Marketing – Finance

The S&P/ASX 200 was down 2 points for the day, ending at 4,573.20.

The RBA kept rates at 4.50% yesterday, and of the statement from Glenn Stevens, one currency trader said, ‘Large chunks of the statement were copy and paste from last month, but it does seem a little bearish on Europe.’

The Dow Jones Industrial Average dropped 107 points, closing at 10,340.69.

The market declined on news that major banks in the US may have understated their holdings of government debt during the ’stress test’ earlier in the year. While the report continued very little information, it reminded traders that the debt problem hasn’t gone away.

In a desperate attempt to get business spending, it’s been reported that President Obama will offer business the ability to write off 100% of all plant and equipment purchased in 2011.

Overnight, the FTSE finished at 5,407.82, lower by 31 points. Mining stocks were lower amid fears of the MRRT will be implemented by the Labour government.

The Nikkei lost 75 points to close at 9,226.00. It’s predicted that the index will spend another day in the red after the Yen hit a fifteen year high against the US dollar overnight.

The price of spot gold in Australian dollars is $1,377.01, while in US dollars it’s $1,255.25. The price of silver in Australian dollars is $21.75 and in US dollars it’s $19.83.

The Aussie dollar versus US dollar is AUDUSD 0.9107 and against the Japanese Yen it’s AUDJPY 76.26.

Crude Oil closed at USD$73.80.

For the biggest movers on the market yesterday click here…

That’s all I have for you today, see you tomorrow.

Shae.

Tags: General

The S&P/ASX 200 was down 2 points for the day, ending at 4,573.20.

The RBA kept rates at 4.50% yesterday, and of the statement from Glenn Stevens, one currency trader said, ‘Large chunks of the statement were copy and paste from last month, but it does seem a little bearish on Europe.’

The Dow Jones Industrial Average dropped 107 points, closing at 10,340.69.

The market declined on news that major banks in the US may have understated their holdings of government debt during the ’stress test’ earlier in the year. While the report continued very little information, it reminded traders that the debt problem hasn’t gone away.

In a desperate attempt to get business spending, it’s been reported that President Obama will offer business the ability to write off 100% of all plant and equipment purchased in 2011.

Overnight, the FTSE finished at 5,407.82, lower by 31 points. Mining stocks were lower amid fears of the MRRT will be implemented by the Labour government.

The Nikkei lost 75 points to close at 9,226.00. It’s predicted that the index will spend another day in the red after the Yen hit a fifteen year high against the US dollar overnight.

The price of spot gold in Australian dollars is $1,377.01, while in US dollars it’s $1,255.25. The price of silver in Australian dollars is $21.75 and in US dollars it’s $19.83.

The Aussie dollar versus US dollar is AUDUSD 0.9107 and against the Japanese Yen it’s AUDJPY 76.26.

Crude Oil closed at USD$73.80.

For the biggest movers on the market yesterday click here…

That’s all I have for you today, see you tomorrow.

Shae.

Tags: General

We won’t deny it. It’s always pleasing to see the Macquarie Group [ASX: MQG] share price take a hammering.

Yesterday the stock hit the skids following news that the company expected profit for the current half to be 25% lower than the same time last year:

The shares closed at $35.25, and today are trading another 1.5% lower, meaning the company’s shares are now trading 40% below its 52 week high from October last year. And over 60% lower than the all-time peak in early 2007.

Of course, on the bright side, if you’d bought in when the shares were trading well below $20 early last year then you would have doubled your money by today… which just goes to show there’s always good news to come from bad news.

And what better news can there be for an economy than an earthquake:

“[I]t could actually be positive for growth. You will probably see a massive lift to the construction sector, which has been dwindling in recent quarters… It’ll create tens of thousands of jobs, most of which will have to be sourced from outside of Christchurch… It should give a pretty big lift to household spending, and should have some knock-on effects throughout the economy.”

[Your editor weeps]

The above quote is attributed to Helen Kevans, economist at JP Morgan in Sydney. We’re sad because Kevans always seemed to your editor to be one of the few sane mainstream economists.

Yet the above comments have just undone all her good work. And now Kevans joins the team of other mainstream economists who we simply cast aside into the basket of Keynesian irrelevance.

You’ll have to excuse our naivety. When we wrote about the fallacies surrounding natural disasters in yesterday’s Money Morning we focused on the misplaced urge among commentators to get the government involved.

However, we didn’t mention how many people will consider the Christchurch earthquake to be a positive for the New Zealand economy. We didn’t mention it because in our naivety we’d assumed that no-one believed in that stale old chestnut anymore.

