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Collapsing economy?
Sep. 30th, 2008 12:02 amThe events of today affecting the global economy will be well known to you all. What I would like to say is this: the world we wake up to tomorrow will be changed utterly. These are not the end times; we will dig ourselves out of this hole. However, the road out is going to be long and very steep for many. Some predictions:
1) With government ownership of much of the economy, we will have regulation up the wazoo. As one Repug congresscritter (paraphrased) said, "Joe SixPack isn't going to stand for bailing out Wall Street". The only way this is going to fly is through increased regulation of the banking and financial industry. This will dwarf Sarbanes-Oxley in its reach into the financial markets. Measuring, hedging, and containing risk will be a sought-after talent and well-compensated. Buying and selling securities will be low on the totem pole.
2) Our families and ourselves are going to suffer. Buy-to-let mortgagors will be wiped. Rates will go up, and as people sit tight, not wanting to move, rental prospects will dry up in the short term. Mortgages granted this month are down 98% on last year here in the United Kingdom! Amazing! See #3 for what will happen when the mortgages are finally sold by the governments.
Those who work in the financial area will be hard-hit. Layoffs and postponement of all but absolutely essential projects will mean joblessness for millions. We'll see people selling their possessions on the street in order to make ends meet. Bankruptcies will go up, and the new laws that limit the banks' exposure to personal bankruptcies will bite the ordinary consumer who borrowed prudently but, through no fault of his/her own, has lost his or her job.
Oh, don't try applying for a credit card anytime soon. If you do, and you get one, don't borrow on it. I feel like cutting mine up right now (we don't carry a balance, thank goodness).
Those in the best position will be those who have money in the bank (deposits, I think, will generally be safe), who have little or no money borrowed, and who have little or no money in the stock market (at least in the short term).
3) When we come out of all this, in about 10 years, the financial markets will look very very different. Risk aversion will be the order of the decade. Only those who do not need money will be able to take out loans. The government will package up what is left of the mortgage débacle and sell it on to a prudent investor who did not get into the property market before. This person or firm (there may be several) will make a killing and own a lot of commercial and personal real estate. S/he or it will make Donald Trump look like someone who has one house on one property in Monopoly. People and companies will be turfed out of their homes and offices. The rental market will then look pretty good, as all these properties will be rented out to people who have lost their homes and to companies which have lost their owned offices. Buffett will probably have gone to that great Berkshire Hathaway in the sky by that time, but someone like him will be the property tycoon of the 2010 decade.
4) Personal misery will increase in the next year as the Northern Hemisphere closes in on winter and the gloomy short days of the season start to bite. Retailers that were banking (funny word, that, in these circumstances...) on a good Christmas to lift them out of losses will be disappointed. Expect to see some retailers go bust in January-March 2009 as the losses mount to unseasonable levels. People will be keeping their wallets firmly shut for all except essential spending. I think that PC World/Dixon's might be one of those that has significant troubles after a lean Christmas season. They have already had some trouble, I understand. Wait for the after-Christmas sales.
I would also expect that suicides and murder/suicides of families will increase as financial strains take their toll. Fathers who kill their spouses and their children and then themselves often do so because of financial reverses current or prospective. This is a horrible outcome of the greed that has consumed our economy and we must do all we can to ensure that this does not happen: governments and charities must increase spending on counseling and mental health services. Expect the suicide rate around Christmas to sharply increase since Christmas is often a time of increased suicide rates--'tis the season to be jolly, you know...be supportive of friends who may be in financial difficulties. If you feel that prayer or good thoughts are effective, pray and think good thoughts.
5) If you think you don't own any stocks, but you have a pension plan or an insurance policy, think again.
I dread waking up to the 7:00 news tomorrow.
1) With government ownership of much of the economy, we will have regulation up the wazoo. As one Repug congresscritter (paraphrased) said, "Joe SixPack isn't going to stand for bailing out Wall Street". The only way this is going to fly is through increased regulation of the banking and financial industry. This will dwarf Sarbanes-Oxley in its reach into the financial markets. Measuring, hedging, and containing risk will be a sought-after talent and well-compensated. Buying and selling securities will be low on the totem pole.
2) Our families and ourselves are going to suffer. Buy-to-let mortgagors will be wiped. Rates will go up, and as people sit tight, not wanting to move, rental prospects will dry up in the short term. Mortgages granted this month are down 98% on last year here in the United Kingdom! Amazing! See #3 for what will happen when the mortgages are finally sold by the governments.
Those who work in the financial area will be hard-hit. Layoffs and postponement of all but absolutely essential projects will mean joblessness for millions. We'll see people selling their possessions on the street in order to make ends meet. Bankruptcies will go up, and the new laws that limit the banks' exposure to personal bankruptcies will bite the ordinary consumer who borrowed prudently but, through no fault of his/her own, has lost his or her job.
Oh, don't try applying for a credit card anytime soon. If you do, and you get one, don't borrow on it. I feel like cutting mine up right now (we don't carry a balance, thank goodness).
Those in the best position will be those who have money in the bank (deposits, I think, will generally be safe), who have little or no money borrowed, and who have little or no money in the stock market (at least in the short term).
3) When we come out of all this, in about 10 years, the financial markets will look very very different. Risk aversion will be the order of the decade. Only those who do not need money will be able to take out loans. The government will package up what is left of the mortgage débacle and sell it on to a prudent investor who did not get into the property market before. This person or firm (there may be several) will make a killing and own a lot of commercial and personal real estate. S/he or it will make Donald Trump look like someone who has one house on one property in Monopoly. People and companies will be turfed out of their homes and offices. The rental market will then look pretty good, as all these properties will be rented out to people who have lost their homes and to companies which have lost their owned offices. Buffett will probably have gone to that great Berkshire Hathaway in the sky by that time, but someone like him will be the property tycoon of the 2010 decade.
4) Personal misery will increase in the next year as the Northern Hemisphere closes in on winter and the gloomy short days of the season start to bite. Retailers that were banking (funny word, that, in these circumstances...) on a good Christmas to lift them out of losses will be disappointed. Expect to see some retailers go bust in January-March 2009 as the losses mount to unseasonable levels. People will be keeping their wallets firmly shut for all except essential spending. I think that PC World/Dixon's might be one of those that has significant troubles after a lean Christmas season. They have already had some trouble, I understand. Wait for the after-Christmas sales.
I would also expect that suicides and murder/suicides of families will increase as financial strains take their toll. Fathers who kill their spouses and their children and then themselves often do so because of financial reverses current or prospective. This is a horrible outcome of the greed that has consumed our economy and we must do all we can to ensure that this does not happen: governments and charities must increase spending on counseling and mental health services. Expect the suicide rate around Christmas to sharply increase since Christmas is often a time of increased suicide rates--'tis the season to be jolly, you know...be supportive of friends who may be in financial difficulties. If you feel that prayer or good thoughts are effective, pray and think good thoughts.
5) If you think you don't own any stocks, but you have a pension plan or an insurance policy, think again.
I dread waking up to the 7:00 news tomorrow.
