Hi Grumpster. My gut feeling is that we are pretty much at the end of our easily accessed and very cheap credit cycle. It's just the way it is as long strong term trends must eventually be countered by opposing forces. And with it I believe that sourcing money either from high paying jobs or via loans would be much harder than what we have been enjoying of late. If that were to occur then it will sour the whole economy as the dreaded realisation will surface which is that people will actually have to stop borrowing debt on top of debt and begin paying off the initial debt. Some may even have to go back to work!
People at the end of the dreaded 18% interest rate cycle were brainwashed into believing rates would stay in the teens forever. 3 years later it went below 10%, as the cost of living fell as wages caught up to the stagnant house prices and Chinese sourced goods were beginning to appear.
That is my gut feeling - that most still believe that interest rates cannot go beyond 10% and cannot comprehend that the rates don't just exist to make life easy for consumers - rates also exist to halt out of control prices. If what I mentioned in my first post becomes reality then our leaders will show no mercy as they will be forced to keep a tight lid on inflation - if they didn't then rising fuel costs and imported inflation would turn our economy into a Zimbabwe like joke.
So there will be inflation - but not the good 'rub your hands together' inflation, but the ugly and painful nasty inflation where no one is a winner except those holding cash or those selling items of real value such as food, crops, dairy, etc. We humans go with the flow and always go with the obvious. When Geelong keeps winning everyone becomes an expert and says Geelong will win the flag. The same with Ferrari. Everyone sticks with what's most likely to give the most predictable result. But the truth is no strong trend ever continues, whether it's drought, storms, etc.
And Grumpster with commodities as it is there's less available than what was yesterday. China's local car market is now selling 1 million cars a month. We can thank ourselves for providing China with the means to consume all this and more. Our economies had just been through hyper mode as a result of China's rapid rise to stardom. China's momentum is real and it will simply continue with or without the rest of the world running on all cylinders. It may have periods of weakness - but it has more room to grow than America which can only go in one direction - and that is not upwards.
