Cuba and Brazil.

I understand what you're saying - China is also ruled by ruthless dictators - but Chili still acted economically in an open market fashion as far as economic policy.

We know that dictators do not do a good job of creating middle classes and increasing GDP's, etc. That we have to attribute to economic policy which came, again, from opening up their markets.

 

But isn't it coincidental that their growth in their economy occurred when they started going toward more open markets?

 

I don't think you'll agree with me on this, so I'll probably just aggravate you which I don't want to do. But "pumping billions into an economy" is a euphemism for "investing in an economy". And that is exactly, under regulation of course, what many emerging markets need. They're not going to get growth "magically" without capital and expertise.

This is one of the pillars of the open market and Korea is a great example of how well it works. They've had a little trouble lately, but that is almost entirely because they are export-sensitive.

Open markets have completely transformed Korea and I can't imagine that anyone in that country would want to go to anything different.

Think of the contrast between North and South Korea. It's like economic Heaven and Hell...

 

I don't understand what you're lobbying for. What are the alternatives here? Do you really think state run energy and utilities is the silver bullet for an economy? Do you like tariffs, controlled foreign investment? Why do you think these will help any country?

I'm asking because I don't see many examples of this around the world. Japan, India, Russia and China all have some aspects of this, but in general they're open and opening up.

For the most part, the poor impoverished countries are the ones that don't open up, right?

 

Also, I find it really odd that you say open markets is so disastrous for the Argentinian economy. Their economy was a complete train wreck. In the late 90's it had inflation of 3000% and a massive public debt.

I think you may be going off information of a couple of years ago. They had a nasty year where GDP decreased by 10% and unemployment went through the roof.

But since then unemployement has gone back to previous levels and growth has been outstanding.

Wikipedia points out that ""The country has seen double-digit unemployment since the mid-1990s until the 4th quarter of 2006, peaking at 18.4% mid-year 1995. The May 2000 unemployment rate was 15.4%; it climbed to 18.3% in December 2001, and by the 4th quarter of 2006 it was around 8.7%.

In 2002, Argentina's GNP sunk by 10.9% with respect to the previous year. Soon, however, the country managed to return to growth, with surprising strength: 8.9% in 2003, 9.0% in 2004 and then again 9.2% in 2005. This was initially due to a surge in exports (over all previous historical records), and then also to the return of local and international confidence, which boosted local consumption and both local and foreign investment."

So Argentina has had its problems and still does. But it is doing remarkably well: it is now high growth exporting machine. In ten years it will in all probability be one of the leading Latin American economies assuming their they can get their public debt under control and make sure their exports are not overly dependent on America.

 

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ShoeshineBoy: I don't understand what you're lobbying for. What are the alternatives here? Do you really think state run energy and utilities is the silver bullet for an economy? Do you like tariffs, controlled foreign investment? Why do you think these will help any country?

I'm asking because I don't see many examples of this around the world. Japan, India, Russia and China all have some aspects of this, but in general they're open and opening up.

For the most part, the poor impoverished countries are the ones that don't open up, right?


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February 28, 2008

SouthAmerica: You asked me a very complex question here that I don’t have a simple answer for you.

Even if I could write a book to answer your question, I know I am not smart enough to give you all the right answers.

If you had the chance to read some of my articles until 5 or 6 years ago, then you would know that I believed 100 percent on a free market economy, and the free market was the best vehicle for allocating scarce resources, and so on.

I was heavily influenced on my thinking by the years that I worked for John Templeton, in Englewood, NJ – before he moved his company to Florida.

But after he moved to Florida I kept in close contact with some of his associates that had been working very closely with Mr. Templeton for over 20 years at that time. And these fellows had assimilated over the years John Templeton’s philosophy and way of looking at investments, government regulation and so forth.

I was very young then, but these group of old men did not seem to mind that I attended weekly investment strategy meetings, went to lunch with them almost on a daily basis, and spent a lot of time after hours talking about investments on their offices, and on weekends I spent hours in the research library helping one of them doing research about some company.

They became some kind of tutors for me and we used to talk about economics and also about investments. But even tough these guys were very smart and successful and they had degrees from universities such as Princeton, Harvard and Cornell, still there was a certain reverence from everyone towards the Master – John Marks Templeton.

Everyone in that group was influenced by John Templeton – by the way, after all these years Mr. Templeton still is the smartest man I ever met in my life.

