Recently, I sketched a few of the big positives and negatives — four each — I thought could affect the market. Writes Roger Dankert: “If worldwide automobile production capacity in the year 2,000 is 80 million cars/year, and effective demand is 59 million cars/year (according to morning Baltimore Sun), who loans the money for customers to buy the extra 21 million cars or do they not get made? Of course prices can fall somewhat to help clear the market, but more likely production will have to be shut in. I don’t see deflation or excess capacity on your list. Do you have an antidote?”
But you raise an important and completely valid point.
On the one hand, of course, factories don’t have to produce everything they’re capable of for companies to stay afloat. And the least efficient plants can get shuttered — one or more auto companies could get swallowed up and “downsized” by the acquirer. That wouldn’t be the end of the world.
But the real question is, how good a job will the world do of providing the economic climate for increased demand? Imagine all the Russians and Chinese, etc., who would like cars. If these economies can get onto (or in the case of Asia, back onto) a strong growth path, the demand will be there. If not, it’s going to be some tough times.
My own feeling is that when push comes to shove, we will not go down the path of trade wars, protectionism, etc. that could lead to a global recession, deflation, pushing-on-strings and all the other rotten stuff that could go with it. But you’re right: it’s a possibility.
THE SOCIAL SECURITY PROBLEM
“Just a quick comment regarding the Social Security Number ‘problem’,” writes Michael Rosner. “Since these ‘numbers’ really don’t count anything, there’s really no reason that the digits have to be numbers. By using letters as well, the number of sequences available becomes (26+10)^9, or over 101,000,000,000,000. Not a likely population to be reached any time soon. Even excluding the letters ‘O’ and ‘I’ to avoid confusion with the numbers ‘0’ and ‘1’, the number is still over 60,000,000,000,000. Plenty of room. Of course, all of our legacy programs will need to be adjusted to allow for Social Security ‘Alpha-Numerics.'”
Clearly this problem is far off and, in any event, nothing compared with the Year 2000 problem we’ve been talking about.
“Incidentally,” I quoted Dan Scott, “most Bosnians speak Serbian, a relative of Croatian.” Now comes Tomislav Peric: “I’m sorry, but Dan Scott is wrong. The Bosnians are now attempting to ‘create’ their own language. Only linguists will decide whether it is a ‘real’ language. Prior to that, Bosnians (Muslims and Croatians) spoke Croatian. They used, and continue to use, Latin letters such as used in English. Muslims and Croatians are a clear majority, about 70%. They do NOT speak Serbian. The Bosnian Serbs speak and write Serbian, using Cyrillic letters. P.S. My family has lived in the same Bosnian village for 200 years.”
Tomorrow: The Day They Couldn’t Fill the Fortune 500