what price, page-55

I think we need to all understand that China etc will be looking at what has happened and see the path they are on could be similar. They will still develop their country but they may also govern their country better so they can avoid some of the mistakes the Western world have done.

In the Western world we are seeing the result of growth, greed and consumerism over 200 years.

We need see the unfolding issues at work. In the USA they have had about 150 years of great times (from about 1830 to 1970) with unprecedented growth with an increase in output, wages and their standards of living.

Every year things got better, they purchased their houses, and owned assets that produced incomes, family values were high and they worked a standard week. Generation on generation became more comfortable as and spent freely. Then around 1970 things started to change.

The company they worked for became more and more productive and made more money. Computers made people more efficient so less people = less wages= more profit. For the last 30 odd years wages for the standard American have flat lined while the small minority who run big business selling things to others make a wage 100 times that of the normal employee. It is cheaper to pay foreign workers and lay of staff. This was the start of the end for this system.

Now if wages stay flat and cost rise each year they will eventually stop spending. This means the company producing goods will lose money.

Solution: The people are asset rich and own their home so you lend them money (credit) against there assets. As people have lots of assets they can borrow lots and then spend it on goods. On top of this they then charge them excessive interest and make more money.

The problem now is that a majority of people have grown up in the good times and continue to live way beyond their means until they have no value left in their assets and they must be sold or liquidated.

Solution: A company cannot let this happen or they won’t make money any more so they devise a no repayment options for 3 years, they will get paid later but can still make money.

The USA has been like this for the past 10 years. The housing market collapse is a direct result of this as well. So where to neat, the people are maxed out on debt, the banks have taken position of assets, the people have stopped spending and the property for the secured loan is now not worth anything.


Sound Familiar?
So now the government provides almost interest free money, reduces taxes and floods the economy so they don’t have to stop spending. This is the death throws now of a corrupt system that drives the boom and bust cycle. You can regulate a system to death to try and prevent it as they did after the depression but this has only allowed companies to work their way around the systems and find to change laws and we will be back where are now in a few years..

It is now only a matter of time before the money injected by the government is used up. There will need to be a market shift in the USA to prevent a collapse and I feel it is only a matter of when will this happen.

Good stocks like BHP etc will survive but at what price? You don’t need to be a rocket scientist to see the writing on the wall here. As all major economies are seeing this you can be sure that many people will stop spending. There will need to be a lot of pain before there is a recovery. The issue is the higher the standard of living the harder the fall will be.

I feel a bit like Kenny Rodgers here with the old gambler song….

I love trading but for now I am a watcher and will be so for some time. If things settle down I will be back in but for now any share trade is a speculative gamble. There is more going on here that we know and this has become a global problem as we all look at the USA and want what they have (or had!).