So, I’m sure that many of you have been following the “sub-prime mortgage crisis”. We’ve grinned to ourselves as billions of dollars have been lost by those rich bastards we all love to hate. What I find interesting is when you read news that is published in the US of A, you really get a feeling of “oh, its bad but we’ll be ok”. But an article that I ran across recently gives you pause. Europe and Asia are panicking. Bad choices starting with the de-regulation in the 1980’s have led to a melt down that is quickly reaching the levels of those in the 1930’s. Dejavu, anyone? Well, anyone that remembers the 1930’s, because we all know that nobody pays attention to history, its just boring old stuff, isn’t it?
Quote from a UK Publication linked here:
China cannot possibly step into the breach. Jahangir Aziz and Xiangming Li argue in a new IMF paper that China’s economy is now so geared to the US and EU markets that a 1pc fall in external demand will lead to a 4.5pc slide in exports and 0.75pc fall in GDP. Assumptions that it will weather a global shock are “likely to be wrong, perhaps dramatically”.
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China is gobbling up iron ore, soy beans and crude oil, but it accounts for less than 4pc of global consumption and is no longer adding to total demand. Imports have been flat since April. China is boosting GDP at the world’s expense, by snatching markets with a cheap yuan. It is beggar-thy-neighbour growth.
Note that Goldman Sachs, Morgan Stanley, and Lehman Brothers have all begun to tear up the “decoupling” manual - the pre-crunch script assuring us that the world could get along fine as the US buckled. “What began as a US-specific shock is morphing into a global shock,” said Peter Berezin, a Goldman Sachs strategist. “There is a clear risk that some of the hot housing markets in Europe and some emerging markets will cool dramatically
I HIGHLY recommend reading the rest of this article, as it breaks down in good detail how this market can spiral even further downward. Its not pretty. NOT PRETTY AT ALL.
The good news is, for those of us in that middle class (that saw the writing on the wall and understood) and decided to go ahead and give up that credit addiction and were smart enough to read the fine print and go for the fixed loans, we’ll probably ride this out just fine. The one market that seems to have steadied out (knock on wood) is the tech market. When times get hard people fix things instead of buying new ones, they hang on to the things they need and the entertainment to make the time pass by.
Current Mood: chicken little
amused