I first got the idea that "THIS IS IT" I think when I realized that our economic central planners would not allow our markets to melt down this close to BEFORE a national election. They had clearly lost control.
Another bad sign was that investment bank stocks were plunging.
Now we have yet another bad sign, that I have mentioned before, but now we're seeing the downstream effects: LIBOR rates are rising.
LIBOR is the rate banks charge each other. The fact that interbank rates are going up, means that the banks are fighting to stay alive and are not willing to risk their capital with other banks, except for higher interest rates to compensate them for what they perceive as rising risks of defaults.
Well, the LIBOR rates are written into other contracts too...including small business lines of credit.
I need some help here because I am not entirely familiar with corporate law and finance: I believe that corporations are discouraged from hoarding cash (through tax penalties), and that it is fairly normal for them to borrow for many routine expenses. SMALL BUSINESSES ARE EITHER NOT ABLE TO GET LINES OF CREDIT, OR THE RATES AT WHICH THEY CAN GET THEM ARE TOO HIGH FOR THEM TO AFFORD.
Now, for those who don't know:
* Small businesses hire most of the employees...
* Small businesses include most of the more profitable ones (they have to be profitable because they do not have access to big financial markets)
WHAT I AM SAYING IS THAT A LOT OF SMALL BUSINESSES--AND THE JOBS THEY PROVIDE--ARE ON THE LINE.
I had some other thoughts for this week, that I am having difficulty remembering...I might post addenda to this topic...
I repeat from earlier posts: paper assets are becoming increasingly tenuous due to rising counterparty risk. I think the wise thing to do is to sell paper assets and hedge your bets with a combo of physical cash, physical gold, farmland, and various strategic tools.
Take delivery of any assets you own--including stock certificates if any. Think twice before owning stock. The economy is grinding down.
I'll have to give some thought to IRAs because those are custodial accounts. I'm not quite sure what the options are...but I do know that it is possible to own gold and real estate (at least it's a tangible asset) in IRAs. I'll probably move some of my IRAs into tangible assets. I think it is even possible to own offshore assets in an IRA.
