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 Re:For the Record
By: perceptions_now
30/08/2009
5:51 pm Yahoo! Profile:
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How did we get here (Cont)
The inevitable happened around 2005, two of the three major growth drivers (Population & Oil) Peaked and their combined effects had a profound influence in events. Population growth had already started to slow and the Baby Boomer generation had just started a 20 year transition, from their Peak Earning & Spending years, to being thrifty Retirees, before leaving us forever.
The slowing Population growth had already influenced the New US housing market, with construction in long term decline. However, the slowing Growth, combined with the Retiring Boomers, spilled over into Existing housing and that Bubble burst, as Demand slowed, forcing a vicious cycle, of falling housing values and rising Foreclosures, re-enforcing each other, in a race to oblivion.
Around the same time, Global Peak Oil, which had been long talked about, as a theory, became a reality. As Production effectively Peaked around 2005 and then started to fall, the Oil Price raced to $147 a barrel, and then, as the costs ballooned and economic reality set in, together with the perception of a faltering global economy, Oil Prices fell, as Demand also reduced.
The rest of the World joined the Party!
Many countries spent up, mainly by vastly increasing Debt and mortgaging the future, on a bet that the status Quo would return.
With Debt to GDP ratio's approaching 100% and in some cases more, the status quo will not return! |
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By: perceptions_now
30/08/2009
5:51 pm Yahoo! Profile:
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How did we get here
There are seldom "Single Reasons or Silver Bullets" for events, such as these and this event is no different!
Going back in time, the last 200 years has seen 3 primary growth drivers -
1) Population Growth
2) Cheap & Abundant Energy (Oil)
3) Innovation
The Global Population attained 1 Billion around 1800, 2 Billion around 1930 and we have now reached over 6.5 Billion, having added 4.5 Billion in just 80 years.
Previous energy supplies Peaked out, as the Global Population expanded, with Wood & Whale Oil giving way to the Cheaper & more Abundant Crude Oil, as it started to come on stream, just on 150 years ago.
Man's Innovation has also expanded incredibly, over the last 200 years, as the Industrial & Information revolutions, increased Production persistently, via means such as the , Steam train, Aeroplane, Television, Medical technology, Nuclear fission, Computer & the Internet.
So, the scene was set and it culminated in the greatest economic boom in history, between 1995 and 2005! This was the "Perfect storm", for making money.
Finally, one of the oldest and most regular players came back into the game, when GREED joined the party, assuming the party would never end. Leveraging, via the Banking/Financial sector, went thru the roof, NINJA Loans came into being and the completely unregulated "Derivates Market", went into the Stratosphere, at over 100 times the Annual Global GDP!
However, there is a dilemma in the current economic/banking system; it REQUIRES exponential growth, within a finite environment! |
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By: perceptions_now
30/08/2009
5:50 pm Yahoo! Profile:
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Where are we Now
Let me put it this way, the US situation is as follows -
1) The Debt to GDP ratio is heading north quickly, to 100% and beyond.
2) Consumers have taken a massive hit, via falling housing equity, lower share values & reduced access to credit.
3) The economy is deleveraging and will do so, for some time to come. Derivatives is the other Elephant in the living room!
4) Two of the three major growth drivers (Oil & Population), have Peaked and are heading south.
5) Unemployment and Taxes are both rising.
6) Business Earnings are falling dramatically and bankruptcies are rising.
7) Tax revenues and consumption are both down.
8) Massive increases in Health and Social Security Costs, are on the way, again expanding government deficits.
9) Problems arising from Climate Change and Food Production are also set to interfere with future plans.
10) Share Markets first fell some 50% and have since increased some 50%, still leaving a massive reduction in total wealth. |
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By: perceptions_now
30/08/2009
5:50 pm Yahoo! Profile:
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For the record, the following is a "Quick" snapshot of where we have been, where we are going and why! My apology for not being able to fit a 200 year history, into a few sentences!
I encourage comment, to agree or disagree & most importantly, I encourage you to propose solutions!
US Influence
Let me dwell for a moment, on the relationship between the USA & the Global Economy.
It has been suggested, in recent times, that the Global economy and in particular the BRIC countries, have De-coupled from the US and the influence of the US is now substantially lessened, on the World economy.
That said, the US economy, in GDP terms, is still greater than the next 3 countries GDP, combined.
For the Record, whilst some countries have room to manoeuvre slightly, they can not swim against the US tide and clearly, the current economic slowdown has put an end to the De-coupling suggestion, at this time! |
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