Why are Some Financial Analysts Pessimistic?

Virtually everyone is far too busy with the things in life that seem more important than trying to understand why their are concerns.

To me we’re like passengers in an airliner. We’re reading our magazines etc. but the cockpit crew are alert to danger far sooner than we are normally speaking.

In this analogy, the cabin crew are aware that the plane is running out of fuel. The fuel is the virtually free money that has driven the economy, like house prices, higher and higher. But the almost free money came at a cost. Debt and a skewed sense of reality. We now have a generation that look at this as normal.

Based on thousands of years of civilization we can state it’s not normal. Normal is more like 6% interest rates. The government knows that of course but created the almost free money so that companies would invest money to increase productivity so that everyone could earn more money. Companies, knowing the almost free money was temporary and would not help their industry long term, chose to use the money to buy back shares on their corporation resulting in more debt instead if higher productivity and wages.

Economists hoping for a “soft landing” meaning a gradual readjustment to normal government debt.

So like a credit card moving month by month towards being maxed out, we know the end will come. Economists hoping for a “soft landing” meaning a gradual readjustment to normal government debt. Unlike a personal credit card, the maximum debt level is not known. So it will be like a core sample of concrete on a machine testing how much pressure it will take before collapsing. Or like the potential for an avalanche slowing building and waiting for the final snow flake that will overload it and start the avalanche.

We don’t know when, just the what.

But smart people prepare for it.