, not just here anymore. Smaller US companies may fail due to China's influence, so these companies will eventually go away. Another fact that remains is the assets that these companies hold. They hold real estate, not just in the US but all over the world. They hold short term investments, long term investments, domestic companies, foreign companies, brand names, etc. which are hardly subject to inflation, so their value is tangible and concrete. As populations increase there is a need for more goods and services, so there is always an increasing need for real estate and consumer products and other goods, that will not change.

The fact remains that we are in a global world now. Money exchanges hands across the world at incredible speeds, wealth is transferred almost instantly. Our knowledge base is huge. Americans will continually invest in foreign countries, foreign companies, global companies, build wealth, and cash out. People will adapt to the problems at hand and find a way to fix them.

The secret is to diversify, no-one knows what will happen in the future.

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