Updated: Juune 17, 2011
We have all experienced the financial crisis. Honest. My annual bonus for 2008 went down from five salaries to just three, so serious was the impact of the would-be financial crisis. Which reminds me. There was no and there is no financial crisis happening in the world. This is merely the properly planned and recycled moment where big corporations do their routine decade shakeup, creating a fictitious situation that allows exploiting their workforce - sack some, reduce and withhold benefits to others, blackmail new employees with slavery terms, and cut costs. A spring cleaning.
So take a moment or three and read the most brilliant dissertation on finance, which should help you get a solid grip on reality and spitshine your rusty perception of why owning money to big corporations is the last thing you want to do, except maybe reality TV and donating both your kidneys.
Iceland was one of the countries hit by would-be recession following the would-be crash of the financial markets worldwide, after a handful of would-be poor people stopped paying their mortgages. Do you think I'm just trying to irritate you? Well, take a look at this graph here:
Do you find anything odd? No? Let me explain.
Iceland had the annual growth of around 3-4% for the first half of the decade. Then, all of a sudden, there's a boom, all the way up to 8%, for two consecutive years, twice the normal rate. Did you hear anyone shout that this is wrong? Did you hear anyone complain? Did you hear anyone forfeit their extra bonuses because the things were too good to be true?
Then, in 2006-2007, the growth rate dropped to 4%, what it used to be in the best days of the first half of the decade. Somehow, this is called crisis. When things go back to NORMAL, how they are supposed to be, the world's vampires proclaim this situation a crisis. As you can see, it's a massive bowl of pickled bollocks.
The same thing happened all over the world - countries enjoyed too much of a growth, real or made-up in numbers, it makes no difference, and when the nature tried to reset its equilibrium, you get the would-be crisis. I can't begin to explain how much of a farce this thing is. If you had the entire Amazon River replaced with diarrhea, it would still not measure up to the smell and flavor of the invented crisis.
Still not convinced? Another example. Bank executives loaned more than they could repay, because just like your Internet service providers, they counted on overcommitting and never having to own up. When people with no money finally decided they should join the reality and be poor again, the banks were asked to pay back. Rather than paying back, the banks declared bankruptcy. This means they allowed Federal Banks to meddle in their businesses somewhat in the short run, they paid only a handful of billions of dollars in annual bonuses to their CEOs, but the most important thing, money never left their coffers.
All right, time to go hardcore. Stock trading is essentially just a bunch of digital code flying back and forth. Transactions are nothing more than values in large pseudo-Excel charts. You add here, you deduct there, Bob's your uncle.
Now, if you, for the sake of an argument, PRETEND that a transaction did not happen - and you strike it our of the reports by undoing its digital history, then for all practical purposes, it never did happen. Deliberate decisions to stop trading when things got bad are a good example of how this is used to the benefit of the key players. You pause the game and it's all good. Just a bit of computer code. Nothing real.
Therefore, we can just assume that the financial crisis never happen. It was only a bit of code. Select all, delete, game over. We're back to where we were before, and all is well. Tom Clancy wrote about this in one of his books, and he got it right. In the book, everyone agreed to ignore a day or two of trading and indeed, they never happened. We can just as easily ignore the drama from late 2008. There you go. Done. No crisis.
Look around you. Did anything change in the last year or two? No, it did not. In the worst case, you may not have gotten a big enough bonus to refresh your three-year old BMW 5 Series, poor you. But you did not feel any shortage in food or water or utilities or any of the amenities that you expect to be the core part of your life. Nothing substantial happened. And if it did, it was deliberately caused by those in power to create the desired illusion.
Note: This image was adapted from a shark image on Wikipedia, licensed under CC BY-SA 3.0.
Let me teach you the golden rule of not being affected by fictitious financial crises. The rule is simple. Don't spend more than you earn. That's all. If you don't have 400,000 dollars for that lovely dream home of yours, then it's not meant to be. Don't loan or take a mortgage. Wait five or ten years and then pay in cash. Now, if you're never going to have that sum of money saved, five or fifty years from now, then it's not meant to be. Cruel, but that's real life. Not everyone can be a millionaire.
What happens when you loan money
You start with a big frigging overdraft that you hope to zero out one day; you pay a handsome interest rate on your mortgage or whatever, which translates into tens and sometimes even hundreds of percents extra payment over the original value of the property you bought; you compromise because do not have a secure financial future, so you settle for less lucrative job offers; you never make bold decisions or drastic changes that could benefit your career; you suffer a heart attack because of all that stress; and you only make it even toward retirement.