But apparently they do. Kevans at JP Morgan for one.

And Michael Janda, so-called business reporter at the ABC is another. He notes:

“[O]ver the next year or two, the earthquake looms as effectively a giant stimulus package to New Zealand’s struggling construction industry.”

Oh dear.

But Janda doesn’t leave it at that. He moves on to address a number of other economic fallacies not worthy of someone called a “business reporter”.

Take this comment, “You see, in capitalism, someone’s misfortune often registers as someone else’s gain. A company’s surging profit is usually reported as a positive, although it often comes at the expense of redundant employees, cut wages, or customer price gouging.”

Oh dear again.

Words that could only come from a poor soul who has been subjected to years of learning economics at Australia’s statist-loving universities. Probably the same economists who wrote the open letter lauding the government stimulus programmes.

In that letter they wrote:

“Just as a major corporation goes into debt to invest in its stock of capital, so does a government. Just as many householders have a debt to a band or a mortgage company, so does a government. A government has a budget deficit and a government debt, but it also has capital assets (roads, ports, better equipped schools, Broadband, etc).”

To which they should have added, none of which produces a positive cashflow to the government. Take a look at the open letter using the link above, you’ll see every one of them is a university lecturer or professor.

Not one of them we’ll guess – without having done background checks – has any experience of earning a living in the private sector, free from government grants and awards.

If they’d bothered to think just for a second, a business goes into debt because it believes the extra investment will generate additional cashflow or capital growth. A household goes into debt because of the same reason, or because they believe the debt will somehow improve their lives in other ways.

The point is, both businesses and households generate an income so they can repay the debt. Government doesn’t. Government debt is different and a burden because it is paid for by others.

Government is not a profitable enterprise. Increasing government debt does not ever lead to an increase in government “profits”. It simply means the government needs to take money away from the private sector.

For these Profs to argue that government debt is similar to private sector debt is a nonsense.

But anyway, back to Janda’s comment. While it’s true that misfortune for some can mean a gain for others, as we wrote yesterday. That’s not what you’d call the driving force of capitalism or free markets.

The reason capitalism is so successful is that, contrary to Mr. Janda’s belief, in almost all instances both sides of a voluntary transaction gain.

It’s only when a transaction in involuntary that you have winners and losers – taxation, compulsory healthcare, etc. In those instances the consumer is left with no choice. The winners are the firms and government bodies lucky enough to receive the money that has been expropriated from the consumer, while the consumer loses out.

In a voluntary exchange, both sides win. Using yesterday’s example, you buy a ham sandwich from a sandwich shop and both sides win. You get to eat, and the shop owner gets rewarded with cash for correctly anticipating that consumers desire ham sandwiches.

Janda talks of what is really a half-baked argument around the multiplier effect from spending on construction to rebuild Christchurch, yet ignores the real benefits of capitalism.

Instead Janda suggests that profitable businesses are only profitable because they sack people, enslave the remaining workforce or stitch up the consumer.

A more illiterate understanding of free market economics we’ve yet to come across.

Has it not crossed Janda’s mind that companies who pursue profitable ventures actually provide a benefit to the economy. That those companies with capitalists who are prepared to put their money on the line may actually employ more people the more profitable they become.

That workers may achieve higher wages as a result of increased skills thanks to the employment they’ve received from the capitalist.

And that the more profitable a business becomes the greater the ability for that same business to cut prices, or for competing firms to charge lower prices.

Yet you read the arguments by Janda and others and they seem to believe the only way to economic growth is through destruction – and I don’t mean Creative Destruction either, that’s where new technologies or new ways of doing business result in an improvement of product or service to the consumer.

Creative destruction is a positive for an economy.

But what Kevans and Janda are referring to is what can only be described as the opposite to Creative Destruction, and that is Destructive Destruction. And if you’re an English language expert, we’re aware of the tautology – if that’s what it is…

Anyway, not only are they lauding the earthquake as a boom to the New Zealand economy, but as can only be expected, a reference is drawn to what the Keynesians seem to believe is the greatest economic stimulus of all time – World War 2:

“Perhaps the greatest historical example of tragic economic stimulus is the Second World War, which many economic historians credit far more than Roosevelt’s New Deal for lifting the US out of the Great Depression.”

It’s an argument we’ve seen repeated on countless occasions. So Janda isn’t the only economic amateur to get it wrong.

