There has been a great deal of hype over the past three or four years on the economic condition of the United States, with many doomsday scenarios.
Some of the concerns and fears expressed in the media, whether blown out of proportion or not, are real. Unfortunately, most people don't have the time, knowledge or inclination to filter the information to completely understand how it affects their personal lives and the business decisions they need to make.
It always intrigues me, even when I am providing personal or business advice, how often people make crucial financial decisions – often erroneously – based on a media topic du jour.
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The numerous opinions and scenarios speculating on the consequences of a failure by the United States to get a grip on its ballooning debt and continued government spending have created fear in the minds of many Canadians investing south of the border. Most rational observers would agree the United States has to do something relatively soon to deal with these concerns.
But how it deals with these issues is where the focus of people's attention should lie. Optimism is hard to find in the negative news barrage, though logically speaking, I believe the United States will survive and thrive beyond this crisis for the following reasons:
- The country remains the largest free economy in the world, about 40 per cent of the total world financial market.
- Most of its debt is internal, American to American, as opposed to American with other countries.
- At the very hint of any crisis anywhere in the world, investors continually to rush to the U.S. dollar and U.S. treasuries as the safest places on the planet to park their funds, which not only provides a lot of liquidity for the United States, but also keeps the country’s interest rates pegged to servicing its debt very low.
- Like Canada in the 1990s, and Greece, Italy and Spain in 2011, governments eventually come to the realization that they must take decisive and painful actions to reduce their debt burden to manageable levels. The U.S. government will come to that point soon if it hasn’t already.
- The U.S. has the largest gold reserve of any country in the world, and we all know what has happened to the value of gold over the past decade.
- The U.S. is the largest exporter of food items that feed the world. People need to eat, so the demand is reliable and growing.
- The U.S. federal government is the biggest landlord in the world, owning or controlling billions of dollars of commercial land and properties.
- Thanks to the rule of law, know-how and freedom given its citizens, the U.S. continues to lead in innovation, and it is continuing to create the largest and some of the most successful corporations in the world, including Apple, Google, Facebook, Coca-Cola, McDonald’s, Wal-Mart, IBM, and Boeing.
- The U.S. continues to be the destination of choice for legal immigrants from around the world, most of whom are very well-educated, and one of the best birth rates of developed economies. The U.S. has sustainable population growth, where other countries, such as Japan and many European members, have demographic trends indicating their populations are shrinking.
- The U.S. and its citizens have been rated the most charitable in the world.
- The latest in oil and gas drilling technology and the new discoveries in the Dakotas, along with the Keystone pipeline from the Canadian oil sands, indicate that the U.S., in a very short time, could be at least North American energy-independent and will no longer need to import oil from the Middle East or other unfriendly areas of the world.
- The U.S., in its 235-year history, has gone through substantially worse crises and rebounded with equal or greater economic growth
- For Canadians moving to the United States, the Canada/U.S. tax treaty allows them to be able to keep assets in Canada or Canadian securities purchased through U.S .financial institutions without any Canadian adverse income tax consequences.
This list is intended to give Canadians a clearer view of where the United States is at by clearing the fog and the uncertainty, and positively refocusing the constant pounding of negative economic scenarios. Canadians should make their financial decisions on whether to invest in the United States from a more logical and less emotional state.
Robert F Keats is a certified financial planning professional in both Canada and the United States, and has spent the past 35 years helping Canadians and Americans do business in, move to or invest in each other's countries. He is the author of The Border Guide, a Canadian bestseller now in its 10th edition, published by Self Counsel Press.