UNHAPPY (LEHMAN) ANNIVERSARY

UNHAPPY (LEHMAN) ANNIVERSARY

 

September 15th marked the five year anniversary of the collapse of Lehman Brothers. That event began the unwinding of the financial world as we knew it. By the end of October the DOW had lost 7100 points. The future of the world economy was one large black hole and no one knew a way out.

I would submit to you that despite the spin from the media, politicians, and economists; we are still in the middle of that black hole with no top or bottom in sight. The recent fumbling around by the Federal Reserve as to whether it should, or should not, take the economy off life support indicates that no one, not even the “best and brightest” knows what to do.

I reiterate the thesis of my last seminar; our business model is broken. Our dysfunctional Government is a symptom, not the cause of the broken model. For the last 60 years corporations have sold us on a feel good economy in which we go into debt to buy their products. The corporations have ended up with all the money and the consumer with all the debt, on which the banks have gotten rich financing.

To repay our debts and have enough money to live, requires an economy that is growing at least 3% annually. We can barely make 1% GDP growth now and any “return to growth” that you may read about is unsustainable because we are either out of, or running out of, natural resources which power growth.

The Fed is repressing interest rates to force investors to take more risk so they feel wealthier and will spend money again. The strategy is not working but it is creating a stock market bubble that can burst at any time.   Wealthy speculators can afford the bubble bursting. The ordinary investor cannot.   It is like driving on a superhighway at warp speed with no steering or brakes.

Much has been written about the five year Lehman anniversary. I have chosen two articles which I believe do the best job of analyzing what has occurred in the last 5 years and lay out an agenda for what needs to happen to get us out of the woods. Please read.

Don’t despair; I am not. There will be a future and we will find a way to make money. I think the frustration that all of us feel who have played by the rules, is that it did not need to be this way.

We know how to run a sustainable and equitable economy and a sane stock market. We’ve done it before but first we will have to wrest the power out of the hands of those benefitting from the current dysfunction. History shows that it can be done. It will not be quick or pretty.

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