Monday, July 9, 2012
Get out of here you capitalist dog. Where's the socialist cat?
Capitalism. To some it's become a dirty word invoking images of corruption and greed and western decadence. I don't quite see it that way. Granted there has been a perversion of the system of late but the fundamental concept is sound, It's just that adjustments must be made from time to time to keep the whole process in balance. At present few adjustments have been made.
Call it functional leveraging if you will. Most of us do it to some degree or other during our life. We borrow money for a car and therefore have use of something more expensive than if it were saved for it. Few could afford to plunk down the thousands of dollars required even for a good used vehicle. Same with a house. I doubt any of us could gather the neighbors together for a home raising these days. They'd tell you to bugger off. But somewhere along the line our grand system has indeed become corrupted. It was a slow but methodical process. Elimination of a law here or regulation there and soon greed reared its' ugly head. Promises of easy no work required profits fed the fire. And most fell for it. When things looked too good to be true it's because they were. We cast out any semblance of past reasoning and ran for the easy money. Never stopping for a second to question the rationale of the process or possible outcomes.
Bubbles here bubbles there it was bubbles everywhere. Almost perverse in the way they form and continue to grow until... We all know the outcomes. From the Savings and Loan debacle to Dot Com bust then Housing and now banking to who knows what it's all become unnatural cycles. You would think that we'd have learned a thing or two from past history but I guess that misquoted PT Barnum expression he never said holds. Another sucker born ever minute. And like Charlie Brown we once again get tricked by Lucy as she snatches the prize away and we land up flat on our backs.
So what's the next bubble one might ask? At present I'm seeing natural gas as a somewhat smaller bubble. The race is on to extract as much as is humanly possible. There's Russia, Syria, China, not to mention several countries in Africa and South America that seem to be in a race to the top. Even in the U.S. it looks like a gold er gas rush. But this is a bit deceiving if you think about it. While companies race to make a fast buck the world economy is slowing down and eventually we know what that will mean if we learned anything from the housing markets. An oversupply will drive down prices as the orders shrink but unfortunately it will be the little guys who will be hurt the most. Then when they are gone the rest of us will suffer. The fortunes will be made on speculation but now we have the swaps and hedges to consider. Let's just hope grandmas' retirement plan wasn't stashed there. What's truly disheartening is that the forces of supply and demand no longer apply. What was once easy to understand now takes a Phd., but it doesn't take a genius to figure out there are bubbles out there just waiting to burst.