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The American Dream

Posted on Jul 14, 2011 by Sandy Finlayson  |

Firstly, may I thank John McNicol for doing a "guest spot" on our blog and for his insights into the investment scene in California.

If there is a mounting belief that the future of innovation lies in China, India and Israel that should give all of us in Europe cause for concern. The point is reinforced by a recent report indicating that, in 2009 the amount of venture capital invested in Europe was a mere 21% of the amount invested in America.

For the past hundred years America has led the World through innovation powered by hydro-carbon energy. By any yardstick, half of the top Universities are to be found in America and, as the report to which I have alluded shows, they still understand the importance of financing innovation.

I have just returned from three weeks on the Eastern Seaboard of America where I was reminded of three of President Bush's famous pronouncements whilst he was in Office:-

•America is addicted to oil. Well, he was certainly not wrong about that. While I was there a Republican Senator claimed that the price of gas has doubled under Obama's Administration. That is a bit of an exaggeration but it is still only £2.50 per gallon. Barely a day goes by without articles appearing in the UK press about the whole hydro-carbon energy / global warming / climate change agenda. However, it appears to have much less prominence in the American press. Either America is still in denial or Europe is the victim of the biggest scientific con trick in history.

•The American way of life is not negotiable. He was right about that as well. Nobody is negotiating but the American press has also latched onto the expression "the squeezed middle" which is now one of the biggest dilemmas for politicians of every persuasion. Millions of jobs are now being done in the BRIC economies just as well and at a fraction of the price that they were previously done in America or Europe. All politicians like to be able to assure their constituents of a gradually increasing standard of living. However that can no longer be taken for granted on either side of the Atlantic as both Europe and America find themselves increasingly in debt to finance the way of life we have all come to take for granted.

•This sucker could go down! For all our sakes, let us hope that this will not come to pass. However, there is an extraordinarily high risk game of politics being played in Washington. The American Constitution, Congress must agree to the increase in the current borrowing limit of $14.3 Trillion. The Republicans are unwilling to countenance an increase in taxes and the Democrats are unwilling to agree to any reduction in public services, resulting in a stalemate. Unless it is broken by the end of July, the Government will not be able to pay its bills. It is inconceivable that this might happen. However, there have already been comments in the Wall Street Journal to the effect that the three major ratings agencies have indicated that American debt could be downgraded. That such a suggestion could even have been made by the rating agencies would in itself have been inconceivable only five years ago.

The Americans are however also very alert to the dangers of the Eurozone. If Greece defaults the Euro could unravel and that will take us all into unknown territory.

Mr Murdoch probably prefers selling stories than actually being the story. However, we are all living in "interesting times".

By that I mean that we are currently living through the period of greatest innovation and opportunity in human history. Despite the emerging Sovereign debt crisis, America is still the dominant force in the World and will be for many years to come. We have much to learn from the Americans' "Can Do" attitude and their ability to connect capital with innovation to create increased wealth from which everyone benefits at the end of the day.

PS Supersize beds for supersize people - American hotel beds have an extra leg in the middle so that they don't collapse (honestly!).

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