Sue – that’s a fantastic question and actually ties into a revelation I had earlier this week.

From what I’ve seen – and keep in mind i’m not an economist – they will be effected. Depending on the strength of world currencies gold and diamonds may, however, behave differently than the rest of the commodity market. I’m just not familiar enough with them to say. In general however, I suspect that decrease in demand corresponding with the massive, global, economic slowdown will have a pretty serious impact. It’s hard to say how long and drawn out that will be.

Several recent articles I’ve read talk about a second impending credit crisis hitting/about to hit Europe tied to investments in emerging markets/economies. My personal hunch is we’re looking at about 6 months-1 and a half years before things start to really turn around on an international scale.

On a separate note however, it recently occurred to me that with China and India’s economies industrializing even an artificially deflated currency will not be sufficient to keep their goods low enough. As they transition to middle economies another region will need to move in to take their place. While that may be South America, I’m beginning to think that central/southern Africa may be ideal.

With extreme poverty, issues with government stability, a lack of strict economic, environmental, and humanitarian laws and an abundance of natural resources it’s very possible that the world returns to Africa in a very big way – especially the west coast.

Map of natural resources:
http://static.howstuffworks.com/gif/maps/swf/AFR_THEM_LandUse.swf

The distance between the west coast of Africa and Europe, the Eastern Seaboard and India/China is less than the distance between China and the US’s western seaboard/the complex rail trip to Europe, etc.

What are your thoughts as someone in the heart of it all?

Chaos is not beholden for a single element in its creation, no a plethora of events have unfolded – some cascading from others, some unintended, some deliberate. The deregulation of financial markets has destabilized these markets. At the same time the practice of letting the banks acquire each other until they reach behemoth status – a relatively new system – until recently banks weren’t allowed to cross state lines – means when a large bank collapses the crater is much larger and the financial fallout larger and more toxic.

Leveraging of assets by banks was increased until now it is something like 30:1 – meaning for every one dollar they have, they can bet thirty on transactions – great profits on the upside, great losses on the downside – amplifying every swing in the market, every twitch. The whole thing was allowed to get out of hand, was not sufficently regulated, and when regulated, the regulations were either poorly or non-existently enforced. Its a wonder it didn’t collapse sooner, is been apparent that behind the scenes manipulations have been occurring for some time now, I’d say at least 10 years if not longer.

The bubbles grew too large, and time ran out.

Thank you.

The problem has always been and will be this practice of trading where deals are based on prediction of future values and are marred with uncertainity

The one important factor I think you have left out is the inability of supply to keep up with demand for primary resources such as oil and food and how this pulled the trigger.

I am somewhat worried about the UK housing market since the UK has a tendency to mimic the US in policy decisions; somewhat unsure about the German market as it depends very much on how the industry fares, but the Germans themselves are cautiously optimistic; and don’t know anything about the Australian market. However, each of these markets have different rules governing real estate and lending, so the effects of the financial crisis will be different too.

2 wars and tax-cuts at the same time?

That won’t work. Unless you solve it by printing. And indeed, some of the effects of this were thought to be good, and some bad but in the end bush admin. did what they thought was best for the country.

About deflation. Nice theory. Show me a single person who honestly can say, damn, everything is so cheap since a year ago when the crisis began. Gas, food, mortages. Don’t think so pal.