housing debt, page-15

Hi all. I hope today's trading for you guys hasn't been as painful as mine lol. This is a little remote from the housing topic but more about the economy as a whole. This is my angle so feel free to tear me up if you disagree - I'll only bite back in a different location.

Let's roll back history. We had a nice little force field surrounding the developed nations; Western Europe, the UK, Japan, USA, Australia/New Zealand, etc. These nations rarely stepped over the line with each other and traded amongst one another without much fuss, without too much intervention and generally scratched each others back to keep the ball rolling. The key to their strong economies was good management, as well as a population that was a little insufficient to cater for the needs for the hungry consumers living there. That was they key to it all; plenty of demand, but always never enough people to do the jobs. This kept wages at very high levels compared to the rest of the world, giving the western public the power to purchase over the nations that have low currencies and an over supply of labour. But what stopped the greedy consumers from purchasing from poorer nations was massive trade barriers to protect the developed nations.

Enter the world free trade agreement. In an effort to help address world poverty most tariffs have been removed to allow the poorer countries to get a foot in to the rich and prosperous nations. So far I think most here would agree that that is not a bad thing as sharing some of the glorious wealth with the rest of the world can really help all to move forward, if done correctly. But it was not done correctly. It was done in a manner that was selfish and self fulfilling, which was basically exploiting the poor people of the nations to get richer.

Don't agree? How is paying someone 100 times less than what you pay a westerner fair? How is buying products from a factory where the workers get no annual leave, no sick leave, no superannuation and that works 10 hour shifts for less than 2 dollars a day fair? If the developed nations were sincere with their open policy then they would have ensured that the workers of the poor countries were not exploited and given what they earned. But no, greed was the order of the day. Let's pay them the very minimal as they will allow. In the meantime we can sell their goods here for much less than the locally made stuff but make a killing with massive profits per item! That was great for companies employing these practices, as it meant they had an advantage selling the cheaper goods over the local goods retailers.

This had multiple effects and pretty much supercharged the wealthy nations and gave a means for the wealth to be transferred to the poor nations - but not to the workers! Retails profits soared, and shares rallied accordingly. Then outlets that were being left behind decided to drop the locally made items and import the cheaper goods so that they can have bigger profits too! And what about the factories making local stuff? Never mind because after shutting down the factories they found that the workers there were even busier dealing with the imported items they had turned to; jobs were created to unload the ships, to truck the goods, to store them, to despatch them and to wholesale them.

So the void was never felt. If anything it was even better as the cost of living was going down due to the lower cost of the imported goods. That left a lot more money for speculating, investing, share trading etc. And because the falling cost of living was driving down inflation interest rates were kept super low, which assisted with the rise of house prices, shares - pretty much anything that was not imported from a slave labour nation!

So what about the factories that decided to stick with the local manufacturing - what are their options? The options now are not as before where going to the cheap import route was just a means for increasing profits. Now it's different - it's not an option any more. To survive you HAVE to shut the factory down and do as your competitors are doing and begin to import foreign. It's a must for survival and it has to be done.

Slowly but insidiously it had been eating away at the real economies of these nations, destroying the very engine room that drives nations; which is small businesses and manufacturing. Not large corporations with the big profits.

The credit crunch opened the eyes of the western world. It brought to the surface the poison that was running through its veins, but no one knew how to deal with it. In fact there is no way to deal with it without undoing the inflation that's being going on from under our noses. We can't restore manufacturing in the western world because no one will buy its goods. If we put up trade barriers now and forced the western world to buy its own products then inflation will jump so high the economies will go into shock and stall.

But would you pay a minimum of $180 for a pair of jeans, $160 for a toaster or $400 minimum for a 20 piece dinner set because they were locally made? No you wouldn't! And because you wouldn't our economy would not and cannot survive without undoing all its debt first so eventually people can afford to buy at those prices.

So here we are fellas. We're in a different world to what we had. We have had the world fully busted open, bringing in the one billion people who are under worked into our economies. That can only have a one way effect on our wages and that is down. You may not notice it, but it is happening before your very eyes. The rate of pay increases we will receive from now on will be almost non existent compared to the inflation pain we will be enduring.

Remember the key to the western world's success 'the key to it all; plenty of demand, but always never enough people to do the jobs. This kept wages at very high levels compared to the rest of the world, giving the western public the power to purchase over the nations that have low currencies and an over supply of labour'. Now we have the opposite to before - we now have an over supply of labour, which will have, and has had a negative of the true world of westerners. Over supply of labour, over supply of goods and an under supply of demand.

Something has to give and I'm pretty sure it won't be our leaders but the nations that they are leading. Look out for steep, but unmonitored inflation as the imbalances between the currencies between the western and eastern nations undergoes a correction.