THE
STOCK MARKET AUG 2007
AUGUST 11th 2007
There is nothing
strange about the current fall in stock market prices. It is the
logical result of fund-managers, banks and hedge funds seeking a
belt an braces approach at the same time as continual growth, causing
the belt to snap and the braces to let the trousers down. It is a case
of economic obesity. The property market, including the so-called
sub-prime market which encouraged lenders to believe their money was
secure even if the borrower was or became insolvent, regardless
of how many people were in the same position, had become fatally
interlocked with the overall global measure of liquidity.
So there is a
shake-out, the result of which will be to remind fund managers there is
no free lunch and no belt and braces, because demand not backed by
purchasing power is not economic demand, and property is a liability as
well as an asset.
It will take a while for the dust to settle, the resulting situation
will be healthier. See file on INFLATION where this shake-out
is anticipated.
NOVEMBER 2007 see also Northern Rock
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