Nervous economies 2016

Not since 2006 has the world been so nervous about its economies. Doesn’t matter if it is China, Russia, Europe, Trump, India, New money, we are all aware of massive debt and we wonder how and when it will have to be repaid. Of all the dangers the GFC heaped on us nearly ten years ago, a step into an unknown economic theory was the most severe. So dangerous, in fact that we don’t even know if debt needs to be repaid any more.

Those of us who were brought up in an atmosphere of financial prudence, of earning before we spent and for whom a tiny mortgage was only one step away from hellfire, find the concept of perpetual debt and easy bankrupt discharge distasteful not to say downright wicked. Widespread robbing of those who have saved money in order to help those who have not is diabolical, whittling away personal responsibility in favour of shrewd theft.

If you doubt the validity of this disaster I refer you to the 6,000 defined pension schemes in UK that are threatened by poor returns on so-called ‘safe’ investments. Denying savers a reasonable return on their savings and forcing them into an investment casino is the exact opposite of what we tried to teach our children. Were we really that far off?

The future economic scene is in the hands of the central banks, led by the Fed. This is not reassuring. Currencies are now too sensitive to interest rate movements, even to the mention of their possibility. When Mrs Yellen sneezes the rest of the world reaches for anti-biotics. The Fed errs on the side of big business in the touching belief that prosperity trickles down from the behemoths to the ants. It doesn’t. The giants simply tread on the ants. In case you are wondering who the ants are, they are you and I. Some very rich readers of the Daily Paradox should not be fooled. You are still ants when Armageddon arrives.

Economics students in universities are asking what the sense of the economics they are being taught is, when the real world behaves so differently. Violent currency swings such as the British Pound is experiencing may encourage people to think it is good for trade – until they have to buy instead of sell. There is always a lag on the impact of currency declines. In the end a weak currency is just that – weak.

Forecasting may be a fool’s game but it is the only game we can afford to play now. We must use our creative talents to project the possible scenarios that follow the present scene. Our best brains must be bent on how to restore sane financial behaviour without annihilating the trust that so many have invested and continue to invest in those who order our lives.

If we do not restore personal standards of financial prudence we will destroy the species that our predecessors so painstakingly built.

I cannot imagine anyone wanting that as their legacy, can you?