Thursday, 24 April 2008

'Demise of the service economy' 2008-04-21

Monday 21st April 2008 8:30 pm: 'Demise of the service economy'

Peter Schiff has an article on called The Collapse of America’s Service Economy which agrees with my point of view expressed below that the service economy is merely a transitional phase, perhaps lasting a generation, between a wealthy industrial economy and a grinding poverty post-industrial Dark Age type economy. The service economy in my view represents the period of liquidation of the wealth created by the manufacturing industrial economy (and that of empires) until it's all gone. Of course, this can last for quite a time, depending on the wealth and size of the empire. However, I think that it's an inevitability that this phenomenon is well under way in the USA, the UK and most of Europe (except perhaps Germany and the lower income Eastern European states who might benefit from the decline of the others).

Having a highly leveraged economy at the time of the drying up of this savings cushion is especially dangerous. Many companies crashed (regardless of the quality of their products) as the dot-com investmant mania broke in 2000, because they were indebted i.e. leveraged to assumptions of continuing growth in that industry, when it suddenly stalled and left them high and dry with no money.

Besides, I like Peter Schiff's cheerful style as he doles out a litany of doom-laden predictons for the Western economies!

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