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The Global Financial Future


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The "cost of living" situation is currently front and centre in financial and political minds. While locally the concentration might seem to give the impression that "cost of living" this is only affecting Australia, it it clear that it is a world-wide phenomenon. The component causes are myriad, but in general terms they all arise from Greed. Greed, like Pride, goeth before destruction (Proverbs 16:18).

 

Economic indicators, especially in the USA, are pointing to a situation similar to an over-inflated balloon, which is still being pumped up. Renowned investor and financier, Warren Buffett, was recently asked for his prediction. While he did not lay things on the table, there was trepidation in his voice. At the moment he is holding back, a sure sign of his uncertainty of the Future. My reading of his response is that he's expecting the balloon to burst, but cannot foretell when it will. He is wise enough to know that the bursting of the balloon will have devastating effects world-wide. For the Common Person, there is very little one can do in the event of a financial collapse of the world economy, save to prepare for the worst.

 

To my mind that means reducing personal debt and concentrating resources on those needed for basic survival. The question becomes, "would an economic collapse result in soaring inflation, making the value of one's money reserves not worth the bytes they represent?"

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Growth is not perpetual.

I still firmly believe that the obsession with year on year growth in business will be our undoing.

 

when was the last time you heard "holding the economy" or "retaining the economy"

its always focused on growth

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5 minutes ago, spenaroo said:

its always focused on growth

Growth of what?????

 

Look at the EV industry as an example (and I'm not going into the good/bad debate)

 

Massive overproduction. Plateauing, or more realistically, off the cliff, sales. Massive monetary losses. Massive numbers of employees laid off. Massive waste of energy and raw materials. 

 

The Stock Market and its various subsidiaries seem to be more like SP bookie shops. Do they actually produce anything? 

 

Ongoing wars whose raisons d'etre make the Martin and McCoy feud look like kindergarten name-calling. And all they manage to produce is employment in the weapons industry in other countries.

 

Perhaps we should welcome a global financial meltdown to destroy the Temple of Mammon, and let us rebuild on the solid knowledge that "greed is good" is a fallacy. 

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2 hours ago, old man emu said:

To my mind that means reducing personal debt and concentrating resources on those needed for basic survival. 

I have an inkling that economics is a hard area to make predictions in, because they can become self fulfilling.

So in your example above - yes, on an individual basis it may make sense to pay off your debts, stock up with tinned goods & ammo and hunker down.

However if there's broad movement in the population to stop spending on all the stuff we spend on, then that money doesn't go around the economy from my pocket to say the sparky, from his pocket to the coffee shop, from the coffee shop employee to JB Hifi etc...

My preferred fix would be a slightly more socialist slant to our democracy/capitalist system.  Using methods such as @nomadpete's idea of a transaction tax to shift more of the burden of taxation from the poor to the wealthy.  Better and more targeted taxation of large companies and what I would class as "obscene" private wealth (what individual needs more than say 20 million dollars?)  Smarter spending of defense budgets so we're not just equipping for the last war but for how future ones will be fought.  A change of focus in housing stock from being an investment to being owner occupied.

There are vast stocks of wealth locked up in things that don't cause economic activity - people sitting on empty houses to make a killing when the capital value increases, tucked away in trust funds, etc.  There must be ways to disincentivise this.

A clever country shouldn't have to have cost of living crises (or homeless people, or people who have to choose between eating or heating).

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Posted (edited)

We are not a clever country, we are a lucky country.

and despite what our politicians think that is not a positive moniker.

 

yeah the EV is a good example of growth,

rapid expansion, building before sales 

(but was all done with the mentality of growing the market, growing production, growing the business)
the reality hits and the house of cards collapses

 

why, because if management said they would build the same number of cars as last year - they would be sacked.

but its an mentality that comes from the top down.

a stagnant business is almost seen, as being the same as loss making. no one is rewarded for keeping things where they are

Edited by spenaroo
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Clever is robotics and automation in mining, computer simulation of orebodies, optimisation of excavators. That is really high tech stuff and Australia leads the world. It isn’t stupid digging.

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While that is true (and I used to work on some sim software for mines years ago). it os one of many segments, and, we have to remember, Australia usually allows foreign ownership of such companies (the company I wored for is now in Japanese hands).

 

On the Warren Buffet angle, he is what is known as a value investor. One of the problems with market valuations is that more money is pouring into the markets throug things like super being available and, in Australia's case, mandated for most of the workforce. This goes to asset managers who hate having cash on their books. So, it creates a demand for investments for which the supply doesn't change much.. Result - higher prices. Of course, that's an oversimplification, but it is one of the issues.. there's simply too much, and of course, being based on human beaviour, sometimes becomes a self-fulfilling prophecy (or profity).

 

There is no reason that bitcoin should attract the current valuation it does, which is c. USD$62K/coin as I speak. You can't even spend it everywhere. Yet the market has become this self-fulfilling prophecy that assigns value to it.. When you think about it, they are electrons.. that is it.

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47 minutes ago, Jerry_Atrick said:

One of the problems with market valuations is that more money is pouring into the markets throug things like super

So is that like saying the world economy has so much money it doesn't know what to do with it?

 

It really is a shame that while this "wealth" exists, it can't be spent on making life better for each person. The problem is one of accumulation without application.

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The issue is that the money that is collected has to tbe invested... Making life better for everyone doesn't necessarily provide a financial return to the investor or asset manager. For example, building enough shelters for homeless people oesn't pay the rent and then it would require the government to puchase the shelters, which they don't have a bottomloess pit for. Of course, it then becomes a priorotisation call by the government, and ulimatelu, in a democracy anyway, society (did we really vote in messrs Abbot and Morrison knowing full well what they are like?). But, as an asset manager (not that I am one), I am not going to build and operate homeless shelters unless I am goingg to get a return.

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10 hours ago, Jerry_Atrick said:

not going to build and operate homeless shelters unless I am going to get a return.

Basically that means that the concept of investing is that investing is a self-perpetuating process whereby that which is invested produces more to be invested. In control systems, that is called "positive feedback" and leads to the unstoppable increase in whatever was at the start. A an example, put one bacterium on a nutrient medium in a  Petri dish and before long the dish will be covered with bacteria.

image.jpeg.23fb59485378fc123b281610d1fc98d4.jpegMicrobiology from A to Z explained - Micropia - Micropia

 

But go back to the need for shelters for the homeless. Why are there homeless people in societies where trillions of currency units are being invested purely with the intention of creating more currency units?

 

 

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Posted (edited)

what happened to philanthropy,

the Peabody, Rothschild, Rockefeller, Carnegie (gave away 90% of his fortune)

earned vast fortunes and spent it on medical research, the arts, public libraries (Carnegie established over 2500), restoring historic landmarks and buildings.

 

then again look at the public's recent vilification of Bill Gates over vaccines

Edited by spenaroo
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1 hour ago, spenaroo said:

and spent it on medical research, the arts, public libraries (Carnegie established over 2500), restoring historic landmarks and buildings.

As much to glory the person in the form of monuments. Money gained from the exploitation of others. Lincoln may have freed the black slaves, but these blokes created the wage slaves.

 

Wage slavery is a term used to criticize exploitation of labor by business, by keeping wages low or stagnant in order to maximize profits. The situation of wage slavery can be loosely defined as a person's dependence on wages (or a salary) for their livelihood, especially when wages are low, treatment and conditions are poor, and there are few chances of upward mobility.

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