Tag Archives: level playing field

“What recession”…after the economic crisis..

happy shopper

For most people the readjustment has already happened, for some they have lost half of their worth but still are worth more than most people will earn in their lifetimes, sometimes many lifetimes over..

Its only numbers on a screen or a piece of paper and that’s the way it was before the credit tsunami hit so what is different..for some if not all it is not much, for others a few they felt it in reality, they lost their job or had to sell their house(s) but strangely enough the Mercedes or BMW was still in the garage and the general feeling is it is all a blip!, something to endure for awhile then everything will get going again, we have put off the holidays (vacation) this year (tourism and airfares are going through the floor), we won’t splash out on a new (Kitchen, extension, spa bath or holiday home) and so on “times are hard” they mutter under now only two caffe lattes a day instead of the usual ten “i needed the total energy to get me through the day” cups.

things are well not that much different, the rich are still rich but poorer, and the poor are well still poor so no change there, the bankers are doing fine thank you very much now that the rest of us have fixed their equity problem but credit is still in short supply and new projects are being shut down or canceled and for ongoing projects the money has been found to finish them off and any other projects that are very advanced into the construction and planning stage they are still being advanced to their next phase, life goes on and very well thank you we still have to eat and shop so things will continue as normal, even that petrol thing has gone away so we are able to run our 4×4 at a reasonable cost again that won’t break the bank so “whats your problem”.

Well the deeper problem is that most people say “oh by 2010” next year by the way?, “that things will be on the up and up again so no problem”, their attitude is that the money they have lost will return with a golden egg, their job will reappear in some flash of light, “that house on Banksia Court is a great price now, so why don’t we put in an offer”, the investors (remember them) are gobbling up the Real Estate (read cheap) bargains at a ferocious rate and ready to sell off to the raising hordes of cashed up buyers that can gain by the exceedingly low interest rate its really wonderful this economic crisis, “best one for years and years” as the “opportunity abounds in the return of the markets and good olde cash” and its “nothing like the one in 1930 something”, this is a “new type of recession”, and remember that “9/11 event we all cruised through that and so this one will be be just like that” so “why worry”.

So with things going so swimmingly I don’t really want to spoil the party in fact it would be a shame too as I for one want things to be good and people not suffer or struggle which a lot do and one thing that is right is the fact we do still have to eat and put petrol in our cars and well “go shopping”…but to do all of this we need money and a big bite of optimism that things are fine, to which to a point things are…

…But except for the realisation that this is it, yes it, the “new new”, the recession the “real deal” and its not going to get better in fact the sooner we all except the situation the sooner we can all move forward, so lets get real shall we.

The level we are at is the real level, not a hyper level or the old (last years) level, that wasn’t a real level at all it was simply an inflated “lets not spoil the party”, level…

…a level that was so way “out of the ballpark” as the Americans put it that it was a stack of cards that was stacked on a stack of cards that was…well lets say we were living in a world of fools, we still are as the fools still believe it will all come back..the ones that will survive and prosper will accept the fact that there is a reality of now and start to live in the new world and not hope it will all come back tomorrow not because it can’t but because it shouldn’t, we won’t survive if it did because all we were doing was wasting everything on trivia, I’m not going there in this journal as that is a bigger picture, yes there will be slow growth as it should be but finance needs to more evenly balanced between classes, there will always be rich and poor, but the fall, if not the devastation of the middle class is the biggest disaster that is facing us all, it doesn’t allow people to live a better life as the gap to being rich is now too great to be bridged, and the rich only look after their own while pushing the gap even further upward, while pushing middle class lower to poverty and worse to minority spending.

