Wow Harry, you say a lot in this paragraph...
"Market bottom are typically not seen in bear markets till consumer debts starts to fall. In the current environment the Fed is lowering rate in order to encourage consumer spending (ie ... debt), but in reality he is just delaying a more serious crash that will come when the consumers can no longer carry the debt in a contracting economy. "
I don't think Greenspan is responsible for people's spending habits... we're all susceptible to the constant training to be happy consumers that goes on at every level and dimension of our lives. Even a vacation, which I just enjoyed, is worked into the system to effectively change the oil, put in new spark plugs and clean my mental windshield in order to get back on the consumer treadmill.
The economic system we live in, isn't capitalism, its managed consumerism. The goal, is to keep the machine in motion. Debt is a real problem in the old economic accounting system.. a closed economic structure.. which is why they got rid of the gold standard. Without a fixed point of reference debt can be swapped out of the system using smoke and mirors.
When the late 90's is looked back on.. I think we'll see that there was a huge boom in wealth caused in part by the y2K buying binge coinciding with dreams in the internet toy store... what we don't see is that the other parts of the economy organized itself to take its share of the pie, they insisted on getting in on the action.. just when the bubble was bursting.
So we've had a crippling energy price spike that scared the hell out of everyone, just as the electronic frontier was falling apart. Equity and jobs have been evaporating in the leading sectors, just as the energy and industrial sectors were grabbing their profits one way or the other. At the same time, world consumer markets have been synchronizing to the downside, trade losses in one area aren't being picked up in other areas... I liken it to a structure that is strong so long as the vibrations are out of phase. If a unifying harmonic frequency takes over a system it can shake it to pieces.
Hopefully, just as the public has taken all the debt it can digest, companies will be on the upswing refilling inventories and new frontiers of business... and hopefully there are sectors of the world that have already turned the corner and are accelerating even if it can't yet be seen.. Japan? Asia? China? Europe? |