The Second World War was no more of a positive economic stimulus to America or anyone else, than is the current Iraq War or Afghanistan War or the Vietnam War or the First World War or the American Civil War.

We only wonder why the Second World War that is championed as the saviour of the American economy. Why not the other wars? If war is an economic booster then surely that would be the case for all wars.

You only have to look at current US defence spending and the mess they’ve created for themselves in the middle east to see how war is anything but a an economic booster.

So let’s get something straight. Destructive Destruction isn’t a positive for any economy. Destruction is only positive when it’s creative. An earthquake and a war most certainly aren’t creative.

The fallacy of it can easily be compared to an individual household. If you accept that WW2 was a great stimulus for the broader economy, then you must also accept that if you smash your television, DVD player and stereo to bits with a hammer then it must be great news for your household economy.

The reality is it isn’t is it? Because now if you want to enjoy the same level of entertainment you’ve got to use your savings to buy a new television, DVD player and stereo.

Sure the likes of Harvey Norman or Dick Smith might benefit from this destructive destruction, but you lose out. You lose out because you now have fewer saving. Savings that you may otherwise have spent elsewhere.

It’s exactly the same principle with the so-called ‘War Stimulus’. Building things in order to destroy them or use them to destroy other things isn’t a positive stimulus to an economy.

As several posters to Janda’s article suggest, a reading of Frederic Bastiat wouldn’t do him any harm in understanding the “broken window” fallacy.

Anyway, this kind of destructive destruction merely takes scarce resources from other industries that may need them in order to build bombs, tanks or fighter planes.

Just ask anyone who lived in Britain during the Second World War whether they thought that the war was a stimulus. Sure the economy produced a whole bunch of stuff, but it also starved the economy and the consumer of things they really wanted – such as food and clothing.

While resources were being tied up with fighting off the Hun, resources couldn’t be used elsewhere.

Being issued with ration books so that you can only eat as much as the government tells you to eat is hardly the sign of a flourishing economy.

Perhaps Janda would prefer a life without capitalism and see how that looks. If he’s lucky he could try out Venezuela where president Hugo Chavez plans to introduce what he calls a “Good Life Card”.

According to the Miami Herald, Chavez said:

“‘I have called it a Good Life Card so far,’ Chávez said in a brief statement made on the government television channel. ‘It’s a card for you to purchase what you are going to take and they keep deducting. It’s to buy what you need, not to promote communism, but to buy what just what you need.’”

You buy what you need based on what the shopkeepers are told to stock.

We’re pretty sure that Venezuela is an economy where private companies aren’t making the kind of surging profits Janda bemoans.

We may grumble about the government encroaching more and more into the lives of Australians (you noticed have you?), but at least for now Australia still operates a broadly market-based economy.

How much longer that will be the case is anyone’s guess.

But with the foolish Keynesian economic viewpoint appearing to gain more ground by the day, and the impotent mainstream press prepared to cheer for more not less government intervention in the economy, Australia is most certainly on a slippery slope to socialism.

Cheers.
Kris Sayce
For Money Morning Australia

Tags: General

On Monday, the S&P/ASX 200 ended the day higher by 30 points to 4,575. It will be a quiet session on the Aussie markets today, as there’s no lead from the US and the Reserve Bank of Australia’s interest rate decision is due at 2.30pm.

It has been widely tipped that interest rates will remain on hold this month.

Credit ratings agency Standard & Poor’s have confirmed that even without a government, Australia still holds its AAA credit rating.

This news that we retain our rating is supposed to be of comfort to international investors, however America still have their AAA rating despite all of their problems…

The American markets were closed yesterday for the Labour Day holiday.

President Obama announced yesterday the USD$50 billion (AUD $54.6 billion) stimulus package. The package will ‘assist’ the economy by creating jobs by upgrading airport runways, railways and national roads.

The FTSE closed at 5,439.19, higher by 11 points.

The Nikkei added 187 points (2.05%), finishing at 9,301.32.

Gold has slowly crept higher in the wake of the jobs data released from the US last Friday.

The price of spot gold in Australian dollars is $1,365.35, while in US dollars it’s $1,250.66. The price of silver in Australian dollars is $21.68 and in US dollars it’s $19.86.

The Aussie dollar versus US dollar is AUDUSD 0.9166 and against the Japanese Yen it’s AUDJPY 77.12.

Oil dropped off overnight as the ‘driving season’ which s the end of the summer holiday period, came to an end. Crude Oil closed at USD$74.10.

For the biggest movers on the market yesterday click here…

That’s all I have for you today, see you tomorrow.

