A while ago we were listening to a business program and they were talking to a financial analyst of one of the big banks when he made an interesting statement. Stating that it is ok for inflation to be low (negative) on goods and services so that the Central Banks would continue pumping money into the system as well as keeping interest rates low and therefore boosting asset prices. The analyst then came out with lots of reasons why asset price inflation is good.
The problem with this is that the people who already own assets become richer from their assets and these people feel richer. However this does not help the real economy as the people who own most of these assets already own plenty things that they need or want. So this does not lead to more spending in the real economy it only leads to the asset richer feeling richer and in the long run this builds up of resentment in the wider public. Maybe this is what has already been happening with the shock votes on Brexit in the UK, the presidential election in the US where Donald Trump became the victor to total shock of a lot of people, the election of a new untested president in France from a political party that a few year ago did not even exist in the shape of Emmanuel Macron and also the reduction in the conservatives majority in the UK . Many predicted before these shocks that it would be a disaster if any of these came true, but as ever the world has kept turning and disaster has not struck, at least not yet.
Could we also be seeing more shocks around the world as we wait for the controllers of the financial system to balance the economy so that the benefits can be felt by all that work and create growth in the economy. The one problem is that when the financial rewards get spread over a wider population the rich must let some of their wealth be distributed to the less well off. We will have to wait and see what happens here.
It is hard to see what is going to happen but we are coming to a point where a market correction is overdue. It is impossible to predict when this will happen or in what market the correction will start. We think it is important to prepare yourself by reduce you debt as much as possible and saving some of your money ready for an oncoming storm.
The Normal Person