Abundance in the Time of the Credit Crunch
We are experiencing a credit crunch. Or at least, many people are buying into that reality. But I don’t.
Am I rich? My family love to think so, and because they do, they help me to create abundance by thinking of my abundance all the time. And I am not going to stop them. There will come a day, soon, when all their thoughts about my abundance and my own creation of abundance will result in physical abundance. I will thank them for their share in the process, but I will not stop their thoughts at the moment - let them work with me. So how does the credit crunch affect me?
I look at it with awe and wonder. I see the perfection of the Universe that we live in and I get a greater understanding of how things fit together.
I recently learned about Elliott waves. I can only describe these Elliott waves as the pulse of the Universe. Imagine a wave zig-zagging its way upwards. It moves up ten paces, then recedes seven paces, then moves up ten paces, then recede six paces, and so on. When you are riding the wave without realising it, you feel the exhilaration of moving up, and the fear of moving down.
Most of the time when you move up, the exhilaration is dampened by the expectation of moving down again. When you move down, your expectations are confirmed, and you desperately hope that there will be another move upwards. When the upward move comes again, your major emotion is a relief that the fear can now go, rather than gratitude and awe at moving up again.
Riding the wave is in many ways worse than riding a rollercoaster, because at least with a rollercoaster you know that it will end at some stage, and you will feel solid earth under your feet again. You know that when you go down upside down, you will not fall on your face, because you are strapped in safely. And at some point you will go down and stay down and leave the rollercoaster with wobbly legs. You know (fingers crossed) that the rollercoaster is safe, otherwise the owner would not have sold the tickets. And you know that you get onto the rollercoaster because you chose to do so and you know that the risk is minimal.
However, riding the wave of the Universe is not nearly so “safe”. You do not buy a ticket, because by the time you realise that you are part of the wave, it is too late and you are born into this existence.
When you focus entirely on riding the wave, you love the bits where you go up, because it feels good to know that you can do that. The waves that take you down are really scary. When you go down, you get that sinking feeling in your stomach and you have nothing to hold onto. You do not know where the wave will stop, and therefore you cannot prepare for the stop. Will you fall flat on your face? No, never. The reason for this is that the wave always turns and moves up again. You can continue to ride the wave and simply stay in until you hit the next wave up, which is what most people do. They talk about the credit crunch with apprehension in their voices. They prepare for the fall and meanwhile cling to the wave as if it is the only real thing in the world. And because they prepare for the fall, that is what they get - that is how the Law of Attraction works.
When you become aware of the wave that you ride, things change. Suddenly you can distance yourself from riding the wave while doing it - like driving a car on a busy road while having a conversation with a child about bullies at school. If someone subsequently asks you why you slowed down at a particular point and changed lanes, you will probably not remember that you had to slow down to wait for oncoming traffic and then change lanes to get past another slow vehicle. But you will recall everything about the conversation with the child, even when driving a car requires much more attention and skill than talking to a child.
When you become aware that the wave is there, you stop riding the wave blindly. You start to ride the wave with intention.
You start to notice the waves that go up, and you know that they will turn down at some point, and you prepare for the downturns with anticipation rather than fear. You start to notice the waves that go down, and you know that they will at some stage turn, and that is a good place to tap into the energy of the rising wave.
At the moment we are at the bottom of one of these Elliott waves - the stock market, the banks and the economic downturn confirms this.
People react to this in two ways. The majority of people live in fear and trepidation and are preparing to lose money, jobs, homes, self-esteem, hope, and so on. Whatever happens next will confirm their expectations. They will walk away with nothing and not even notice when the wave turns up again, because they will still be clinging to the wave in fear. Nothing will change their views.
Then there is a minority of people that have become aware of the waves, and that are aware that we are at the bottom of a wave now. They are preparing to focus on the energy of the upturn and they are putting everything in their lives in place so that they can focus 100% when the upturn starts. For these people it does not matter if the upturn is a small wave, because they will understand a small wave is part of a much bigger wave. Their mindset rather than the size of the wave will determine their fortunes. They are the “lucky” ones - the ones that open a business or win the lottery during a recession and seem to turn everything they touch into gold. I have decided long ago to be part of this group, and I am now reaping the benefits, with loads of opportunities coming my way.
