The Black Swan is an event that is highly improbable but not impossible. Most swans are white and black swans are very rare. Our lives are gretaly affected by unexpected events . These are very rare but of tremendous importance. We have seem to have short memories of tragic events. World War Two arrived to many people unexpectedly although World War One was just a few decades away. Yet with hindsight ( alas everything seems easier with hindsight) they should have seen the war clouds coming as Germany builds up its war machines.
The war clouds are coming but of a different kind. It is a financial war cloud. Perhaps the Mother of All Stock market collapse is coming. A financial Armaggedon is on the horizon. If you think I am a Doomsday pessimist , look at the signs. The fall in value of the US dollar is a symptom of a disease, the disease is called Overspending. Decades of overspending by US Government and US consumers have created a huge debt bubble. No one will ever believe anything drastic can happen to the world's only superpower. There is only one solution. The USA has to stop spending more than what they earn.
This will affect companies exporting to the USA and countries with large exports to the USA will be affected. This will create new opportunities as well. US MNCs will become stronger than US companies that have most of their business turnover in the USA. Those with high turnover outside USA will recover to become stronger. The USA's share of the world's market is declining thanks to the growth in Asia and other emerging economies. Manufacturers will be affected but not to the degree as Financial Manufacturers.
These Financial Manufacturers are the creators of the sub-prime mortgage problems. They create Financial Products to market to investors. Initially these Products are good , they provide diversity and protects investors against the market volatility. But greed has taken over and Financial Products now are designed to maximise the size of the wallets of those in Wall Street. The amount paid to Wall Street Executives is staggering. Financial Manufacturers unlike Product Manufacturers can create something out of nothing. They are supported by the huge amount of money that is released in to the markets by Governments all over the world. It is this huge liquidity combined with the excesses of Financial Manufacturers that will create a Black Swan event.
What will happen when this Black Swan arrives? Stock and property markets will be the first to fall. Those markets that rose the highest and the fastest will fall the most and the fastest. Jobs will shrink. The Travel Industry will see dark days. More books will be written with many authors claiming they have seen it coming. The Black Swan will arrive suddenly and unexpectedly. Over spending is like taking drugs. You cannot slowly be weaned off drugs by taking less and less each week. You have to stop, totally and completely. US overspending will not stop until the Black Swan arrives. But when will it comes? That is the six million dollar question that some people will pay billions to know. Since I am not yet a billionaire, I can't tell you.
