The deficits climax
It always starts with denial. An uneasy sense of doom as the wind blows through the trees when the storm is coming. We know that impending disaster may occur. We know that smoke also belongs to fire but don’t act like it is a dangerous situation. We keep doing what we always do. Just the everyday things. We heard people say: “The wind blows it away!” But then …. denial is no longer possible … “cracking the time ‘.
Waves of hope and disappointment. They go up and down. Two weeks ago the stocks went up and broke key resistance levels. Euro Crisis existed, but there were enough measures been made; the quarrel between the U.S. and China on Yuan: even that is resolved. What doesn’t the stock move higher? No they don’t! Because we are on the moment of time when there is smoke and fire. Go out the door before it is too late!
World history has many moments of adversity and we decline to deal. Crises are not new and are common. But not for people. They seems always be surprised by the impending doom. In retrospect, a crisis is only visible after he has been. But while we advance a crises we see many disclaimers.
Ultimately, the core of every crisis can be summarized with the word ‘trust’. Confidence in the economic progress; confidence in the currency and confidence in our political leaders and there solutions. Who is studying economics discover the principles of any economic system and the beginning lessen can be summarized in the word ‘trust or confident’. It is not the circumstances that make the crises but the way we as humans react to the circumstances.
Every crisis has a moment of denial. It is a typical human element to pretend there are no problems. These are the patterns of the ’socio economics. The man and the way he reacts to an impending disaster. Many have written about human behavior. W.D. Gann is one of those people who used the term “socio economics ‘ as describe in a pattern that humans never changes in there behavior.
The core of the argument is that Gann’s history repeats itself because human behavior never changes, the so called socio-economics. Human behavior appears to behave along the road of ‘stagnation’ and ‘growth’. Charles Kindleberger has five different stages of socio-economics defined. They correspond to the image by Gann described the cycle of human behavior.
The pattern of Charles Kindleberger is as follows:
1. Shift: a change in economic conditions of large groups of people caused new opportunities.
2. Euphoria: a self-reinforcing pattern develops where people have high expectations of earnings of a particular product.
3. Mania, the bubble phase: The prospect of huge profits attracts new investors and swindlers that will help people to invest.
4. Unrest: insiders realize that prices are unrealistic and their profits start to finish and find new investment opportunities.
5. Panics: Finally the last phase. The departing investors and cause a chain reaction of outsiders panic. Everyone flocks to the outside through the same door.
This is what we have seen happening in recent years and what has happen time and time again in the global economy. One time with greater consequences than others; one time in a small wave of other times in a major. Reinvestment wave in the first quarter of this year has led to unrealistic growth to stocks. The huge refinancing in economics and government injections led to a ‘clinical’ economic growth. The medicine now seem to have worked out. From the U.S., we see a tremendous growth to negative numbers and the enormous debt incurred makes public investment impossible. Governments makes it even worst by save money. The Greek crisis, in May this year, discounted in the stock market as they say but I think it is the phase of ‘unrest’.
People realize that a longer-term growth prospects is decreasing. We saw it on the falling rate of economic confidence in the U.S. and a huge shortfall of investment. The banks loaned increased in the recent quarter. Especially small and medium enterprises begged off. The banks have declared they want to invest but are themselves widely in updating their portfolios ‘out of stocks’. In May, the equity portfolio declined by 10% and bonds increased by 20%. New money is not going into the stock markets but to the safe investments of government bonds. The first stage is started and we focus, we are on the eve of the phase of ‘panic’. Banks have already begun. And then, suddenly realizes that painful moments are going to do. “cleared off”, we are all going out the same door. The final phase is about to begin.