As for everyone around me, my question is: what will I do during a recession? The difference is that I need to list the opportunities that suddenly abound, and prioritise them. Then I need to focus on one after the other, and live my destiny. These opportunities have come for me at the end of a cycle, which is also the beginning of a much larger cycle, and I love it.
Do I take opportunities away from others?
A man called Foster Hibbard tells the tale of the two men that went down to the ocean, one with a teaspoon, the other with a bucket. Each of them took away the amount of water he chose to take away. The ocean doesn’t care how much water they take away, because there is plenty wanter. I chose to go down to the ocean with a tanker truck - or maybe a fleet, to get my share. Will there be some water left for you in the ocean? Of course. That is called abundance, and it is infinite. The limits that exist, are in our minds because we do not understand what infinity means.
How will you benefit from the credit crunch?
Elsabe Smit
http://www.articlesbase.com/self-improvement-articles/abundance-in-the-time-of-the-credit-crunch-690559.html
What Caused Liquidity Crunch? Can happen in 2007? take a look
What Caused the Liquidity Crunch?
Last week the Dow Jones industrial average fell 4.2%, the steepest drop since March 2003. Financial shares took a beating on growing evidence that problems in the sub-prime mortgage market are spreading, making financing the corporate buy-outs that drove the market’s rally more difficult.
Many financial market participants are of the view that there is a definite deterioration in credit conditions, which means less liquidity for private equity, stock buy-backs, and business expansion. Fed officials, however, have downplayed this claim.
In an interview with the Wall Street Journal on July 24 the president of the Philadelphia Federal Reserve Bank, Charles Plosser, said that the present slump in the housing market is not going to trigger a liquidity crunch and a consequent general economic recession. The reason for this is that banks are unlikely to curtail lending since their balance sheets are in good shape. Plosser attributes this to financial innovations (financial engineering) in the last 10 to 20 years that have enabled banks to distribute much of the risk.
Plosser adds:
Does that say nothing bad can happen? Of course not. But it means I’m a little more sanguine that that whole view of a credit crunch is probably not as applicable now as it might have been 10 or 20 years ago…. Banks in this district are pretty healthy …. Their biggest complaint is not housing mortgage defaults and credit crunch, it’s the yield curve. They’ve got money to lend.[1]
(Banks as a rule lend at long-term rates and raise funds at short-term rates. Hence they prefer an upward sloping yield curve — when long-term rates are higher than short-term rates. At present the yield curve is relatively flat, which undermines profits from lending.)
Fed officials including Plosser present the current housing slump as the outcome of irresponsible lending by mortgage brokers and various other mysterious forces. On this logic it is the role of the Fed to monitor the situation in the housing market and, if required, to interfere in order to prevent the housing slump from spilling over to the rest of the economy.
We suggest that what we are currently observing in the housing market is the deflation of the housing bubble, which could be a precursor to a widely spread liquidity crunch. The deflation of the bubble is the result of the Fed’s boom-bust monetary policies. Here is why.
We define a bubble as activity that has emerged on the back of the loose monetary policy of the central bank. In the absence of monetary pumping this type of activity would not have emerged. Since bubble activities are not self-funded, their emergence must come at the expense of various self-funded or productive activities. This means that less real funding is left for true wealth generators, which in turn undermines real wealth formation.
When new money is created, its effect is not felt instantaneously across all markets. The effect moves from one individual to another and thus from one market to another. In short, monetary pumping generates bubble activities across all markets as time goes by.
It is quite likely that the loose monetary policy of the Fed between January 2001 and June 2004 has laid the foundation for the emergence of various non-productive activities. (The federal funds rate target was lowered from 6.5% to 1%.)
An easy monetary stance coupled with fractional-reserve bank lending has given rise to an abundance of money out of "thin air." Between Q3 2001 to Q4 2004 the average yearly rate of growth of our monetary measure AMS stood at 7.5%. This should be contrasted with the rate of growth of 2% in Q2 2001 and 0.9% in Q4 2000. The illusory prosperity that the bubble activities have generated in fact amounted to the consumption of real savings and to a weakening of the pool of real funding — the heart of real economic growth.
