Big Change Ahead?

It occurred to me recently looking at various predictions of economic collapse that those of us who have grown up in the West in the last 30 years have never known anything but continued economic success and progress.

We don't need to look back however to see many complete upheavals to peoples lives. The war must have seemed like madness. The economic depression of the 30s. The War before that and then another opulent period of boom for the fortunate before that.

Now there is the spectre of global warming - something that was inevitable with a moments thought anyway. A limited Earth with exponentially growing human population and on top of that each individual with exponentially growing lifestyle demands - very quickly were gonna ransack the Earth. Obvious.

And there is also the prediction so global economic melt down. The faith is that this time Capitalism has got it right and there are no more boom/bust cycles. But we simply don't know about this animal Capitalism - its a new beast less than 100 years old. In UK there are big problems. House prices were taken out of the inflation measure so while they have been rising in price, inflation has been perceived as low and so the banks have been able to argue for low interest rates... which has encouraged borrowing and spending and so has pushed up prices. So real inflation has been high (try and buy a house in UK now on a normal wage) but it has been conveniently ignored. Since house prices are rising so fast people perceive that they are gaining money and this is remortgaged against loans which fuel spending and inflation more.

The problem is that this inflation has become to creep into the central unignorable economy and that is forcing an increase in interest rates to slow the economy down. If we are lucky the balance will be just right. If we are unlucky the economy will not slow down and interests rates will have to be increased more at the expense of people with existing loans. If those loans become unpayable and people liquidate the rising supply of items especially houses on the market will drop the price, which inturn will invalidate the remortgages as they turn out to be supported by thin air and the economy begins to spiral down. Its classic bust mentality - runs on the bank etc and spiralling bad debt in the economy. (Worst case scenario)

So it occurred to me maybe the future is not going to continue rosy forever. Maybe not today, maybe not tomorrow but one day for some reason I might expect to live in a world which is much harder than it is today. That the little bubble of easiness which I call life is just a period of economic success in a world history which we know has always had its ups and downs.

A sobering thought!