subject: Why You Should Recession & Inflation Proof Your Life [print this page] The news for the past year or two has consistently reported doom and gloom about the Global Financial Crisis. Many people are a little bored about it - they hear nothing else
If you were fired more than a year ago, and are still unemployed, you would have a keen interest in the news, looking for some good news for a change. You can imagine the fears and frustrations of those in this dreadful situation.
The good news is that many long-term unemployed are still maintaining a brave face, and often find it possible to laugh at adversity.
I have friends in this situation with whom I discuss home business opportunities. Most remain convinced that the continuing growth in China will restore normal commercial operation soon. It is an almost classic case of denial.
Two questions: What is normal? And Why will the Chinese help the rest of the world "get back to normal"?
Here is the thing: No-one really has a handle on "Balance." Because the Chinese are starting to feel the inflationary pressures of their rampant growth, they may be able or willing to help everyone else out.
But the bad news is that most countries are continuing to borrow to support their economies. The borrowings have largely been passed on to lenders, whose role is to finance business, bankroll loans and provide cash for discretionary purchases that society desires. And China is the main lender for all this.
The banks know the real situation, and make a lot of noise about lending, but sit on the money, because they know the reality - they are deferring losses, and they have to hoard cash for the shake-out...
Think about it. Would you lend money out knowing that you needed it to pay your own inflated liabilities, sometime in the near future? If you were certain that, eventually, cash was the only thing that would save you. Not property, falling in value, or unable to be sold at anywhere near the Book Value. Not shares, that are so volatile that a 15% swing in a month is not unusual anymore.
A miracle of sorts would be required, the mega rich get out of their ivory towers and help combat the poverty and the pain that the under and unemployed are struggling to cope with.
What we need to do is fund education and training for those who have not been able to find employment, assisting those who through lack of knowledge or opportunity are unable to assist themselves.
This training should be for jobs where there is a future, for public works and infrastructure projects, and for public housing where it's needed
Alan Greenspan wrote in the WSJ that while credit was not a risk, as the Government can print money at will, there is a definite interest rate risk. He commented on US Federal Debt levels also.
Currently US interest rates are close to zero. However, I remember that in the late 70's over a 4 month period, the rates increased by 1% per month. In early 1980, the banking prime rate for lending was 15.6%.
Debt as a percentage of the GDP rose from 38% in June 08 to 59% in June 2010. How much more can this increase with out substantial movement in interest rates? I am not trying to frighten anyone, but we need to look at the facts.
The implications are obvious. Inflation will rise sooner than most think. People need to find ways to protect their incomes from inflation, and their lives from recession
