This morning, walking to work, your editor was worried. The end of the world might not be as pleasant as he had hoped. These worries almost turned him into the latest victim of the credit crunch. That is to say, he almost got arrested.
What was he worrying about? He has no debt; but he has huge obligations. Of his six children, only one is really self-supporting. Others are in school or just starting their careers. He has houses to maintain – on two continents. And he has a business in full expansion…with new offices…and new products. Under the circumstances, expenses are not easily cut – to say nothing of taxes!
But that’s what happens in a real panic. Each man looks to his own. How will he pay his mortgage? How will he be able to retire? How will he keep food on the table and a roof over his head?
He begins to think…to reflect…to regret. If only he’d sold those stupid bank shares. If only he’d gotten out of India and China. If only he’d sold his business…put the money in gold…and retired – when he had the chance!
The latest figures show American retirement accounts have lost $2 trillion in the last 15 months. That is, of course, in addition to the amount lost in the real estate market.
Naturally, these financial losses are now migrating to the economy. A report from MasterCard tells us that consumers are cutting back sharply. There was a big drop in September retail transactions, via credit card, says MC.
“Unfolding Worldwide Turmoil Could Reverse Years of Prosperity,” says a headline in the Washington Post . Not exactly. What is actually happening is that the prosperity is being revealed for what it really was – phony. If people had been spending money they had earned – the money that you get when you are truly prosperous – we wouldn’t have such a problem today. Instead, people spent money before they earned it. And now, their earnings are turning down…their assets are losing value…and they have no way to repay the loans. So, the loans go bad…the banks lose money…and credit is withdrawn throughout the entire system… forcing further sales, lower prices, more bankruptcies, more job cuts…and more worries.
Thus it was that your editor…his mind troubled by all these heavy concerns…walked into his office building without his identification badge.
“Where’s your pass?” the guard wanted to know.
“Oops…I must have forgotten it.”
“Then, you’ll have to wait here until someone from your office comes to collect you.”
Your editor is a calm fellow. But whereas he had been working in this very same building for the last four years…and whereas he and the security guards have seen each other practically every day… and whereas he was eager to get to his desk and find out how much money he lost yesterday – he permitted himself to throw a fit.
Fortunately, rather than call the police, the guards let him pass.
And instead of pitching a fit, we advise you, dear reader, to be sure that you are adequately prepared for the economic situation unfolding before us.
for The Daily Reckoning Australia