{"id":28849,"date":"2012-04-05T10:35:49","date_gmt":"2012-04-05T14:35:49","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/04\/what-the-u-s-can-learn-from-the-titanic\/"},"modified":"2012-04-05T10:35:49","modified_gmt":"2012-04-05T14:35:49","slug":"what-the-u-s-can-learn-from-the-titanic","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/04\/05\/what-the-u-s-can-learn-from-the-titanic\/","title":{"rendered":"What the U.S. Can Learn From the Titanic"},"content":{"rendered":"

Article by Investment U<\/a> <\/p>\n

\"What<\/p>\n

Nothing is too big to fail. It was true for the Titanic and it's true for the United States. With that said, could the U.S. be heading towards an iceberg?<\/p>\n<\/div>\n

While browsing the BBC\u2019s news site on Tuesday, I stumbled on a piece about the Titanic.<\/p>\n

Since I\u2019ve seen the movie \u2013 and therefore know everything about the big ship (including the fate of Rose DeWitt Bukater\u2019s blue diamond necklace) \u2013 I\u2019m not quite sure why I opened the story at all. But I did regardless, with two embedded quotes immediately jumping out at me:<\/p>\n

\u201cThere is no danger that Titanic will sink. The boat is unsinkable and nothing but inconvenience will be suffered by the passengers.\u201d <\/em>\u2013 Phillip Franklin, White Star Line Vice-President, 1912<\/p>\n

\u201cThe bottom line is no ship is unsinkable. No matter how safe a ship is, if you drive it full speed into a rock, it is likely to sink.\u201d <\/em>\u2013 Tony Selman, Vice Chairman of the Radio Officers\u2019 Association, 2012<\/p>\n

A full century after the fact, most people know that the Titanic did in fact sink. That\u2019s the beauty of hindsight: We get to shake our heads and scoff at other people\u2019s foolish mistakes, easily accepting that there\u2019s room for human error in anything human-made.<\/p>\n

At least when it comes to boats. Concerning entire economies, however \u2013 especially ones we\u2019ve put our faith in \u2013 too many U.S. politicians and citizens alike seem to think it\u2019s a completely different story. We buy into the \u201ctoo big to fail mentality,\u201d the same exact kind that got the White Star Line into so much trouble back in 1912.<\/p>\n

So in essence, we haven\u2019t really learned the main lesson from the Titanic\u2019s epic failure at all.<\/p>\n

The Titanic Was \u201cToo Big to Fail,\u201d Too<\/strong><\/h2>\n

When the Titanic crashed into an iceberg and sank, the twentieth century learned the hard way that nothing is indestructible. But as history repeatedly shows, it didn\u2019t take too long for the world to forget that.<\/p>\n

Much more recently, before the 2008 financial crisis, there were a number of stocks listed on American exchanges that analysts deemed \u201ctoo big to fail.\u201d These companies were giants of their industries, with global presences (or at least connections) and supposedly stable business strategies.<\/p>\n

But then the housing bubble burst, leading to a national financial meltdown, which led to a global financial meltdown<\/a> that\u2019s still playing out in some parts of the world. Just like that, many of those \u201ctoo big to fail\u201d companies were abjectly failing, largely because they\u2019d been taking on risks they could only cover in bull markets.<\/p>\n

But rather than relearning the harsh but necessary lesson, the United States just tweaked the meaning of the term\u2026<\/p>\n

Usually applied to banks, it became a political term of assurance. Heavy doses of government monetary intervention was suddenly propping up businesses to ensure their survival; investors might lose 90% of their shares\u2019 value, but not 100%.<\/p>\n

Then again, even that modified idea of \u201ctoo big to fail\u201d didn\u2019t hold true across the board.<\/p>\n

While the U.S. government lent taxpayer arms and legs to every other major bank out there, including some foreign entities, it sat back and watched as Lehman Brothers \u2013 a financial giant in its time \u2013 crashed and fully burned.<\/p>\n

America the Sinking<\/strong><\/h2>\n

The Titanic \u2013 and the much more recent Concordia \u2013 proved that there\u2019s no such thing as \u201ctoo big to fail\u201d when it comes to ships. And the same proved true of businesses in 2008.<\/p>\n

So why do we now believe the rule of thumb might not apply to entire countries like the United States?<\/p>\n

Admittedly, America is a huge country built off of great principles that give it great potential. It\u2019s the economic Titanic of its day: The one that everybody wants to get on board in some way, shape or form; the nation that, for years, people considered too big to fail.<\/p>\n

But it\u2019s that very attitude that\u2019s causing America\u2019s downfall.<\/p>\n

According to the government\u2019s website, TreasuryDirect, as of September 30, 2000, the \u201cdebt outstanding\u201d (i.e. deficit) stood at $5,674,178,209,886.86. By the same time eight years later, it had risen to $10,024,724,896,912.49, an appallingly large difference.<\/p>\n

And it\u2019s jumped further and faster in the three and a half years since.<\/p>\n

In short, the United States\u2019 spending habits were unsustainable at the beginning of the century, and it\u2019s quickly reaching the point of no return. Just because it looks (or looked) impressive on the outside doesn\u2019t mean it\u2019s immune to the risks assaulting less significant economies even now.<\/p>\n

Perception isn\u2019t everything. And anytime anybody claims that anything \u2013 from ideas to businesses to economies \u2013 is too big to fail, remember the Titanic\u2026 and then book a different cruise.<\/p>\n

Good Investing,<\/p>\n

Jeannette Di Louie<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n

Article by Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"

Article by Investment U Nothing is too big to fail. It was true for the Titanic and it's true for the United States. With that said, could the U.S. be heading towards an iceberg? While browsing the BBC\u2019s news site on Tuesday, I stumbled on a piece about the Titanic. Since I\u2019ve seen the movie … <\/p>\n

Continue reading “What the U.S. Can Learn From the Titanic”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-28849","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/28849","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=28849"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/28849\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=28849"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=28849"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=28849"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}