Trevor Manual is the South African Minister of Finance. Last week he told the country that recession is not on the cards.
Prominent financial experts around the globe have been telling us that the world's financial condition is at its worst since the Great Depression. Most of this caused by the $800 billion plus losses experienced in the aftermath of the sub-prime crisis.
Can a world-wide recession be averted?
Recession is caused by market sentiment. People make decisions based on their perception of the economic climate. Consumers cut back on consumption. Investors cut back on investment. Producers cut production. All because of expectations of an economic downturn. Having burned their fingers through poor judgement, investors shy away from any investment that involves a perceived risk.
There are some very negative pressures on our economy and on the global economy as a whole. Increasing oil prices from an already highly inflated base. A world food production crisis fueled by a wide-scale agricultural shift to the production of bio energy.
Can these negative pressures be counteracted by a positive attitude? An up-beat minister of finance is certainly of great value, but will his positive view of the future be taken-up by business?
If more people are willing to come to the party, then economic disaster can be averted! All it takes is a positive outlook.
Showing posts with label sub-prime crisis. Show all posts
Showing posts with label sub-prime crisis. Show all posts
Sunday, 13 April 2008
Monday, 21 January 2008
Recession
Today the international stock markets collectively took quite a dive. Bears dominated the markets. Fears of a US led global recession are gripping the planet! Expectations are running rife of a full blown market recession. Perhaps a major stock market crash!
And all of this because a number of ‘highly intelligent’ investors invested without brains!
While on the subject of the sub-prime crisis, the simple fact is that it should never have happened! It defies logic. Why would anyone invest $1 million to something that is only worth $100,000? The only possible reason is a promise of disproportionate returns. Does anyone remember the dotcom boom – and crash? A simple case of widespread greed as investors chased easy money. If you haven’t seen the John Bird and John Fortune explanation, then click here to see it now. Hilarious but true.
Back to the impending recession.
John Smith is a rep for a large company. His first appointment for the week is with Samantha Froggins. Samantha usually places a substantial order from John. Today the order is for less. Much less.
"I'm being cautious" she says. "I heard that we’re going into recession. I don’t want to be saddled with dead stock. The reports are very worrying. I'm not sure that I've cut enough".
Not all of John's clients have cut back, but there are enough to cause concern.
At 4:00 p.m. John finally arrives at the BMW dealership. Fred is there to meet him. The papers are ready for John’s new 5 series BMW. The commission is substantial, and in anticipation Fred has booked a table at the exclusive La Vie en Rose.
Fred can't believe what he hears next. "Fred, we are moving into a recession. I have had three cancelled orders today and another five were reduced. I'm really sorry, but we'll have to put the car on hold. The Golf will have to do for another year."
Fred is devastated. If ever there was a done deal, this was it. He calls the restaurant and cancels his booking.
Soon La Vie en Rose will be laying-off staff. And so the cycle goes.
For a recession to happen, there have to be participants. No participates - no recession. As they say, markets, and the economy, are driven by sentiment.
Barry
And all of this because a number of ‘highly intelligent’ investors invested without brains!
While on the subject of the sub-prime crisis, the simple fact is that it should never have happened! It defies logic. Why would anyone invest $1 million to something that is only worth $100,000? The only possible reason is a promise of disproportionate returns. Does anyone remember the dotcom boom – and crash? A simple case of widespread greed as investors chased easy money. If you haven’t seen the John Bird and John Fortune explanation, then click here to see it now. Hilarious but true.
Back to the impending recession.
John Smith is a rep for a large company. His first appointment for the week is with Samantha Froggins. Samantha usually places a substantial order from John. Today the order is for less. Much less.
"I'm being cautious" she says. "I heard that we’re going into recession. I don’t want to be saddled with dead stock. The reports are very worrying. I'm not sure that I've cut enough".
Not all of John's clients have cut back, but there are enough to cause concern.
At 4:00 p.m. John finally arrives at the BMW dealership. Fred is there to meet him. The papers are ready for John’s new 5 series BMW. The commission is substantial, and in anticipation Fred has booked a table at the exclusive La Vie en Rose.
Fred can't believe what he hears next. "Fred, we are moving into a recession. I have had three cancelled orders today and another five were reduced. I'm really sorry, but we'll have to put the car on hold. The Golf will have to do for another year."
Fred is devastated. If ever there was a done deal, this was it. He calls the restaurant and cancels his booking.
Soon La Vie en Rose will be laying-off staff. And so the cycle goes.
For a recession to happen, there have to be participants. No participates - no recession. As they say, markets, and the economy, are driven by sentiment.
Barry
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