http://www.bbc.co.uk/news/business-15669197(At the risk of upsetting the Sgt
)
Greed is NOT Good Mr Gekko. Well good for some but not good for all. Hang on for a bumpy ride guys - it's a 90+% chance that things are about to get economically a lot lot worse.
It's hard to lay the blame on any one cause - it just that the last 20 years of growth based on credit fueled western consumption (greed, indulgence and self delusion) is a house of cards (demonstrated in the USA and now about to be demonstrated in Europe/eurozone). The fact that the eurozone was an economic basket case with economic management forfeited to 'paper tiger' technocratics and some flimsy obviously inadequate rules without political will or political clout or defined political responsibility has only exasperated the problem - and now coming home to roost (e.g Greece debacle - both Greece and eurozone's political response/non-response
).
My bet is that Italy is about to go 'tits up'. For Italy to survive would have taken a miracle and for all the favourable stars to line up. As it is all the confluences are working the other way - Debts coming due, cost of borrowing going up (and surpassing the repayment threshold
), political instability (as per usual but will become worse with self interest, survival and 'rats and fat cats leaving the ship') and now the chance of 'trading their way out' greatly reduced (realistically zero
).
Irony of ironies, the eurozone is looking to America for help. Realistic? Politically or economically can or will they do it? Economically it would make sense but this is now a political decision (a hardnose and unpopular political decision with some maybe economic benefits/ imperatives in an election year in a politic contest which is more popularity contest than leadership quality contest
).
Ditto China. The eurozone asked the Chinese who stared back at them inscrutably blankly. Economically it would make some sense but with their Home economy starting to take off it is not an economic imperative. Politically? - you're got to be kidding. The thrifty poor Chinese bail out the same bloated Europeans who for 200 years tried to kick them when they were down and tried to suck the life blood from them? Yeah, right. Even a police state dictatorship would have probs forcing that political football down the throats of 1.2 billion poor but proud nationalistic Chinese.
China might participate in a European fire sale - Sicily, 20 billion euro? VW or Fiat 20 billion euro?
Ditto India pretty much.
Look to Japan? They'll be looking for their own bail out if world trade takes a major down turn (which is a most likely follow on from a European slow down).
If things pan out the way I predict, which I rate at a 90% chance, the problem will be so acute, so profound, the economic effect will last ten years. And I'm not the only one with this prediction and fear.
Where does that leave Australia? We'll be saved by sound economic positioning and structure (thanks to 20 years of Liberal
and Labour economic responsibility and good government - making a number of hard decisions over a long period of time) and resources sales to China and India (relying on their domestic growth) at reduced price at reduced volumes. But it will hurt.
Where does that leave you and me? - up shit creek without a paddle. My super is 50% of what it was 5 years ago, and taken another lost with all this eurozone uncertainty. And it is unlikely to improve in the next 10 (in my estimation).
Thank God for Real Estate. Even if it stagnant at least it ain't going backwards (yet
).
