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Are we heading for a worldwide economic depression?


old man emu
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I wonder if we are heading into an worldwide economic perfect storm. 

 

We have a war in Europe that has cut the supply of fuel, the life blood of industry. At the same time that war has curtained the supply of grains which are the basic raw materials for food. The current localised war has created fears of its expanding and the use of weapons of mass destruction. Then there are the effects of changes in the average temperatures and heat distribution in the atmosphere and oceans. We must not forget the wild card of the planet's geological upheavals.

 

Today the gamblers of Wall Street are showing signs of throwing in their chips, thereby making the global pot of money lessen in value. That's the Big Game, but the side tables see what happens there and follow suit. International trade is still affected by the COVID pandemic through the bottleneck in the provision of freight containers and ships to put them onto.

 

Should we convert our digital money to solid gold? It's spot price as I write is USD1875 per ounce. The purchasing value of the bits of paper that we happily use for daily transactions can tumble in an instant, and as it falls the value in the digital records falls with it.

 

It sounds pessimistic, but shouldn't one plan for the worst and hope for the best?

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Wise words OME. I am writing this from a farm which was bought from monies earned like you said.

But none of us can really see the future. What if the recession hits industry so hard they lessen their need for raw materials?

In the meantime, I am wondering about buying ingots of copper.

 

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I have little doubt we're going into a period of several years of economic stress - but we're a resilient bunch. Anytime gloom pervades one area, entrepreneurial people move to another area where demand is high, and make the most of it.

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We (collectively) are pretty soft. A calamity is when our favourite brand is not available in our usual supermarket. Our normal supply chain has little slack and doesn't take much disrupting and fresh food items have  a relatively short shelf life.. It's near monopoly in nature too and pushes suppliers so they stop producing. Look at milk lately as an example. Nev

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10 hours ago, old man emu said:

Should we convert our digital money to solid gold?

How hard is it to buy physical gold? Most people who buy gold are given a piece of paper to say they own gold. I don't know how accurate it is, but I read somewhere that of all the paper gold in the world, only 80% of that amount has ever been mined. Personally, if I bought gold I'd like to have the real stuff in my possession. Buried under the chook house maybe.

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People put their money in it GOLD bullion, as a bit of a last resort when things are looking  perhaps like they are now. It's a very conservative performer. Others might go for Art, Collectables etc or other valuable metals Futures (derivatives) become far above current prices. SAFE as Houses is not safe enough. We've stupidly been encouraged to get into the Housing market  when highly leveraged and it looks as if some will get their fingers burned. RISING rates place inflationary pressures too. The reserve Bank hasn't helped people  who aren't RISK aware. nor did the Morrison government that wants to keep house prices up by any means. Not many alive today KNOW much about the Last DEPRESSION that went from 1929 till the WW2. People with a lot of disposable money do well out of depressions.. It accelerates the transfer from POOR to the RICH. That's a FACT not politics of envy. > IF raw unchecked Capitalism is the answer, we'd better examine the question.   Nev

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I see strong similarities between property developers in China and those here is Australia. Make big promises; borrow big to fulfil the promises and then overprice the product. We'll have a property price crash soon, but not necessarily as a result of the Chinese crash. Our crash will be caused by the cumulative effects of China's problems, Europe's problems, and maybe civil disturbances in the USA.

 

The situation is a result of the vice of gambling. "Speculate to accumulate" is a  phrase used by potential profiteers to remind prospective investors that returns can only come from good investment. In fact it is really a buzzword (or buzzphrase) to get money from others to squander on fruitless and flowery ideas. It has been a feature of European business since Chris the C got Queen Isabella to put up three ships for him the "go West". That one came off, but later there were the Tulip Bubble of 1637- 37; the South Sea Bubble of 1720, and finally the Ponzi scheme.

