Make Hay While The Sun Shines.
If there is not already, there should be a web site dedicated to the language of bankers and the “financial engineers” they employ.
Whether you call it a credit crunch, asset crisis, or liquidity crunch the truth is far simpler:
“Society has been riding the greatest economic boom ever” This was according to US Treasury secretary Hank Paulson.
By spending more money than is earned tens of billions of dollars, euros and pounds have been used up on valueless consumer goods. This is what has driven stock markets. Now bankers seek lower interest rates, so we can borrow more to buy more.
If we don’t, corporate profits will fall and our pensions will be hurt.
Personally, what I find particularly frightening is the fact that potential problems have not started. They are lined up like dominos ready to tumble, but they have yet to do so.
In England during last year 27,100 people had there homes taken away, that is up from 22,400 during 2006 and only 8,300 in 2003. This is predicted to rise to as many as 50,000 home repossessions during 2008.
Why?
Interest rates are well below historic norms, in fact a fraction of where they were in the 1990’s. Inflation is officially 2-3%, and unemployment continues to fall.
What will happen if things get bad, even worse get really really bad?
My guess is that the latest DVD player with high definition live action replay will not be classed as an asset of value.
For twenty years I have been a vociferous advocate of real assets: gold, silver and if you can afford them rare coins. 10 years ago, gold was trading at only $300 per troy ounce, in January 2008 it had an all time nominal high of $948.
Just 10 years ago the financial wizards of Wall Street were hailing the death of gold as a currency, predicting it would never gain its lustre. In 2008 those same wizards say gold is too high.
I will leave our readers to decide as consumers what has value for them. A new flat screen TV, or an ounce of gold.
Leave a Reply