Shae.

Tags: General

This year’s bumper gold-mining deals come as big discoveries have gone missing in gold…

WHATEVER’S LURKING in Andean Resource’s data room – opened to suitors for two years, but now closed after GoldCorp trumped Eldorado’s US$3.3bn bid – it must be pretty spectacular.

Because on published figures, and at current spot prices, GoldCorp’s offer equals 74% of the gold and silver resources indicated and inferred at Cerro Negro. Based on viable reserves alone, the bid is priced at 1.5 times proven and probable ounces!

That suggests real confidence not only in the precious-metal bull market, but most spectacularly in Andean’s exploration projects.

Southern Argentina certainly looks compared with the world’s better-developed but fast-ailing gold mining sites. A marginal producer at the top of gold’s last long-run bull market, South America has since overtaken Australia, North America and South Africa, and now spits out twice as much gold per year (according to GFMS’s 2010 forecasts) as the world’s single largest gold-mining nation, China. Extraction costs are also alluring, doubling since 2006 to around $350 per ounce (GFMS again) but undercutting North America’s average cash costs by well over $100 and slashing South Africa’s cost in half.

As for the timing, 2010 has already overtaken full-year 2008 with record spending on gold mining mergers and acquisition. The sector’s third-largest corporate action takeover of the year to date, GoldCorp’s agreed offer – which may still see revised bids from other suitors, according to the newswires – follows Newcrest’s US$8.4bn acquisition of fellow Australian firm Lihir in May, and last month’s $7bn purchase by Kinross of the 91% of Red Back Mining it didn’t already own.

This size of takeover led the mining world table in 2008, when precious-metal producers didn’t even figure in the top 10 deals, despite it being a bumper year for gold M&A. And as for last year, gold’s biggest takeover in 2009 was for the $1.7bn purchase of Sino Gold by Eldorado – Andean’s disappointed suitor today.

So what about price? Well, Newcrest’s takeover of Lihir in May was priced at just 22% of proven and probable reserves, equal to 12% of indicated and inferred resources – a real bargain compared to Kinross’s merger with Redback. Even with spot gold trading near all-time highs, that cost nearly 25% of potential resources, equal to fully 38% of proven and probable ounces. Little wonder perhaps that ISS on Friday called Kinross’ bid too rich; J.P.Morgan says Redback would needs to near-double its resources to make the offer worthwhile.

But with gold mining firms bloated with cash and bleeding reserves as they continue to mine, could one-third (or so) of proven-and-probable ounces set a useful benchmark for acquisitive majors? Andean may be sitting on a further 4.2 million ounces of “potential” gold, reckons Credit Suisse’s Michael Slifirski. In which case (and not forgetting South America’s low extraction costs), GoldCorp’s bid would fall to 35% of total resources at current prices.

Together with the Kinross-Redback deal (and only if both complete), that might suggest a base level for M&A pricing in a world losing 4 million ounces per year in new discoveries since 1980.

Adrian Ash
For Money Morning Australia

Adrian Ash is head of research at www.BullionVault.com

Tags: General

Webster’s defines trust as: The assured reliance on the character, ability, strength, or truth of someone or something.

We often – in this blog – discuss trust, and how important it is in the selling process. Stephen M.R. Covey opined in his magnificent book, The Speed of Trust, and congruent with the Websternian* definition, that trust involves two main areas; character and competence. And, to buy from someone trying to sell you something of any type of substantial nature or price, you most likely will need to trust them both aspects.

Would you agree?

I mean, if you believe they have good character but are lacking in competence in terms of product design, quality, service or anything else you hold to be of value, you probably won’t purchase from them. At least, that would be my guess. On the other hand, if they are competent in the aforementioned areas but you believe them to lack in the character department, you’re more than likely also not going to choose to buy.

How does all of this “trust” we’re talking about actually play out in the success of one’s business? One very big part concerns customer loyalty, which greatly affects growth.

In his article entitled, “What The Heck Is A ‘Chief Honesty Officer?”, Darryl Rosen, former President of Sam’s Wines & Spirits, a family-owned business he took from small store to a multi-unit retailer with nearly $70 million in sales, and author of Surviving the Middle Miles 26.2 Ways to Cross the Finish Line with Your Customers quotes Fred Reichheld, author of The Ultimate Question:

“Without trust, there can be no loyalty, and without loyalty, there can be no growth. The simple truth is that trust means confidence. When your customers trust you, it means that they have confidence in you. It means that when you make claims during the selling process, they are inclined to believe you and that, my friends, is what it is all about.”

