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A Flat Economic World May Lead To Peace

Friday, July 31, 2015   (0 Comments)
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Forbes.com 07/31/15

 

What if we really give economic access to the global Millennial middle class? I believe that we can create a flatter and more peaceful world, where buyers, sellers and owners co-exist harmoniously. I realize that this may be ambitious for many of you reading this article; however, we do know that, when people have a stake in something tangible, they are less likely to feel disenfranchised.

The U.S. race riots of the 1960s are a perfect and dramatic illustration of a disenfranchised group. Baby Boomers, you can relate these stories to Millennials. The suppressed African-American population were kept out of mainstream economic America for the better part of the 20th century. They didn’t own homes, they didn’t own businesses, and they were unemployed. They essentially had nothing to lose by setting their neighborhoods aflame.  We saw the same phenomena during the Arab Spring that erupted in Egypt. The overeducated middle class couldn’t get jobs and weren’t part of the homeownership class. They had nothing to lose by violently revolting. The bottom line was that these groups did not have a seat at the economic table.

Let’s look at China, for instance, which has the largest emerging middle class in the world. This population has lots of access to U.S. products. They drink Coke, they wear Nikes, and they talk on their iPhones. It’s estimated that the China consumer purchased over $100 billion of U.S. goods in 2013. According to an article on Seeking Alpha, “Nowhere else in the world is there such a growing consumer market with an estimated 600 million individuals (roughly 40% of their entire population) making up the middle class …”

The irony is that the average Chinese consumer has difficulty buying stock in the U.S. companies they purchase from. The wealthy Chinese, both inside or outside of the government, have cracked the code, enjoying about $40 billion in direct investment in the U.S.  It takes many forms, including owning U.S. Treasuries (China’s government is the largest holder), real estate, cars, companies, and not to forget the recent foray into the media. The National Association of Realtors has noted that the Chinese also just became the largest foreign purchasers of residential property in the United States, accounting for 16 percent of all foreign purchases overtaking the Canadians as the top foreign investor.

 

The Chinese are investing in the U.S. because “There is more trust felt for the United States and the U.S. government that those assets will be protected by the government, compared with assets here in China, which could be taken away tomorrow,” as stated by Michael Godin, V.P. of Real Estate Global Partners on a CNBC show. The rich can get around the Chinese law that actually prohibits any more than $50,000 U.S. dollars per person leaving the country per year, but the average Chinese individual has pent up savings not earning much in China. It is estimated by Bloomberg, that their “savings—deposits currently stand at $21 trillion—(and they) will increasingly need to be deployed overseas.” Heretofore, the Chinese investor could not “purchase overseas equities directly due to (Chinese) government restrictions and only the wealthiest can buy them indirectly through qualified investor programs,” as noted by Bloomberg.com.

The good news is that it is now legal for a Chinese investor to buy U.S. stocks.  All they need to do is simply fill out some forms and upload their ID, like a passport, proof of address and other scanned documents and wait for approval to use a U.S stock account. This has been a slow process beginning in 2006, when the Chinese government first allowed Chinese to invest in foreign securities markets via certain fund management institutions, known as Qualified Domestic Institutional Investors.

 

It’s time to open our stock market to these foreign investors. It is good for our economy to increase our domestic U.S. company’s access to capital. As Brian Dolan, noted financial writer, said in a recent article, “Established global brands located in mature economies are well-positioned to benefit from the expected growth in Asia and other fast-growing economies.” It’s good to have the foreign investor share in the ownership of the company’s stock and not just consume their products.

I work with a company called, DriveWealth. They are a mobile-driven brokerage firm that gives the emerging Millennial middle class everywhere, the power to buy U.S. listed securities, U.S. listed ETFs, including individual stocks. The platform virtually gives everyone in the entire world the ability to invest.  It’s nice to know that the Chinese investor can now buy stock in Alibaba . Alibaba established their biggest IPO ever last year in the U.S., and the regular Chinese investor was precluded from investing. Now they can.

 

I want to be clear that the coming together to create a flat world has to be based upon more than just access to the stock market. This Millennial generation has already begun to crack-the-code to create a flat world by connecting anywhere and anytime via social media.  A global charity called, World Merit embraces this new connectivity and has a mission to improve our world by providing young global citizens inclusive opportunities to become leaders through social action. World Merit sends out a monthly challenge to their more than 100,000 Millennials, who have to creatively design solutions.

DriveWealth is also inspiring social action by hosting a challenge related to economic sustainability.  Each participant has to take several Wall Street Survivor courses online, learning about saving and investing.  They are then challenged to “pay their knowledge forward” by teaching a peer or a younger person about what they have learned. This is a perfect activity for your Millennials to also become engaged.

We Baby Boomers need to learn how to connect, particularly from our next generation of young people. I may be the eternal optimist, but I truly believe that through access and education, we can together build a flat world.  I’m a child of the age of The Beatles and in the words of John Lennon, which I love so much, “You may say I’m a dreamer, but I’m not the only one. I hope someday you’ll join us. And the world will live as one.”


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