Subprime woes engulf global economies

The challenges we face are probably unprecedented in history. The financial crisis is a direct result of leveraging on debt. For example a bank lends a total of $1m to 100 borrowers at 9%. It then sells the debt to an investor at 6.5%. All is well till a big percentage of the original 100 borrowers start to default. Multiply the figures by a factor of the population living in sub-optimal financial conditions and the problems escalate. Cost push inflation. As we consume our natural resources at break-neck speed and population needs grow it becomes more and more expensive to extract and transport these resources. Climatic conditions have led to huge agricultural deficit in many of the producing countries. Wheat crop failures in the American mid-west, drought conditions in India, floods in China and conversion of food producing land to fuel oil feedstock production have impacted global food supply. By exporting manufacturing and pollution to China western economies have extended the supply chain imposing huge demands on global transportation. By leveraging on China's low labour costs the western economies have created three scenarios: 1. Reduced employment in low level manufacturing jobs. (this did help low iq individuals). 2. Increased transportation demand. (see the size of gross tonnage of the world's merchant fleet 1980 - 2001. See http://www.unescap.org/ttdw/Publications/TPTS_pubs/pub_2307/pub_2307_ch9.pdf While this statistic shows the growth in registered tonnage, statistics are not readily available on the number of voyages or tons per nautical mile. I suspect that this has grown at a pace faster than the compounded average of 2.5% per annum. 3. Concentration of wealth with the Chinese government. The Chinese government is the largest investor and stakeholder in China's economic growth. The communist party - applying capitalist principles has become the richest government in the world. (eat your heart out America. You created this scenario through the MFN status. People may remember the Kissinger-Nixon tandem who engaged with China to outflank the former Soviet Union). The US sub-prime crisis is just the catalyst for a period of stagflation and structural adjustments of the world economy. During the next five years I speculate that the adjustments will be quite dramatic: a. Stabilising of the EURO - US$ mechanism. b. Free float of the Chinese Yuan and emergence of a third monetary block aligned to the Yuan. Likely candidates are the Chinese satrapies in south-east asia and some countries in africa. c. Oil decoupled from US$ contract denominator. I think some of the Arab countries will break out. d. WTO accessions superseded by bilateral and inter-regional agreements. Structural adjustments are always terrible on the "have nots".

Hi henryjoe, Its looks that joe, even here in the U.K its really bad housing market is suffering and inflation is sky high and Im not even mention the oil over here food prices have soared I just don't know how some people are able to carry on so it crisis everywhere and we know who to blame Tamara