At the end of 2007:
Most people were employed.
They had no savings and were not saving.
They had bad credit, but banks were willing to lend anyway.
Fast forward to the end of 2008:
Some people, who have no savings, are beginning to lose their jobs.
Those that still have jobs are concerned they are going to lose their job so they are begging to save.
Most people had their credit rating reduced. More importantly though, banks are not lending to people that have bad credit.
This is a huge transformation and a few conclusions can be made:
It took years of excess to reach the 2007 level. It will take years of moderation to get back to it.
This will lead to deflation.
During deflation the best performing investments are cash or short (anything).
2 hours ago
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