How true that is! As Darryl concludes his article, “And  we don’t need a Chief Honesty Officer to tell us that.”

I also love what my friend, Gill Wagner, Founder of the organization, Honest Selling says, “Sell with manipulation and the world is your battlefield. Sell with honesty and the world is your playground.”

It certainly builds trust, which results in loyalty, which results in company growth.

—–

*That’s right; I said Websternian. And, no, I don’t believe it’s an actual word.

Tags: General

On Friday, the S&P/ASX 200 closed at 4,541.02, higher by 8 points.

The Dow Jones Industrial Average added 127 points, ending the week at 10,447.93. The jobs data surprised the markets, as the figures weren’t as bad as predicted. The US economy only lost 54,000 nonfarm jobs.

America’s trade deficit for June increased by USD$49.9 billion (AUD $ billion), which is 18% higher than May’s reading. The unexpected increase has seen economists lower their expectations for lot of gross domestic product (GDP) figures.

The FTSE closed at 5,428.15, up by 51 points for the day. Factory output grew for the third quarter as export demand picked up. It’s expected that overall output will increase 3.7% this year.

The Nikkei gained 51 points, closing at 9,114.13.

The price of spot gold in Australian dollars is $1362.93, while in US dollars it’s $1,247.76. The price of silver in Australian dollars is $21.56 and in US dollars it’s $19.74.

The Aussie dollar has opened higher this morning after US jobs data.

The Aussie dollar versus US dollar is AUDUSD 0.9153 and against the Japanese Yen it’s AUDJPY 77.27.

Crude Oil closed at USD$74.33.

For the biggest movers on the market yesterday click here…

That’s all I have for you this Monday, see you tomorrow.

Shae.

Tags: General

Blog posts on books I love are the most difficult for me to write.

Why? Because often, books like the one I’m suggesting today, despite being fun and easy to read, have lessons that run so deep, I’m concerned I won’t be able to communicate the messages sufficiently and/or appealingly enough that you’ll be moved to read them.

Such is the case with Aspire: Discovering Your Purpose Through The POWER OF WORDS.

In this extremely powerful work, former Franklin Quest partner and now highly sought-after business consultant, speaker and Coach, Kevin Hall, invites us along on his personal and exciting journey to discover how words (yes, words!) can help us clarify and discover our purpose as well as help us to do the same for others.

With the help of a kind octogenarian, Dr. Arthur Watkins, a man who’d invested his life in the study of words, Kevin focuses on dissecting 11 different powerful words, both English and from other cultures. The very first one, learned from Mr. Pravin Cherkoori, a wise and humble Indian shopkeeper in Vienna, Austria, is what the author refers to as The Secret Word. He also refers to it as as “one of the most meaningful gifts of my life.”

The featured words are: Genshai, Pathfinder, Namaste, Passion, Sapere Vedere, Humility, Inspire, Empathy, Coach, Ollin, and Integrity. Yes, we learn their roots and their origins of usage, and how they team with other words to arrive at their current meanings and incarnations. By the way, if you’re like I am, you’ll find this to be fascinating in and of itself.

What’s special about this, however, is how the words are used to tie into the real-life characters we come to know and root for; some of whom overcame dramatic odds to succeed and find their purpose.

I could go on and on with how emotionally touched I was throughout the book. Instead, if I may, I’d like to quote from the Foreword by Dr. Stephen Covey:

“The more you understand words and the layers within them, the more it helps you understand your path and purpose…Words are the direction signs that show the way to {following your} bliss. Words, in concert with the actions they inspire, help you become a better leader, a better spouse, a better parent, a better salesperson, a better athlete…The power in words generates wealth, health, productivity, discipline, spirituality, and limitless other desirable human traits.”

Dr. Covey’s Foreword ends a page later with:

“Whatever your goal, your quest, your passion, I am confident Aspire will unlock for you a universal force that will light the way to inspiration and personal growth. I suggest you keep a pen or pencil close by as you read this profound work over and over again. I know I will.”

All I can say in response to the above paragraph is, “it did, I did, and I will.”

Well, one more thing: I hope you’ll do the same.

Tags: General

Money Morning reader Wilson sent your editor a shocking video yesterday.

So shocking we could barely believe it was true. We even thought that maybe some nerdy tech wizard had dubbed the video.

