More economic change in store for Americans, experts tell local audience
By Marlena Chavira-Medford
Staff Writer
The economy is going through a major reconstruction right now, said Paul Dietrich, chairman and CEO of Foxhall Capital Management Inc. at a recent “Coffee and Conversation” event held at The Inn at Rancho Santa Fe.The monthly gathering is organized by Deana Carter, a local financial advisor. In addition to managing investment funds, Dietrich is an international corporate attorney and economic advisor to World Bank. He is also a former publisher and editor in chief of “Saturday Review,” one of the nation’s oldest cultural magazines. He previously served four years as a state representative for the Missouri General Assembly. These days you’ll find his writings in the likes of the “Wall Street Journal,” “Washington Post,” “London Times,” “Singapore Times” and “South China Morning Post.”
“American consumers have been on crack credit for the last 20 to 30 years. We’re in rehab now,” Dietrich said.
That means more and more Americans are saving their money —something this country hasn’t seen since the early ’50s. For the first time in 30 years, credit card debt is going down because fewer people are using credit, he added.
“That’s good for Americans, but there is a shadow side to this, ” Dietrich said. “Millions of businesses over the last 30 years assumed that cheap and easy credit would always be there. Once that’s gone, they’re business model goes out the window.”
The result will be a “bipolar economy,” one in which some businesses fail by the droves, while others flourish. Anything associated with corporate luxury spending, “like steakhouses and yacht sales” will feel the pinch. So will the housing market, which he expects will bottom out in 2014. The auto industry is also in for stormy weather, he said.
“Americans aren’t leasing a new car every three to four years because they’re realizing that cars last longer than three to four years. Cars are commodities and people will drive them into the ground, which is smart, but it’s going to hurt auto sales.”
It wasn’t all bad news, however. Some industries are actually in for a boom, “like Coca-Cola, which had 80 percent of its revenue from outside the U.S. this year. The companies with global reach will likely do very well.”
Dietrich knows because he sees it firsthand when he’s lecturing graduate students studying finance in Beijing, and China’s economy is fertile ground for American franchises such as Dunkin’ Donuts, McDonald’s, Kentucky Fried Chicken — and recently, even a Hooters in Shanghai, with some patrons camping outside the restaurant for three days.
“For the first time in China’s 4,000-year history, they’re seeing childhood obesity among the wealthy,” he said.
And now that protein sources are becoming more readily available for the upper classes of Chinese society, something else interesting is happening.
“They’re getting taller. You can see the difference from one generation to the next. If the kids got plenty of protein growing up, they are much taller than their parents. But they are also discriminated against for their height because it indicates that they are privileged. Some tell me they even get spit on for being tall. It’s the only place in the world where your height tells your economic standing.”
But as China continues to thrive, protein will become more available to all economic classes, and because Chinese farmers can’t grow enough food to feed everyone in that country, food commodities will boom. Wheat is on the rise, and corn is at an all-time high, Dietrich said, but added that this demand will also drive prices up at American grocery stores.
At least one Chinese government official that Dietrich knows is studying America’s Eisenhower presidency in hopes of picking up some tips.
“That’s when we privatized many things and built all our super-highways, which is what’s happening in China right now.”
Because they’re beefing up infrastructure there, construction commodities like copper are going to be on the rise — and companies such as GE, which dominate at least seven markets there, will also benefit.
“Asian stocks are going to rock. Right now is the time to buy low and sell high.”
And though China is taking a page or two from the U.S. playbook by developing a taste for Starbucks macchiatos and studying the U.S. post-WWII boom, Denison points out that Americans could also learn a thing or two from Chinese philosophy.
“The Asian philosophy is based on looking at the big picture so they see the long-term effect of everything. America is not like that. We are a nation of fast food and fast cars. They have people in their government who are charged with the task of weighing out the long-term effects of every financial decision they make. They look at what the effects of their decisions will be for two generations to come. The day I learned that I went home very sad because I know that nobody in DC has that job. What would our country look like if we did?”
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