h&f 0059 Local Is The New Global

A balmy night in Bedford-Stuyvesant, NYC

As local as it gets: A balmy night in Bedford-Stuyvesant, NYC

Just thinking out loud and testing a logic here…

Credit markets are frozen with no loosening in sight.  The US stock market will rise and fall in fits and starts, but equities do not look likely to gain any sustainable momentum any time soon as long as the market doesn’t come clean on housing prices.  The mortgage collateral at the root of the problem must be revalued and some people estimate the value deficit representing homes and other assets to be around 1T – yep, one trillion  dollars, a number too big to be thought of for most humans.  Why will banks lend when they still teeter on the verge of collapse with that revaluation pending and are focused on consolidation to prevent that?

For the full story on the one trillion and more, see Catherine Austin Fitts: http://solari.com/blog/?p=1598.

In short, theres no option but to return to a real economy, no longer relying on paper profits and financial engineering.  Although you may not rely on it directly (only a few of us do) your spending and your assets, especially if you own a home, are integral parts of the equation.  The current system counts on you to bank with Big Bank X and to consume like crazy all the things you don’t really need.  But the power is shifting: to you.

That is:  As the free flow of cheap credit is a thing of the past, we find ourselves in a new economy, one in which money is seeking what’s real just to keep its base value.  And what is real?  Commodities (gold, silver, and the minerals we need to build things) and whatever it is in your local community that you create demand for as a necessity.  Local goods and services are well positioned to be the new capital engines.  Big Bank X, and more importantly, Big Box Store X, know this.

Our government has a difficult problem: fix the problem (revalue and repurchase the overvalued assets) without startling the markets.  The Fed is continuing its undisclosed bailout (well above and beyond the now storied $700 billion) of financial institutions as a response to the problem.  If we knew how much was going out and to whom, people might well panic and start runs on those banks and foreign investors might do the same.

So, it may be a while before we get back to a reasonable flow of credit.  That leaves the local, real economy with opportunity: to bank local, buy local, create local opportunity, keep your cash and barter for what you need. The big boys will follow as they will seek any viable market.  One example: a major chain store setting up shop right in the heart of a structurally and perennially poor Brazilian favela (Casas Bahia in Paraisopolis, Brasil).  The government won’t serve the favelas, but the market will.  Thus, the way out of this global crisis seems to be local action.  The “think global, act local” cliche now gains new, real life.

Local is the new global.


~ by ericjhenderson on November 17, 2008.

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