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Sunday, October 19, 2008

The End of the World as we know it! (Part Three)

The Grim Reaper has arrived!




In parts One and Two I wrote of the seeming meltdown of the world order as oil prices soared, social order went to hell, and people were losing their homes. I predicted there was much more to come, but while I was right about that, I certainly wasn’t expecting what we got!

How does a company that has been in business for more than 150 years suddenly find that it cannot continue to trade. Didn’t they learn anything at all over all that time while in business? Suddenly we find that it was not just one or two companies that were in trouble but the entire banking system. Now governments all around the world have been forced into action to prop up the capitalist form of doing business. How did we come to this point?

The short answer is that it was because of the way we do things. Our capitalist system runs on credit. We are all expected to live beyond our means. Credit cards arrive in the mail urging us to step out from beyond our safe “living within our means” policy, and go borrow, borrow, borrow! We are urged that it is important to keep up with the Jones’ next door.

It is a shame to be the only family in the neighbourhood driving a ten-year old car. Still using the old big chunky television? Why, when you can bring home a flat screen for no money down and pennies per month. Are you actually renting the place in which you live? Don’t you know that home ownership is essential; otherwise you are throwing your money away.

Well, now the business world are coming to face what are being called toxic loans on their books. These are loans and mortgages that people were given, sometimes railroaded into, that they can no longer afford to pay. When interest rates were low they were sucked in, and subsequently rates have risen and Gotcha! Many young families are now being thrown out and their homes are taken over by the same kind bankers who drew them into the mess.

Children are being taken out of private schools to be put into the public system; people are losing their jobs, and in the first case of its kind (lately) in the United States, a man killed his entire family and himself because they were broke and losing their home.

Meanwhile, as an astonishing first time ever, capitalist governments are taking up equity positions in private enterprise in order that such businesses have money to continue to trade. Make no mistake about it, this is nationalisation, something that is so abhorrent to Western governments that they have to hold their noses while doing it.

In the case of one entire country, Iceland, it finds itself technically bankrupt. Imagine that, an entire country has gone broke. On the complete opposite end of the spectrum are the many 20 to 25 year old young women who are declaring bankruptcy because they have so overspent themselves on all the things that modern society insists that they do. How shameful is that?

This is clearly an-going story, so I shall be back with an update. Meanwhile, the question arises as to what can we do as individuals to protect ourselves? The problems are so large and so deep, covering so much territory that it is difficult to know which way to jump. Governments are taking strategic steps to guarantee your deposits in banks, so if that is your only concern perhaps you can relax. Certainly, without those guarantees even more banks will go to the wall as customers demand their money.

If you’re an investor on any of the stock markets you are certainly at very great risk as we see volatility being the order of the day. Mainly, it seems to be a case of hanging on and hoping that all those over-paid executives haven’t made too big a mess of things.

Copyright © 2008 Eugene Carmichael