My very close friend he kept in touch on a regular basis with John Templeton until he died in 1996. And every time when I used to visit him he update me about everything that was going on with Mr. Templeton and his family.

I met Mr. Templeton a number of times over the years, and I saw his appearances on the Wall Street show on PBS with Louis Rukeiser – over the years Mr. Templeton appeared more than 30 times on that show.

John Templeton was the ultimate free market thinker and he was completely against any type of government regulation and intervention. I think that in his view everything that the government get involved with they screw up. He did not like government regulation, and he thought that governments should stay out of the way, and should not interfere with the private sector. He believed in privatization of any businesses own by governments, and he also believed in private sector solutions for everything.

That’s why I admire and have so much respect for Warren Buffet – basically he came from the same school of economic thought that John Marks Templeton did.

These were the major influences that helped mold my way of thinking in many ways. But I always read a lot books over the years, and I also read a lot of other materials, newspapers, magazines, journals, and so on…

Despite all of this free market economics education my mind did not stayed frozen on the past, because I think out of the box, and I have an adaptive mind that takes into account the new changing circumstances. I understand that we live in a very dynamic world that is changing all the time.

There is nothing set in stone on my mind and my mindset is ready to accept new ideas, and new solutions to solve any type of economic problems.

You can see how much I changed my way of thinking over the years when you read my 4-part article about China investing $ 200 billion dollars in Brazil.

Today, I know that there is a place for government regulation, and in that article I wrote that the Chinese government in partnership with the Brazilian government should make the investments that I suggested.

Over the years I realized that the generals in Brazil did a good job regarding economic development during the dictatorship years, and I also realized that the private sector usually don’t make the investments necessary for a country to prosper in the long run.

Today, I don’t believe in the privatization of government assets, but right now I don’t have time to explain for you why?


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This is oh so true. There is a immutable law in America at least:

If you have a major issue and give it to the federal government, they will ALWAYS come up with most costly, burdensome, ill-thought out solution that is possible and leave it for the next four generations to suffer with.

 

I think of Carlos Slim and Mexico. It's ridiculous imo because the people of Mexico have to buy their cell phone through that 60 billion dollar cochino. I don't know how many people he paid off to keep a monopoly, but he did a darn good job. So Mexicans have costly cell phone service with no choice because of it.

In my case, I have probably 8 providers I can pick from and two of them are very cheap and I can save a ton of money if I want to...

And in Mexico the petrodollars that go into government hands are notoriously corrupt. Every Mexican you talk to will tell you that the money is misappropriated.

Contrast that with Exxon: I can buy Exxon and hold it for twenty years and make a nice steady 10%. Seriously, look at a 30 year chart some time from Exxon: it's a nice upwardly trending investment decade after decade in all markets.

Mexicans can't do that: they can't buy into their petrodollars. They get absolutely no investment benefit from it whatsoever.

Again, I can put a 100k into Exxon and be filthy rich/ready to retire in 40 years. The Mexicans get nothing except watching their petrodollars pissed into a river of corruption.

If you ask me, this is another example of the government wasting precious resources that belong to the people of Mexico and coming up with the most burdensome solution possible...

And take our government: adding a 50 cent (or whatever) sales tax on gas. What do they do with all that money?!?

 

I agree that sometimes emerging markets have no choice but to let their generals lead the country as they are 1) often more respected than the politicians and 2) the only ones with the "muscle" to get something done. And some generals can actually do a decent job: Thailand is an example of this right now

But military leadership should be transitional until the company can get on a solid footing...

And, yes, China's communist government has done quite well. But this is largely due to luck: they've got some strong leadership that has somehow miraculously made good solid decisions in many key areas.

But then who thinks that all these human-rights-abusing communist leaders are a good long term solution for China???

 

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February 28, 2008

SouthAmerica: I said: “Over the years I realized that the generals in Brazil did a good job regarding economic development during the dictatorship years, and I also realized that the private sector usually don’t make the investments necessary for a country to prosper in the long run.”

In the case of Brazil we had a very good reason why that happened, and today most people don’t know that. But the military academy of Agulhas Negras used to have one of the best economic departments of any institutions of higher learning in Brazil – in a sense many of these military fellows who ended up running things in Brazil – they had a very good grasp of economic theory including the fundamentals of economic development theory.

The Academy of Agulhas Negras in Brazil was equivalent to West Point Academy for the United States.

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