USA

Your contrarian alarm should always go off whenever everyone in the world agrees on a market outlook. The same thus might apply to the outlook on the US dollar and America's financial health. Is the US debt really all that bad, relative to other countries in the world? If many other countries have similar amounts of debt relative to their GDP's, then how is the dollar doomed against their currencies? Also, beyond debt to GDP one needs to consider long-term growth factors as well. The US doesn't face a demographic time bomb the way China does, or a purely dying population as Japan. The graphic below, courtesy of Visual Economics sheds some light on the US debt situation relative to some other high debt nations in the world.

The Washington Post published an in-depth article following an unemployed US family day by day for months, who are "out of options", in Indiana. Thing is, it seems the family they picked made, and continues to make, a lot of horribly irresponsible financial decisions. Yet from a global perspective, they still have a pretty high standard of living relative to most people in the world, even those in pretty developed countries, given they still have two cars, a dirt bike, hunting rifles, an x-box, a blackberry, watch cable tv and buy lotto tickets regularly. Their main problem is that they never saved any money even when times were good.

He sinks into the couch, foot jiggling, his gaze traveling from his wife to the television to the darkness outside, broken now and then by the distant glow of passing headlights.

His mind settles into another round of "What if?"

As in: What if we don't have cash to buy milk, eggs, bread or diapers? What if our unemployment benefits run out? What if we never find jobs?

...Scott got a job on a paint crew at an RV plant, and by the end of 2007 his income had climbed to $53,000, more than he had ever earned. After work he was the man at the bar with the thick roll of bills, the man he had always wanted to be, buying round after round for himself and his friends. The man with "the full pocket," as he liked to say. He took his son on a fishing trip. He took his family out to eat and told them to order whatever they wanted.

I still remember the day back in 2004 when I was at a medical center in Boston getting an x-ray and I asked the simple question, "How much will this cost me?", since I had a Health Savings Account at the time. Naturally I wanted to know what the price was before I signed off. I remember the day well because the employees looked at me like I was crazy, and even after my pushing and explaining why I wanted to know the price, they still had no idea how to find out what the price to me would be. Or even an estimate. I guess there simply wasn't infrastructure in place for this: to simply tell people what their services will cost. I had to wait until the bill came to find out.

It was a pretty telling experience, in terms of the problems with the US healthcare system and its lack of proper economic incentives. Clearly such an environment leaves a lot of inefficiencies in the healthcare service chain, since there isn't that daily pressure to bring down costs. Or even know them.

How much might costs be able to fall if Healthcare services were prodded by simple pricing pressure to be more efficient? These are just quotes from some cost-cutting health industry veterans, but it at least gives us a ballpark figure... 30-50%. I bet it's actually much higher on a long future time frame, there are probably many things we do in healthcare whereby costs could be brought down in the range of 90% or more, if one thinks of how innovation has removed costs in other areas. For example, companies no longer employ teams of typists just to type things. I guess even the healthcare industry has adopted this practice... but at the same time most industries would laugh at the idea of not having digital records... which US healthcare is still working on... so yeah lot's of fat that can be cut. No pun intended.

Today I can see a few headlines telling me that markets are down due to the US savings rate hitting its highest level in fifteen years. And beyond the usual we-need-to-attribute-every-market-movement-to-something problem with financial media (do we really know markets fell/rose/were mixed because of the one piece of news highlighted as the cause), I've actually come across a few different places where the jump in US savings is being reported as a negative piece of news.

U.S. stocks fell, giving the Standard & Poor’s 500 Index the first two-week decline since March, after the highest American savings rate in 15 years spurred concern that consumer spending will slow... “The magnitude of that savings rate may have gotten some folks by surprise,” said Philip Orlando, who helps manage $409 billion as chief equity market strategist at Federated Investors Inc. in New York. Economic and earnings growth is “potentially not going to be as robust as some were thinking. That’s weighing on stocks.”