author thomas ramseyer
December 18, 2008
If any country becomes hostile with frustration
Facts
A long period of low interest rates led by the USA – Asia Crisis, 09/11, Irak war – ended mid 2004. The fed fund rates bobbing up and down at the level of about 1% for one good year – 07/2003 – 06/2004 – triggered world wide economical growth rates as well as stock exchanges' rally to all time highs.
Starting 08/2004 the fed fund rates were augmented by one quarter percent (1/4%) per each quarter by 4.25% from 1% to 5.25% in 06/2006. This level was maintained until 07/2007 to preferrably smoothly cool down US economy impacting worldwide economy too. The gradual rate's decrease by 1/4% from 5.25% to 4.25 % was hastily exchanged for a desperately plummeting of the rate to some 3/8% in 11/2008. Too late; the only thing for the government to do now is to gather the wealth's debris.
The Bush-administration-friendly interest rate policy adopted by formerly independent Mr. Greenspan has pushed economy to soaring highs just to let them
plunge into fathomless depths.
Fed triggers off catastrophy
Due to higher interests payable, individuals' loans became non performing; i.e. mortgage interest, consumer credit interest and other, revealed to be the very burden for the economy. High indebtedness of individuals have the banks' threats of execution become more and more toothless. As people have invested only 10 % of the houseprice – USD 25'000.- in a USD 250'000 house – they did not really care about leaving their keys to the mortgage institute. Thus the gradually faltering financial systems bear the load of growing losses as we know.
Apraisal
As the indebtedness in the US grew to an extend which is not really healthy there will be a behavioural change never seen for the last 30 years.
The fact of growing savings according to the statistics mislead the analysts of all kind. The savings are asymmetric; the class of poor creditors more and more opposed the class of rich savers. What we witness is a wealth shift from shattered savers to busted creditors; realocation while burning all the wealth.
Appalachian and other rural standard of education had naiv people borrow money from cunning credit sharks represented by well educated sweetly talking banking staff. Advisory was very poor. Surely wrong incentives thus pure greed – due to the Bush Administration cheap money policy – had act all bankers and credit institutions alike: easy money given to poorly informed individuals throughout the United States.
Possible Remedy
Remedy for sure is not what the leaving and the coming Administrations are up to right now. Staffed with people being used to the past decenniums' rules the probability of failure by repetition of the old faults are to become true. The announced change does not take place.
The old mates' revival will have a disasterous effect on economies throughout the world. It is only a postponement of some four to ten years the new Administration evidently is aiming at. It is to be pointed out that all of the President elect's new administration belong to the upper 10'000. Thus they have been severely hit by the stock exchange crash. They will try to get their wealth back by applying the same old rotten programme - boosting the economy by cheap money - as in the past few years.
The supportive hectic activity of the government is meant only to have financial creditors pay down their debts as well pay interest due to other members of the financial system. No real production.
USD 700'000'000'000 meaning USD 7'000'000'000 at a rate of 1% p.a. only. Imagine 2, 3, 4, or more %. USD 700 Trillion mean USD 230'000 additional debt per American citizen as well as USD 2'300 further interest expenses per year. All upgrades of infrastructure do not really help the population. Most of it is not employed by builders, equipment providers, architects and others.
Recommendation
1) Start saving – pay down debts
2) It will be wise to have the whole owing world's population save money to pay down their debts. This by facing all the consequences of lower or even contractive economic growth rates in the northern hemispere's countries.
3) We are doing this for our children and all coming generations. We must stop consuming at the expense of our children's future.
4) Educate the United States' population, upgrade educational system
Despite the demographic pyramid looking promisingly healthy by having a broader basis than European countries as well as some Fareast countries (China, Japan), a lot of that broad basis is composed of immigrants' as well as their children in the third generation. A lot of them are not well educated due to them severely lacking money. 25% of the American citizens only talk Spanish whereas White House activities are maintained in American English.
5) Basically educate people in the US so that they can evaluate interest payment impacts in case of interest rises as well as lay-offs.
6) Substantially lower taxes to have immediate impact on mainstream's purse.
I.e. Taxes levied on food, beverage, medicines, medical treatment.
7) Support single parents as well as retired people
Transfer knowledge, skills and science to SubSaharan Africa
8) Develope southern countries focusing on sub-sahara Africa to step in as work force in the northern Countries (Europe, Russia, US and Canada) as well as potential investors buying the assets from the aging Europe's population for them to be granted medical care as well as accommodation.
This is the most important recommendation. SubSaharanAfrican Countries will consist of the most numerous population aged between 18 and 64 years. Focus on Western Africa led by populated Nigeria (roughly 150 Million) with the most stable political system and situation since years. Have them get education thus being able to develop on their own. Include Africa in the northern Educational System (Bologna System) Make it possible to upgrade faculties thus graduated students may pursue their studies in northern countries throughout the world.
copyright thomas ramseyer
