11th November 2008 Update

Shares around the world have been falling again, as I predicted. The Chinese stimulus is not likely to do much for the western world.

The two issues worth looking at today are the forthcoming economic summit in Washington, on Friday and President-Elect Obama's pressure on the Bush administration to 'save' the Auto manufacturers, Ford and GM.

The general feeling among world's economists is that we need to spend our way of of this problem. To my mind, that is rather like trying to pump water through the Panama canal to stop the Atlantic tide from going out. There always have been and always will be economic cycles and to fall back on a misinterpretation of a half-work by a half-baked early 20th economist (J M Keynes, whose theories have been discounted for over fifty years by mainstream economists) seems absurd. But that is where we are. I can predict with gloomy confidence that whatever comes out of Friday 15th will be a spend policy. If you have capital, and income from your capital, you need to consider how they might try to finance that and try to take steps to protect yourself. Inflation - which is mostly a deliberate policy, they have an inflation target! - is the usual form of state capital theft. There are other ways including the sequestration of private assets.

Saving Ford and GM is quite pointless. For several years the car makers have been almost giving away their products on a marginal cost basis to keep their plant open. Most of those cars sold were on particularly advantageous credit terms and especially in the USA anyone who wanted a new car who could conceivably have been granted credit to buy one, has already got a new car. Who are they going to build the cars for? The numbers are so wildly stacked against keeping the main car plants open I cannot see this happening even with determination from the top.

Going back to my recent posts on the banking situation. We need to remember that shares are part of the collateral (one way or another) of every bank. When the stock markets slump, so the balance sheets move into the red. It is the stock market crash that poses the greatest threat to financial stability in the world today. Banks are already on the precipice, further significant declines in the bourses could tip them over. If one of the really big banks should go down, it could take the rest of them down with it. Don't be at the end of the queue at the cashpoint if that should happen.