Since June 2004 the Fed has reversed its monetary stance. The fed funds rate target was raised from 1% to 5.25% currently. In response to this the growth momentum of our monetary measure AMS has been in visible downtrend since Q4 2004. The yearly rate of growth fell from 7.1% in Q4 2004 to 1.4% in Q2 2007.
Once the Fed tightened its stance this started to undermine various activities that emerged on the back of the previous loose monetary stance. In short, these activities have come under pressure.
We have seen that the effect of changes in money supply (i.e., creating and supporting various non-productive activities) on various markets operates with a variable time lag. As a result of this, the effect from past changes in money supply can continue to assert its dominance notwithstanding more recent changes in the money supply. (Past loose monetary policies can still provide support to various bubble activities despite more recent tight monetary stance.)
We suspect that the tighter stance since June 2004 is only now starting to gain momentum with the housing market being hit first. This means that sooner or later the various other parts of the economy are likely to exhibit difficulties.
In short, the fall in the growth momentum of money is going to put pressure on activities that sprang up on the back of previous loose monetary policy. (Remember that bubbles are supported by means of loose monetary policy that diverts real funding from wealth generating activities. Once the money rate of growth slows down, this slows the diversion of real wealth, i.e., slows down the support for these activities.)
When various non-productive activities start to deflate, this tends to exert a direct and indirect effect on the quality of bank assets notwithstanding financial innovations. Obviously once this happens banks tend to curb their lending growth.
Does this imply that the United States is heading for a serious liquidity crunch and severe economic slump? We suggest that this will be dictated by the state of the pool of real funding.
If the pool of real funding is still growing then commercial banks are unlikely to curtail their lending — at the worst, they might reduce the rate of lending expansion. This means that instead of being liquidated, various false activities might be forced to slow down their pace of expansion.
Obviously, if commercial banks were to significantly curtail their lending then this could be indicative that the pool of real funding at the disposal of Americans is in trouble. Should commercial banks trim their lending it is likely to lead to a fall in money supply and to a liquidity crunch, all other things being equal.
For the time being, overall commercial bank lending is still expanding although at a slower pace. After climbing to 11% in November last year the yearly rate of growth fell to 8.3% so far in July. (In the week ending July 18, bank loans increased by $23.3 billion.)
Another possible source for a liquidity crunch is the Fed’s policy of targeting the federal funds rate. In the week ending July 25, the Fed’s balance sheet (also called Fed Credit) fell by $3.669 billion. The yearly rate of growth fell to 2.7% from 3.1% in June and 4.2% in March.
The decline in the pace of monetary injections by the Fed could be indicative that the current fed funds rate target of 5.25% is too high relative to economic activity. In short, a weakening in economic activity puts downward pressure on interest rates. To protect the target of 5.25% the Fed is forced to slow down its monetary pumping.
It follows that liquidity could come under severe pressure if the Fed decides to cling to the current fed funds rate target whilst the economy is weakening.
We can thus conclude that as the effect of the tighter monetary stance of the Fed since June 2004 gains strength the chances for a widely spread liquidity crunch are rising. The entire issue could further exacerbate should the Fed cling to the current fed funds rate target whilst the economy is weakening.
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Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. He is chief economist of Man Financial, Australia. Send him mail and see his outstanding Mises.org Daily Articles Archive.
when youve spent several trillion dollars on a futile war and then had very low interest without curbing borrowing youve created massive debt. nudge interest rates up a tad and bang - suddenly noone can pay anymore. Second, trillions pouring into compulsory superannuation is creating huge upward pressure on inflation - when al that money comes on stream prioces will go up and onylthe greys / oldies will be able to buy. In the meantime some of the most incompetent and corrupt people in the business are handling all that money and putting it into schemes sure to fail, the running off with thier big fat commissions as it all goes bung. the best investment is a bunch of gardening tools - nothing else is going to be of much value soon.
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This morning the feds lowered the rate banks borrow money at. This is like having a crack in a dam and sticking chewing gum in it to stop the leaks.
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I bellieve the credit lequitidy crunch is an offshoot of the Subprime mortgage mess. Now that homeowners loans–the bad ones have been called,banks are tightening thier rules with lenders. Another factor no one doesn’t know what these mortgages are tied into. Already the subprime has spread into commidities like the oil market for OPEC expressed thier fears of it yesterday.
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