Wealth Creation, LNG Exports and the iPhone 5

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Published on Monday, 01 October 2012 19:06

By John Plesnicar 

The recent release of the Apple iPhone 5 has created a buzz around the world.  U.S. television outlets send reporters to watch consumers standing in lines waiting for hours to purchase the new iPhone.  Based on a JP Morgan research note, articles have also been written on how Apple’s iPhone 5 could singlehandedly rescue the U.S. economy.

The U.S. Federal Reserve, most U.S. politicians, and even some Nobel Prize winning economists believe consuming is a way in which wealth is created.  Most Americans believe purchasing the iPhone 5 is good for the U.S. economy.

A closer look at the balance sheet for Americans tells a different story.

U.S. National Debt:

$51,000 Debt Per Person
$140,000 Debt Per Taxpayer

Personal Debt:
$50,000 Per Person

Federal Liabilities
1,000,000 Total Federal Liabilities per Taxpayer

Most Americans purchasing the iPhone 5 can’t meet and never will be able to meet their share of U.S. government debt and liabilities.  Many Americans are not able to get out of personal debt.  As an example the latest report from the U.S. Education Department states that federal student loan defaults are up from the previous two-year reporting period and almost double the rate of five years earlier. Unfortunately the thinking that consuming is good for the United States economy has taken hold as conventional wisdom.

How many of the new iPhone 5 purchases will be used to increase productivity?   For most users the new iPhone 5 will be very similar to the iPhone 4s and will be used as a toy and not a tool for increasing productivity. 

The U.S. must get excited about industries which create real wealth.  LNG exports are productive and create genuine wealth.

There are plenty of U.S. politicians, analysts, and economists who would like to restrict natural gas drilling and LNG exports.  Some of these same people are encouraging a population already deep in debt to buy the new iPhone 5 to help the US economy.  Consumption by a population already deep in debt without an increase in productivity will only lead to more debt.

The real discussion that needs to take place in the U.S. is how true wealth is created. Is it created by consuming or producing?  Producing is the only way to create true wealth.

In order to continue its high standard of living and service the current debt while fulfilling future obligations the United States must expand its economy.  The U.S. must increase productivity and begin producing products, services and natural resources the world is willing to pay for.  U.S. LNG exports are part of this solution.   

Apple is one of the most innovative and successful companies in the history of the world.  I’m using Apple as an example to illustrate consumption vs. production in the U.S and current policies.  There is no doubt U.S. consumer consumption of Apple iPhones is good for global shareholders of Apple. This U.S. consumption of Apple products is only possible though because of the current reckless monetary and fiscal policy of the United States.   

The United States is at a debt and obligations crossroad.  Policies of raising taxes and printing money are reactions to a consumption economy which is not growing. The world will not tolerate having their goods, services and investments paid back with a continuing devalued U.S. dollar.  By not quickly approving LNG export applications U.S. politicians and bureaucrats are purposefully restricting production and wealth creation.  At the same time U.S. policy encourages the consumption of iPhones.  Future U.S. policy decisions, laws, and regulations need to be focused on encouraging wealth production, not subsidizing consumption.   LNG exports are part of a real wealth creation solution for the U.S. College students buying the new iPhone 5 so they can “tweet” or Facebook friends with news on what they ate for lunch is not.

John Plesnicar is the Managing Director of LNG Global
Comments: info@lngglobal.com