As the United States economy soars, it stands out in comparison to Japan and Europe. The situation seems to be on an upward trajectory, promising even more prosperity in the near future.
The unemployment rate is gradually decreasing, currently resting at 5.8 percent. At the same time, consumer prices are rising at a modest 1.7 percent, while the annual GDP is growing at a robust rate of 3.5 percent. Additionally, the stock market continues to create wealth for many.
Occasionally, life presents us with moments of bliss so remarkable that we can hardly believe they are happening. These rare instances can be likened to a green flash—unexpectedly perfect times, such as the death of Teddy Kennedy. When the stars align, the atmosphere becomes full of good vibes.
Such moments can stem from meticulous planning or perhaps just sheer serendipity. Regardless of their origins, we tend to embrace them with gratitude. Yet, while these uplifting events deserve our appreciation, our focus today will shift to less fortunate moments and the lessons they impart.
The Easter Island Example
Natural disasters may be likened to significant historical milestones—Hurricane Katrina, the Loma Prieta earthquake, or even the perplexed expressions of former President Obama. Each of these events raises questions: what lessons do they offer, and where do they lead us? And what happens when humanity’s meddling causes chaos? Consider the fate of Easter Island.
Commonly, the narrative suggests that the islanders depleted their lush landscape by cutting down trees and erecting monumental statues. This decimation led to a drastic decline in their environment, impairing agricultural output.
In essence, the island’s resources were overexploited, making it unsustainable for the local population. As a result, a rapid decline ensued, leaving remaining inhabitants to struggle with bare subsistence. While there are alternative explanations for Easter Island’s mysterious demise, the conventional tale provides a cautionary reflection.
Nothing encapsulates the absurdities of human behavior like the financial markets, which bring to light moments of mania and panic. These are instances where human folly is starkly revealed.
Here Comes the Flood
In September, foreign investments in long-term U.S. securities reached their highest level in over four years, according to Reuters. The U.S. Treasury Department reported inflows across all major asset categories.
In total, net purchases of long-term U.S. assets, including stocks and bonds, amounted to $164.3 billion in September, following a $52.1 billion inflow in August—making it the most significant inflow since March 2010. However, when factoring in short-term assets such as bills, there was a $55.6 billion sell-off of U.S. assets by foreign investors, marking the first outflow since June.
Foreigners continued their acquisition of U.S. Treasuries for the second consecutive month, registering inflows of $48.1 billion in September—the highest since February—despite the fact that benchmark 10-year note yields, which move inversely to prices, increased to 2.5 percent during that month.
Interestingly, the dollar gained momentum in September, reflecting its third consecutive monthly increase.
While one might argue there is nothing alarming about a surge of foreign investment into U.S. assets, it does provoke curiosity. Could this influx of capital resemble the catastrophic act of depleting resources to create towering statues?
A sense of unease lingers, prompting us to ponder what it all truly signifies.
Sincerely,
MN Gordon
for Economic Prism
