Recession, No End In Sight Yet
November 10, 2011
As the worlds good and great, our glorious leaders, endlessly debate how to bring the world economy back to a “normality” there seems to be a simple fact they they might not have grasped.
We all now know that over the past 20 years or so a few oligarchs have cornered a disproportionate amount of the worlds money and assets. By the World Bank’s own estimate 47% of the worlds wealth is owned by just 215 families (report 2010) and in USA the top 1% own more than the bottom 150 million.
But here the rub,
What the worlds leaders are asking all of us to do is go out and spend, like good little consumers, in order to kick start the economies into action.
Here's what they have not grasped.
Billions of people are living on the breadline and I don’t mean only poor third world peasants. Middle income families in the west are now just about holding on.
The 1% have removed an enormous amount of money from the system and banked it in assets like gold, commodities and other illiquid investments.
For the past 10 or so years the slack in the economy was taken up with debt.
Home equity release schemes, credit cards, bank loans and overdrafts etc have been used to keep the consumer boom going,
not real incomes!
But now that the finance tap has been well and truly shut off, there is no more money to spend on consumer goods, in the west at least. In the far east things are bouncing along at a good rate, for the time being at least until they also realize where they are going!
For economies to work there needs to be a reasonable sharing of wealth with the majority having sufficient disposable income to allow them to be a part of the consumer society.
The advertising industry has done a fine job of brain washing the public that they need more and more “stuff” in order to be truly happy and most of the profits have flowed to the 1%. ( a subject I cover in my forthcoming book, Insidious.
Where do they think the next wave of free cash is going to come from?
Even the so called QE does not flow down to the masses, its given to the banks, for free, who are using it to buy Treasury bonds with a 2% yield and no risk.
Wouldn’t you if you were them? I wouldn’t lend to some small business that might not be here next year.
So if you are hoping that things are going to get better sometime soon , I wouldn’t hold your breath.
Hope for the best but prepare for the worst.
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