COMMENTARY ON GLOBAL CREDIT CRISIS

The continuing Global Credit Crisis

This information is just that, not advice.

While this information is of a general nature it provides some insight into our perceptions and our belief system at AccuVest, and some insight into our view of continuing credit crises overseas and its relevance to Australia.

At AccuVest, the Global Financial Crisis (GFC) is not perceived as an event that is over and behind us. Instead, GFC is regarded as an early wave in the broader Global Credit Crisis.

The GCC is an ongoing experience and an economic symptom of the developed world having become addicted to debt and its associated excesses.

It will necessarily affect investment markets and challenge many of the paradigms and beliefs of the past 40 years; including the belief in efficient markets.

The endemic nature of the debt bubble is reflected in the following analysis of Government debt by nation by the OECD showing debt at the end of 2007 and projected Government debt by the end of 2012. Recognition of the level of Government debt the IMF perceive as being sustainable is quite relevant. We believe there will be few soft answers to this problem.

Debt in a country has many elements. Government is but one. Some insight into the composition of total debt in the USA at the end of September 2011 is shown below. It is worth considering the last time that total debt (and particularly private debt) in the USA fell as much in percentage terms. This is clearly a once in a multi-generational event. Life experience of the ‘way investment things work’ may not be a good reference point.