Dr. Doom Sees a Bloom in the Gloom
October 24th, 2008By David Barnes, VP Strategic Analysis
Is it only me, or are you confused too? It seems like only yesterday, pundits were worried about stagflation. Not long before that, they feared inflation. Today, they’re fretting about deflation. Yes, you’re right: each of those economic conditions has a different cause and a different effect on consumer behavior. We can only experience one of them.
I favor the recession with risks of depression scenario. My interpretation of economic history is that the stock market crash of September–October 1929 did not cause the Great Depression. The depression developed after policy makers sat on their hands and politicians raised their hands for protectionist laws that impeded the free flow of funds between markets. I think that misguided protectionist sentiment is the greatest risk to demand for flat panel products. The IT tariffs re-imposed by Europe are one form of misguided protectionism potential regulations. Trade barriers arising from “protect our jobs” sentiment is another. The only people who own their jobs are people who own their own company. The rest of us must compete and that’s what keeps prices low. Imagine the cost of living in a world in which Americans or Europeans made everything instead of Chinese making many things. How high would wages have to be?
There is potential for credit contractions to create employment contractions that cause demand contractions that cause price contractions that cause credit contractions. That only happens if credit markets break, however. If national banks and commercial institutions continue cooperating, if politicians allow free trade, we can work this out. As Franklin Roosevelt said, “…the only thing we have to fear is fear itself”—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.
When I look at the trend towards $350 LCD TV sets (at 32”), I can’t help but think that flat panels have become the new mainstream technology. The average CRT TV set sold in the USA for fifty years was priced near $350. The upside is that flat panels enable all sorts of new products. These range from the new LG Cookie touch-phone that puts the world (wide web) in your hand to out-of-home displays that put information on a wall. I am writing this on a PC with two 24” monitors and I plan to go to four larger monitors next time. Demand for flat panel displays is limited only by our imagination. That is the bloom in the gloom.
Data in our Worldwide Flat Panel Forecast suggests that sales of displays for established applications will grow more slowly in the future than in the past. If I put myself back in 1998, however, none of us forecasted the amazing array of flat panel products available in 2008. Why assume we can foresee all the products that we be available in 2018? Some blossoms are falling but new buds are growing.