What happens when you don't
You hoard money, which slowly builds up into a respectable sum; you gain extra perks, including a savings account interest rate; you are financially secure, so you can make calm and calculated life decisions, bettering yourself even more; you do not worry about your future, therefore you live a happier, stress-free life; you have power that you can use to make smart and valuable business decisions; best of all, you are no one's bitch.
This should be your golden argument against my claims. By not investing, you're not helping the economy grow. By not creating a potential of future revenue, which may or may not realize, hence the occasional so-called crises, you forestall the expansion of businesses, career opportunities and technology research.
Untrue. By not doing what I'm expected to do, i.e. be indebted to people who run things, I create a power balance that gives me more leverage as a player in the business arena. And I'm setting the natural growth pace for the economy, which is based on real value. Have you ever wondered why currencies are calibrated against things like gold and oil? Because digital and even printed money is worthless. How about that? Technology research in most advanced countries is financed by governments, using real tax-payers' money, not virtual stocks. How about that?
The rules of natural conservation dictate that if countries progress at a faster rate than the actual physical production allows, eventually there's going to be a reset, which will be interpreted as an economical crisis, primarily by people who live at the extrapolated end of revenue curves.
Now, please note that I'm not advocating against business investments in general. In some cases, taking a loan is the smart thing to do, but only if you're planning on creating revenue of your own. Taking a mortgage against a house you plan to live in is madness. Your house is not a product per se, especially not with you festering inside. A second or a third house, maybe. But the one you need to justify your vapid existence, nope.
If you open a restaurant, then with smart management and some luck, you are likely to start earning money, which will, eventually, down the road, repay the loan. Unless you plan to use your home or your car for business purposes that can be translated into a product or a service, then you are making the biggest mistake of your lives, in becoming forever slaves and perpetuating your mediocrity. Alas, too many people are sentimental about nonsense things like family that they ignore cold, hard facts and the cruel logic of mathematics.
You may also claim that my method will lead to reduced production, layoffs, unemployment, and whatnot, until eventually the economy settles into a natural equilibrium. However, this is not what the society wants, therefore this kind of scenario is considered bad.
Now, speaking of life standards, have you noticed that modern and powerful countries import millions of immigrants, who are then used as cheap labor? They pay the foreigners a fraction of what they would have to pay the domestic workforce, allowing much higher margins and a prolonged illusion of power and prosperity. Do you think that your life standard would be as good if those people were not there? Don't you think that everything would cost so much more if you had to pay decent salaries to everyone in the capital market?
Imagine what would happen if you removed every single foreign worker from the United Kingdom, France, Germany, or Italy. Prices would skyrocket, forcing the people to adopt much more humble life standards or work harder to obtain as much.
Another good example is that of the United States of America. It got out of its 1929 financial crisis by going to war. What happened is that millions of people, mostly women, were introduced into the industry and production levels were quadrupled to meet the war demands. Nothing fictitious, actual production of material like planes and tanks and munitions. And despite the tremendous costs of war, the whole situation benefited the country enormously. Which proves that hard labor in no-nonsense situations can yield impressive prosperity.
Therefore, there's no need to be afraid of hard work. But if you're used to a dainty 30-hour workweek and buying a brand new Passat every year, then you might find the notion of having to work 45 hours every week and changing your car once every four years terrifying. Horrible, right. But it is merely a logical adjustment of unreal, over-inflated life standards perpetuated by massive exploitation of cheap labor domestically and worldwide.
Laws of Physics are cruel, but they must be obeyed.
There you go. This is the reality of the financial crisis no one will ever teach you. You'll see tons of fancy graphs explaining all kinds of theories and whatever, but the simple fact is, people got greedy and are now paying for their greed. Can't pay, tough luck. Wait in line until you can. Don't spend more than you earn. Period.
If you were not affected by this drama, then you are probably one of the sensible people who believe in signed integers, as you understand the subtle difference between own and owe. There are challenges, true, created by the virtual reality, but they are more sort of an annoyance than any real problem. Unfortunately, the same like hypes about social networking and similar stupidity, people get sucked into these stories faster than you can say partial differential equations. Oh, humanity.
The best lesson in economics anyone will have ever given you. Dedoimedo out.
P.S. Dust Bowl, Iceland GDP, The London Stock Exchange, Okemah oil derrick, Airacobra manufacturing plant, and the US dollar images are all in public domain.