And here is the real problem for as the recession deepens the middle class people spend less, why, because they will have less to spend so as they slip more to the poor end of the demographic their basic needs override the so called disposable income and with their basic needs costs rising at a rate of higher than inflation the flow on to anything else goes well down, what was a treat is then a luxury and now a luxury they can’t afford, and so on it goes, for the rich they have now a really big problem because it is this small area that they gather their fortunes, say for instance you are an upmarket clothing manufacturer and things are going great and your profits are $20 million a year, then the spending crunch hits and it will be your clothes that will take a dive first as people switch to cheaper clothing, so you cut your margins which really means your profits as remember the clothes still cost the same to make, you can only cut back so far in costs and labour and your factory bills are going through the roof which you have already done to maximise profits, so then how soon will that $20 million profit be a deficit, Airlines have already seen the reality, profit has gone through the floor and that is with cheap fuel in the tanks as well, and its not the poor Airlines either its the British Airways and Singapore Airlines that are stunned at the numbers coming out of their paperwork, once healthy they are suddenly begging for customers but it will be the small to medium profitable businesses that will really be hit and hit harder and many will go to the wall.

And of course the layoffs will continue, as these medium businesses shred their workforce (the first thing to go) it is also the larger companies that are also shredding smaller ones just to survive, the car industry is a case in point, just watching the General Motors debacle is like watching the Titanic sink..slowly with a large loss of life or in this case livelihoods and many of these new out of work company people are investing in small franchises to guarantee income but only so many can survive and many will turn to the Internet, the clever ones will make money the others won’t as the Internet is strange beast and for someone who can sell cars wouldn’t have the technical knowledge to build a really clever web site and will only copy a successful idea just like a million other out of work non-technical savvy entrepreneurs and so with their millions of sites of the same product they will fail in the giant big Internet ocean and on it goes.

But there is good news too, Real Estate will finally bottom and find its real level and so what you buy will be the value price of your property and not a hyped up price, however if your thinking of making a big profit on the property like in the good olde years then you and all those investors holding their cards close to their chests are in for one big almighty shock, and it could still go down further, but only by not much!, but still downwards and then the investors are going to panic and flood the market with properties they can’t off load as for now they have to pay for them and their expensive up keep and still lose at the sale, that is their fault as they couldn’t afford to buy them in the first place for really they just wanted to stimulate the market back into their favor and big profits, it worked very well before because as the hyper hype of pushing Real Estate prices into somewhere around Mars, investors and middle incomes could “spend spend spend” the huge margins coming their way with a sale of the higher inflated price or with a loan from the bank on well “really nothing”, suddenly now you are faced with your property being worth 15% or worse 25% less of its value in 12 months, however there is nothing wrong with this at all for now you are only back at the reality factor, in other words “It is only now what your property is really absolutely, X my heart and hope to die is really really worth”, and if you have taken out a $50 thousand dollar loan to buy a 4×4 tractor on that inflated price then well “brother your in deep shit”.

The really great news is that we are now all back on Planet Earth but its not over yet and not by a long shot, it will get far worse yet as the public spending and the severe job losses come home to roost and hit hard, and it will take years to climb out to a steady income, and make no doubt the party is well and truly over and anyone who wants to keep up the lifestyle will find themselves left behind as the world will change in a way that everyone can have a good time and not the excess of a few, yes we will still can have fun and so we should but being real with ourselves and our perception of the world will give more back than the take take mentality that has brought us to our knees, we are in a very different world than the depression of the 1930’s as we are now a global economy, we rely on each now more than ever, but right now we need to stop and really think of what sort of world we really want, and only then will we go forward..

..but for now to go forward we will go backwards and everything will settle down, somethings will be better because you will be able to afford that house at 25% off the cost and travel will be cheaper, clothes too in fact a lot of things will come down to a new realistic level, in other words the price they are today and customers will be more discerning and want quality and things that last than the cheap throwaway years of olde and with that many pricy cheap companies will fold because if you don’t adapt you will disappear, but finally things really are better than you really think as to have everything back into reality you can now plan and save and that a economic crisis is really the best thing that could have happened to you, I was so happy when it all fell down, really happy nothing has made me smile more, and I want it to continue as long as possible, mad..no, common sense because this planet needs time to recover from our continuous development, stripping of resources, over population, garbage and a million other things associated with greed and trivia.

…the economic crisis has saved us from oblivion, from killing ourselves, Its a warning to be responsible to ourselves and our home, its showed us our ugly side and it is not pretty, so heed the warning and enjoy the shortage of money instead of too much of it.