Are you confused by the current economic crisis?
Well, here’s what’s happened and what is happening and what will likely happen in the future.
Past: The Clinton administration funded fat mortgages to poor people on poor-quality housing. A lot of paper was issued, backed by this debt. When supply increased way beyond demand, the market crashed and the effect rippled worldwide, as a lot of unworthy people in a lot of countries were also getting fat mortgages or buying paper based on them.
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Present: To stop banks going out of business and the ripple-effect of that collapsing their economies, governments have given big loans of taxpayers money to banks and hived off their bad loans into ‘bad banks’. Because money, stocks and property are now depressed as investment vehicles, commodities have risen. That’s why gold, for example, is now at a silly price and will likely crash, when supply exceeds demand, again.
Government bureaucracy and welfare (and thus public spending) is also monstrously disproportionate to the population the the UK and Ireland. There are too many chiefs and hangers on and not enough indians.
Future: Governments can’t keep throwing money at banks. It’s taxpayers money. Some countries, like the UK and Ireland, are extremely indebted. This makes them bad risks for investment; they might not be able to pay you back in the short-to-medium term.
So their economies suffer with less inward investment. That means fewer jobs. They also have a massive administration and welfare strain on their budgets.
If those (individuals, companies, other countries) who own government paper (bonds, paper money) decide to sell them off, they could bankrupt whole countries. Or just depress the value of their paper.
The hope is that governments, through debt-funded spending, can keep the show on the road until their economies pick up.
What is irritating:
– Manufacturing is now done more cheaply in the Second and Third Worlds. First World economies are now based on service industries. As example is the City Of London finance industry in the UK. Unionisation, red-tape, taxation and high wages make First-World countries less attractive for manufacturing. So no one has money to spend on service-industry products in these countries; previous spending was done with borrowed money or money from the finance and property sectors.
– Socialist governments still spending what they don’t have and looking for ways to leech off of those who do. Except the ‘haves’ are hurting now, also.
– Higher taxation when everyone’s feeling the pinch; who wants to start a business when taxes eat into your profits and said taxes go to pay the unproductive?
Prognosis: A long recession or even depression. There’re still a lot of bad paper and bad ideas and ignorant, deceitful politicians which need to be flushed down the toilet of history, so enterprise can re-assert itself.
To prevent a repeat of this situation, simple, clear laws need to be enacted: Lie about your product and be criminalised for it. That’s all.