The markets are going down because at the end of the day the bailing out of the bankrupt finanicial institutions did not solve anything.
All they did was transfer the bad debt from the private sector to the public sector by piling on new debt onto existing debt.
The debt has to be paid back or be written off!!!
The problem now is that who will bail out the governments around the world that are insolvent?
Whether we like it or not we are a global interlinked economy. What happens in Europe or the US will affect us.
Europe and the US are China's biggest customers. If demand falls then so too will China's exports which in effect will cause a drop in demand for our resources (Iron, Copper, Zinc, Alumina, etc...)
The only hope we will have is if the so called emerging markets can somehow drive domestic consumption up so that they can consume the goods they are producing thereby minimising any drop in demand from the West.
Australia's is a resource rich country that is now in the position of having low government debt but massive private debt.
If the resources boom ends tomorrow and unemployment goes up as a result, then how will people pay their large mortgages?
No one has learnt a single thing from the GFC, which is still ongoing.
When I log into my netbank account and I see a little message saying that encourages me to increase my credit limit, then I know that the worst is yet to come.
