strategic buzzwords

Earlier it was China, quantitative easing and demand for commodities, which made firms, analysts and every other to justify their actions, whatever that might be, acquisitions or high valuations. 

Now it is the same, but in the opposite direction. It is China slowing down, low commodity prices, and the Fed quitting the easing. I wonder how some things just don't change. While there are still acquisitions happening around the world, the cues are about slowing down. 

What I have seen and remain confident about is that economists never concur on anything. You put several of them in a room and they will diverge in their opinions. Again, it is evident from history that any economy moves in cycles; we witness growth and recessions all the time, one after the other. 

My take is that no federal policy would be able to permanently change the path of a cycle. We might want to attribute the change to the government, but it is more due to the spirited free markets that eventually push for the change. This is because in a democracy and free markets economy, the government's role is limited, and should be limited, only to put the system in place and oversee as a regulator, and not meddle much. 

As the economy, including the government, is made up of humans, what drives it is the change in the behavior of the individuals. We know that they are not rational beings; therefore at any point in time, the economy reflects their moods. Higher value is driven by meaningful growth, which is reflected by increase in future cash flows, and cash flows are generated through investments. When they are optimistic about future, good investments are made, projects are executed well, and there is growth. Opposite is true when people become depressed and consequently, reluctant to invest in projects. 

Just like firms, investing, financing and dividend decisions of the country are dependent upon the behavior of the people. It is up to the government, as a manager, to take these decisions in the best interests of the stakeholders; probably the key function of the government is to lift the mood. I don't know why China is slowing down now when it was growing in earlier years. May be people are scared of its past financing decisions, or may be something else. I don't know why commodity prices are low now. Isn't it all good for the firms to buy them cheap to use in their production, and drive growth? Quantitative easing has been the savior for the US economy, but how much credit is due to it is something we need to ponder. If it was not there, what would have happened? Would markets have remained on the brink until now? I don't have an answer to any hypothetical question. Of course, sometimes things don't really work out for a long time just like it is the case for Japan, where they are clueless about what should be the way forward. I find that ironic.

Mostly, though, we are responsible for our own actions. If we remain positive collectively, work hard enough towards what we want, use only reasonable, not excessive, debt and execute our tasks well enough, we should be able to move forward. If that sounds Utopian even for a capitalistic economy, my advocacy is to hope for this during longer cycles. Wait, hasn't this been happening already? We have had more positive years than negative years in the past as long as we can go back. From stone age to here, we have moved far enough. That is going to continue long enough into the future. I see this as the bright side.