Jamal Mecklai: An America sandwich

MARKET MANIAC

I moved to the US when I was a lad of 21, and returning there for a visit a couple of weeks ago, I realised that it's been 21 years since I left America. I've been back in the interim, of course, but somehow this trip seemed more seminal.

It was a real joy being back. America seems to be a completely different place from the last time I visited (about three years ago). It has clearer eyes, a greater sense of joy and delight, and more""much more""money. For all these differences, however, its twin essences""shopping and the search for innocence""remain unchanged, which is probably why I felt completely at home.

I've been writing about the trip and for this extract""the entire article is on jamalmecklai.blogspot.com""I'll focus on some observations that directly relate to the US economy and financial markets. First of all, the economy is doing great. Everywhere we went, people were out spending more money""much more money""than they used to three or four years ago. Now, I know, I was visiting the high spots and I was on vacation, but I've lived in America, and I can feel the economic energy. It is high""way higher than the numbers suggest.

My uncle in Florida says the economy is the strongest he has seen in a long time. He said, you know what Napoleon said about the British""they're just a bunch of shopkeepers buying from and selling to each other. That's what America is today, and, he added, you know what the British did to Napoleon. He also said that the best economy he could remember was the period from about halfway through Clinton's first term till the end of his second term""that's from 1994 to 2000. And, he said, you know why that happened? Because the White House and Congress were controlled by different parties and the government couldn't get in the way of America""he's about as libertarian as I know, in case you hadn't noticed, but I think there's some truth there.

Which suggests that if the Republicans shock everybody by winning the White House, the boom will continue and perhaps accelerate. Alternatively, if the Democrats do win and, if history repeats itself (even approximately), we could see a surprise turnaround in the continuing wild and joyous markets. Maybe the recent trauma in the Treasuries market was signalling just this fear. Or, of course, and this would be my bet, Bloomberg will shock everybody by running and winning and the US""and the world""will embark on an entirely new (and, in my view, much higher) growth path. Keep your fingers crossed.

Another wonderful thing I noticed about America is how much more integrated it is""apparently, years of affirmative action are finally paying off in the evolution of a much larger black middle class. We saw colours mingling everywhere""in New York (which, despite its liberal in-your-faceness, had hardly been a bastion of mixed partying, certainly in the 1980s), on the West Coast, in Miami, where, of course, the integration is more Spanish-speaking. And, hey, there's even a black guy trying to run for president on a major political ticket""something you'd never have seen even five years ago.

And this""the fact that there is a lot less racial tension around""is, to my mind, one of the most unremarked of invisible forces that is keeping the US strong. I mean, if there is less energy being spent in divisiveness, there's more energy left for living and making money. Indeed, if I am correct and integration increases, we will continue to see US growth surprise on the upside, which means that interest rates will take longer to come down than people expect and the dollar will, notwithstanding the current account deficit (which, while high, is, incidentally, falling relative to GDP), get stronger, at least against the euro and sterling. While on the subject of deficits, incidentally, another little noted fact is that virtually every one of the 50 states is currently running a budget surplus""no wonder people are having so much fun.

And finally, a word about shopping, which, in many senses, is the raison d'etre of America. While the I-shop-therefore-I-am essence of America is often derided by intellectual taste-makers everywhere, I find that it actually contributes greatly to American productivity and entrepreneurship.

First of all, if everything is for sale and the price is right in your face, there's no time wasted in transacting. More importantly, though, since there's always more than a critical mass of people willing to buy almost anything, it allows all sorts of people to dream up almost any kind of product or service. A friend of mine told me that""for $3,500""he had been on a zero gravity flight""you sit in a plane that zooms up to 40,000 feet and then swishes down to 25,000 feet and during the downswing you slip into a zero gravity environment for a few seconds, which experience is repeated several times. He said it was amazing and made him feel like a one-year-old baby. Now $3,500 is a lot of money but it's also not a lot of money. And the fact is that in America there are enough people willing to shell out $3,500 to see what it felt like, which is what made it commercially viable, which provides the most critical underpinning for entrepreneurship.

Welcome to America, and the good news is that India is going/growing in the same direction.