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I wrote this without thinking just feeling, it is what it is and I am not going to edit and check it:
I get the sense that trouble is around the corner, you are seeing with big time yield spikes in bonds across the globe, also you are seeing it with default insurance, I just came across this one
price of insuring against a potential U.S. default is spiking. Big-time. The one-year cost of insuring U.S. Treasuries is now over 0.37% — or 37 basis points.
My point is this feels like 2007 all over again, just like you had the calls saying that housing was a bubble, eventually you started getting people acknowledging that there was a problem but nobody was prepared to accept a worst case scenario, all the predictions were that there will be an adjustment but nothing epic. And so the reversal gathered momentum.
You get the same feeling at the moment with the sovereign debt crisis, everyone knows that it is there and that it is likely to be a problem but everyone just keeps thinking that someone else will solve the problem, like China is the cure for everyone or emerging markets are the future. Bulls…t Emerging markets are so far behind the technology boom all they have going for themselves currently is commodities and large uneducated populations.
Do me a favour one significant pullback in commodity prices will send these emerging economies back to their 3rd world status, with disease and poverty and the all to present crime wiping out large portions of the population.
Sorry for my bleak outlook, but trouble is around the corner on an epic level. All that happened with the GFC round 1 was people became aware of tremendous financial insolvency. However, it only placed as a reference point to people changing their lifestyles it didn’t really have a meaningful impact in actual practise. The reason being, as people started comprehending the insolvency the central banks and government treasuries were able to create an optical illusion that kicked the can further down the road to serfdom. When the public who were awakened to the reality of insolvency in round 1, realise that all they have been living though is a failed Chapter 11 then the finale, round 2 of the GFC is likely to finally penetrate a much deeper level in the collective wisdom of the world.
A period of incredibly difficult restraint is almost upon us, yes there was always going to be a contraction in the global economy much like the business cycle to the Austrian economist is like night following day. The problem now is that by postponing the inevitable we are likely to experience a cold dark winter (metaphorically speaking) that is the only way to wash away the excesses brought about by a credit induced ailment of living beyond our means.
There is still way too much money in the hands of the rich relative to the poor for emerging markets to experience a true middle class boom. We also need to ask whether a middle class boom financed on credit is worth the bust that is inevitable. We are well passed the fancy economic theories of monetary and Keynesian economics or any such theory for that matter. We have entered the real world where theory has little place to answer someones need for food, shelter and clothing. It is time for common sense to prevail for leaders to dig deep and prepare their flock for the coming misery.
I live in the stable, commodity rich country called Australia, I live in a beautiful first world city called Sydney. This place is fast becoming unaffordable. No let me correct that it has been unaffordable for a long time, without further credit greasing the engine for growth there simply will not be room for the status quo to remain. Free society with the belief in mans ability to enjoy whatever he or she wants has placed an extremely onerus burden on staying on course. We have substituted a life of moderation for a life on a treadmill that is far more glamorous than middle of the road. The treadmill has every changing scenery, but it is all a façade, in fact it is worse it isn’t even real, it is borrowed, it doesn’t belong to us, we have stolen from the future. Almost as if we believe we are able to stretch forward in time and take hold our future and enjoy it now.
But there is a problem here, just like when one is being naughty, deep down we stir feelings and emotions we know are not right, we don’t feel comfortable with it so we force ourselves to enjoy it while it lasts and therefore our feelings become ever so myopic as we fear the future and chose to enjoy the present. These contrasting emotions to our unconscious selves leave us wounded on a psychic level that just like Jung demands the individual to go through a process of individuation so too are we as a society to go through the collective individuation process as we experience the need to correct the wrongs of our past.
