A month ago and I would have agreed with you guys saying buy up and we'll be out of it in a year or two, but something has happened since then, something big. The world's stimulous packages have failed.
Failed.
Markets are still collapsing, companies are still going under.
We just threw a big fuck load of cash at this and it did nothing.
Toyota just asked for a bail out. Toyota. If the worlds most successful car company is bankrupt then they're all fucked.
A big difference between this crash and the great depression was that the US could call in foreign debts in the 30s. This is part of what caused WWII because after the 29 crash US called in loans from Europe and in the first year Germany's unemployment went from 8% to 15%, and in the second year from 15% to 30%. This time the US has a foreign defecit. It owes money. And as the US GDP falls through the floor this money starts to look pretty hard to pay back.
The Bush fiscal policy of ignore things at home and make sure the oil price stays steady failed. Oil prices soared and now that they're back down again the world is left with the crippling afterblow. Everyone is blaming sub prime mortgages? What do you think were the factors contributing the the mass defaulting last year? Could it be the price of fuel almost doubling at the bowser? Go below the credit and the trading and the lawyers and the service economy and what drives all economies? Energy. But I've been told I'm wrong and that oil price had nothing to do with it and I'm not an economist so I'm not going to harp on about the cause.
I will harp on about the effects though. Australia is a resource based economy, we sell iron ore to China. China aren't buying, why? Because they are an export economy, they sell TVs to the US, but the US aren't buying TVs. Why? Because Bush spent 4 trillion on a war while his country borrowed money for their houses.
An entire generation of stock investors just lost their retirement funds, this means they won't be spending them on products made by the current work force. It also means they qualify for the pension that the government can't afford to pay. This was already a problem in Europe and China. What is it now?
Will you feel like paying your taxes when you also have to support your parents because their pension checks aren't arriving? What happens when people don't feel like paying taxes? Black market trade. Government revenue plunges and they can't afford things like hospitals and police force.
What happens when you don't have a job, your dad dies waiting for a hospital bed, your mum is living in your kids bedroom, your car just got stolen and spam goes back to being a food product and not an internet product?
Are we all sure this is going away in a year or two?
This post has been edited by Cold Iron: 04 March 2009 - 09:55 PM