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Spread your assets. Never have all your eggs in the one basket. FUNDAMENTAL rule of investment. Also a high return on loaned money indicates a more risky nature of the deal. The market factors it in. Nev

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16 hours ago, facthunter said:

Not many alive today KNOW much about the Last DEPRESSION that went from 1929 till the WW2…

…and so the lessons in frugality they learned have largely been forgotten during two generations of plenty.

My mum used to wash little plastic bags and hang them on the Hills hoist to dry. Nothing was thrown away if it could be used. Today, our prosperity is totally dependent on a fragile logistic system that allows small local producers to be squashed by larger producers far away. 

 

How many of us could grow our own fresh vegies?

 

https://www.abc.net.au/news/2011-03-06/fresh-food-shortage-in-remote-community/1968424

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They grow themselves if you plant them and the roos don't get them. first.  My Daughter's  suburban garden is like a Jurassic Park. There's even Lilly Pilly trees there that I recognised from my bushwalking times in NSW. (self sown). Nev

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You've never seen bugs, until you try to grow your own vegetables! - then they rock up by the thousand, in all shapes, sizes and varieties, that you've never even seen before! Then there's the rats and the mice.....

Try to grow fruit, and the birds will come from 50 kms away, just to peck at it! Even worse, they will put half a dozen peck marks in every piece of fruit, and rarely eat a whole piece!

I've got mandarins and oranges, and the fruit fly beats me to virtually every piece of fruit! They even attack my lemons! I've a got a grape vine, and if the rats aren't eating the grapes, the vines got powdery mildew!

Herbs are the easiest to grow, they'll live in any soil, endure major heat levels, and they don't need much water. I'm going to try green beans and parsnips next season, wish me luck!

 

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Herbs chilli onions  garlic and things like that. Some grapes are more resistant to Powdery Mildew than others. Caused by cool misty days of high humidity.. Birds will eat anything with a touch of colour like red for ripe.. You have to protect everything. with netting.  or wire. Nev

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Gardening tip found elsewhere. Paint stones red and place them in your strawberry patch. The birds peck them, find how hard they are, and don't come back. Or so they say.

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I used gas guns and birdfrite cartridges and eventually the birds got used to them . They Must have changed to "dinner's ready HERE now", signal.  Roaring around the rows on a Honda  Farm bike with a destroyed muffler worked for a while. You're fighting a losing battle.. I sold the show and got out as wine grape prices were going south.  3 years later it would have been hard to dispose of. It's still running today but the Income would be down. Nev

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4 hours ago, facthunter said:

Spread your assets. Never have all your eggs in the one basket. FUNDAMENTAL rule of investment. Also a high return on loaned money indicates a more risky nature of the deal. The market factors it in. Nev

In terms of spreading ones assets, wise words, although not heeded by whom is considered the worlds most successful investor - Warren Buffet. He prefers a more concentrated portfolio of quality, than a diversified portfolio to spread one's nets. Diversifying one's risk is a tenet of portfolio management theory, and to be honest, I am not arguing it - just wanted to highlight it isn't always the right way to go.. but then, he has an army of researchers to minimise the portfolio risk associated with concetrations. In addition, when he moves, the market moves with him (generally), and he did write words to the effect that, "I have 1-800 counselling service set up. Whenever I think of buying into an airline, I give them a call to talk me out of it."

 

Higher the return is usually on higher risk investments (putting up money for a loan in an investment on future cash flows). We always look at the risk adjusted return on equity when determining its value.

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I'm not suggesting the idea of reflecting the All Ordinaries or anything like that. in your Folio. That concept lacks logic to me.  You'll never make money betting on every horse in the race either and the stock market is Gambling 101 if you don't get insider knowledge (illegal but how to police it?)  IF you are already buying  a significant home why would you increase your exposure by Buying more if the market is already overheated?. Don't buy into anything at it's peak and don't wait for the peak to sell or you might just miss it. Leave a bit for the next guy. Buy what are Bargains except old cars and art. IF your barber tells you to buy something it's late in the game and you should probably sell it. Nev

Edited by facthunter
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