Wealth Transfer - Are Your Investments Secure?
The greatest transfer of wealth in the history of the world is gaining speed and effects everyone in the developed world who lives in over consuming nations. Yet we hear little about it from the entertainer celebrity TV talking head so called “experts” or politicians. Has our political system become so corrupt that no one in power has the guts or inclination to speak the truth or is it a matter of incompetence and lack of vision and foresight?
The wealth transfer is underway due to two irreversible mega trends. The first is the high cost of oil and other raw commodities that net consumption nations like the United States are forced to pay in the highly competitive world marketplace. When you have a habit of always consuming more than you produce trouble is sure to follow. Money can not flow out of a county forever to pay for it’s over consumption, under production habits. A day of reckoning will eventually take place.
Do not be fooled by the occasional price dips and pullbacks. As demand increases in a world where all the easy to get at oil reserves have been discovered or already drawn down the long term trend will be up for a very long time.
A serious effort at energy conservation and placing funds into savings accounts rather than immediately spending more than you make seem to be impossible for most American families to manage. But than the people are encouraged to indulge in unwise behavior by the nations “spend your way to prosperity” nonsense put forward by the nation’s politicians.
An example of the wastefulness that is rampant in America is the average size of new homes. The square footage of new homes continues to increase. According to the National Association of Home Builders, (March 2006) the median American house size is slightly more than 2,000 square feet. This is up for about 1,500 square feet of ten years ago. In most parts of the US this extra square footage has to be heated, cooled, furnished, mortgaged, and maintained. This is a tremendous unnecessary extra burden on the world’s resources.
The second mega trend affecting money outflows from the US is that the trade and fiscal imbalances (deficits) being accumulated are totally out of control. Never in the history of the world has a nation been able to truly prosper when money flows are net huge outflows. The US has been able to sustain such imbalances so far only because the US Dollar enjoys a unique position as the premier reserve currency in the world. However this privileged position will not persist forever.
A sharp dollar decline could occur at any time and may be far greater than most people can now envision.
There is something terribly wrong when you borrow money from the poor thrifty people of the world to finance your own wars and over consumption habits. Such a practice must end in disaster.
The transfer of wealth to entities outside of the US weakens the ability of the US to compete in world markets as it’s financial position weakens and it is unable to finance an expansion of it’s manufacturing base at competitive rates.
With the two mega trends mentioned above well underway the risk that foreign nations will take measures to reduce their dollar exposure is more than a worry. Nations are quietly adjusting their own foreign exchange holdings to reduce the amount of Dollars held by their treasuries. At some point the risk becomes substantial that the Dollar will go into a rapid free fall, which would destabilize economic growth worldwide.
As wealth continues to be transferred from high consuming nations to surplus oil and commodity producing nations the outlook for world peace is not encouraging. Wars have been fought over far more trivial matters than decreasing standards of living among lower income and middle class families of proud nations like the US, The UK, and those in Western Europe.
And how might all of this mega trend business effect your own investments? More information can be found at Investment World Today
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Posted in Investment World