It's time people learned that the interest rate, increased credit, wage price spirals, and excess government spending -- which is basically increased consumer credit levels with the tax payer as creditor, (without a choice in the matter it appears - what is voting for?**) -- has a natural consequence, which is a boom & bust economy.
It is evident that prices of stocks or value of investment cannot exceed the natural growth rate of the economy, which it appears cannot exceed the human growth rate. In other words production cannot exceed consumption, whose main engine is the lowest level consumer.* If the population and productivity does not grow, then the economy cannot grow. Productivity, no matter the degree of mechanization has a terminal efficiency point, so after a certain point has to level off, ergo average wealth must eventually remain constant.
**Electoral democracy is like serving on a committee of the lowest grade and most gullible morons who are getting their information and advice from the lowest grade of cynical, corrupt sleazebag.. Bin thair, done that.
* You just cannot hand the consumer more money and increase the economy. This is a fallacy which many governments try as a quick fix, i.e. lowering interest rates, presumably increasing wealth. All that happens is the available money supply decreases in value to equal what is available to sell the consumer. So all we have is a differential roller coaster where for a brief period, increased investment creates the illusion of temporary wealth. In discovery industries, where prices rise due to shortages where substitution cannot easily be implemented and discoveries take place to fill that gap continually, the illusion of new wealth is even more cruel, but temporarily certain focus points accumulate wealth as they take natural precedence in maintaining supply.
Everybody is chasing the same buck and it is some skittish about going into what are termed high risk industries, or the uncertainty of exploration and production of commodities however short of perceived supply. In fact in a bad economy such as this one, the real risk is in normal production and business. Commodities in our present organic market are not much of a risk, provided that the main consuming nations do not suddenly contract. I will admit that China has this loose cannon aspect to it. They have continually and suddenly taken turns to stop supply or change price structures wholesale. Long term dependability is not their long suit. It would appear that European growth, even eastern European growth, Russian and North American growth are non starters for perhaps the next 5 to 7 years. Asian growth, while not totally dependent on Europe and North America will slow as well. Perhaps to half what we have seen int he past ten years. They are doing this to avoid excess inflation and to harmonize with markets that they normally predate.
Given the shaking European economies and the bleak outlook for most business in Europe and North America I predict this level of economic stagnation we are experiencing will increase and maintain for the next half decade at least. However I am not completely bleak in natural outlook in all areas of innovation or production. IT is ironic that during the great depression of the thirties, we underwent a spectacular increase in innovation, engineering and the motor car became affordable to the average man. Mining exploration and gold production took off like a rocket. These considerations, it would seem run totally counter to the image of depressions being times of moribundity. It underscores that some things are easily available which benefits the producer. One of these is labour and the other is the low price of supplies. Credit we admit is a problem.
The paradigm I have pointed out repeatedly is that our situition today vis a vis equity mirrors some of the problems of the 1980's. During that time equity funding stagnated. Previously in the 1970's many organizations drilled off gold deposits without being able to find nickel one of development or mill money. The markets in Canada without maior infusions of US capital could not get into production. Both Canadian and US policy rejected allowing money to go across the border. The achieved this in a few ways. Their were laws enacted in the US and Canada. We had the CDC and FIRA. As well capital gains tax had been implemented in Canada, which made it much less attractive to invest in this country. Our securities commissions disallowed US private placements except under very special circumstances. All of this conspired to brutally contract the once fabulous Canadian mining market. Mill money disappeared. The names of Canadian mining stocks had once been on the lips of every famous TV personality in the US. Our industry was fabled and iconic, Easy money was every where in the great white north. Gradually this legendary status shrank to a few dirty stories told in back alleys. In 1979 there were 300 operating mines in Canada. Today there are 75. The rise of phony environmentalism, anti mining forces, ever more tentative land tenure, native objections and plain government stonewalling, put the the rest of the nails in the coffin of small mining in Canada.
What was done in the 1980's to finance was to turn to debt. It was often fatal back then as we had double digit interest rates. If not for the complete lack of money around it would make much better sense today.
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