But no, it appears to be the genuine article. Here’s what shocked your editor so much, and why it’s proof that you must never trust what you hear from the mainstream…

You see, there’s an online financial video channel called RainmakeriTV. As best as we can figure out, it compiles interviews of various people – CEOs, economists, brokers, etc. – and then posts those videos on its website for people to view.

As it happens, just yesterday RainmakeriTV interviewed a chap called David Wyss. Mr. Wyss is the chief economist for [cough] respected ratings agency Standard & Poor’s.

Now, you know we’re not fans of mainstream economic talk. By now we’re used to their babble. We’ve got used to the fact that they’ve either got no idea what they’re talking about, or they’re deliberately misleading everyone with their economic analysis.

But the comment that I’m about to show you from Mr. Wyss takes mainstream economic analysis to a whole new level. Either that or he’s just admitting what others are too scared to say.

So, what was it that was so bad and so shocking that it rendered your editor speechless?

It was this…

“The big problem’s the consumer. Consumer is just scared, he doesn’t wanna spend, he’s being more cautious. As individuals I applaud that because we should be saving more money, but from the economy standpoint we’d really like to get people out there living beyond their means like normal.”

A more economically retarded view of the economy we’re yet to hear.

Of course, the switched on interviewer immediately pounced on Mr. Wyss calling him to task for making such an outrageous comment… oh, no, that’s right, she didn’t. Sorry, we forgot for a moment that we’re talking about the mainstream.

Anyway, if you don’t believe that even a mainstream economist could say such a thing, just click here and view the video for yourself. You won’t have long to wait, it’s early on in the interview…

Look, maybe we’re over-reacting here. And maybe we’re just trawling over old ground.

But you know what, someone’s got to over-react. And someone’s got to keep making the argument that mainstream economists are guilty of misleading the general public.

I mean, seriously, who in their right mind could possibly argue that it’s good for the economy if people are “living beyond their means like normal”?

The answer is it isn’t. With one exception. It’s good for the finance industry. Especially the banks.

Living beyond your means generally means that you’re spending more money than you earn. Of course, spending more than you earn isn’t really possible unless you sell assets to cover the shortfall…

Or, you borrow the money from somewhere. Like, say, from a bank.

Now, we should point out that using debt to finance purchases isn’t always bad. We don’t see anything wrong with taking out a mortgage to buy a house – providing you’re not over-extending yourself.

And we don’t see a problem with taking out a short-term loan to buy whitegoods or furniture. Why not take up Harvey Norman on their interest free deals? Just make sure you pay the whole darn thing off so you don’t get stung with a 30% interest rate.

But for an economist to suggest consumers need to go back to living beyond their means in order to help the economy is rubbish. Especially from an economist who is employed by a company that claims to be “a leader of financial market intelligence”.

Financial market ignorance we’d say.

It’s all part of the muddle-headed notion that saving is bad, because saving prevents spending. And that it’s only spending that can save the economy.

As we’ve argued many times before that just isn’t true. Saving isn’t the dead money mainstream economists claim.

Savings serve two purposes. In a non-corrupt and insolvent banking system, savings provide the capital for others to spend. Savings allow individuals to borrow that money in order to spend on current consumer items, or businesses to spend it on capital goods for future production.

In both cases there’s the expectation the borrowers will repay and the saver will earn some interest as a reward for foregoing spending.

But savings serve another purpose too. Savings are the means by which savers postpone their spending until the future. They’d prefer to have their cash plus interest in one year – for example – rather than spending the money on goods or services today.

For the businesses that have invested in anticipation of future spending, that’s great news. It means there will be consumers available to buy their goods and help them earn more profits.

If there aren’t consumers in the future then it makes it harder for the business to repay their loan and harder for them to justify the increased capital expenditure.

It’s not difficult. But that’s not how the mainstream views it. They want all spending to happen now. The more the better. The trouble is, in their eyes it’s always now.

The more spending that happens today, the bigger the profits for companies will be today and the more money they’ll make.

Of course they forget about the impact on spending in the future. If everyone’s spent their money today then there’s nothing left to spend in the future. The consumer is too busy paying the bills for past spending and doesn’t have enough left over to keep spending at the previous rate.

And neither do they have enough money to save for future consumption or investment.

That’s the position many economies worldwide are in at the moment. They’ve lived beyond their means and now they are being urged to live even further beyond their means – “like normal.”

The breaking news for the likes of Mr. Wyss and other mainstream economists and commentators is that it can’t last and it won’t last.

Sadly, we think they know that, but it’s not in their interests to tell you.

Cheers.
Kris Sayce
For Money Morning Australia

Tags: General