Shrinking biz, a reality

A very good article in Business Week (aug 09, p. 20) high lights the issue at hand. The investors at the stock exchange market believes that the economy is recovering, however, it seems to be a bit of a superficial analasys. Most of the reported positive is based on cost cutting, not economic growth. With cost cutting comes redundancies, and with the increasing number of unemployed people in the market the purchasing power is reduced, add the employed people who has accepted reduced salaries to be able to keep their jobs...

With this in mind we have to be prepared for the worst. We can most likely expect a downward spiral that will squeeze the market even further. Even though the article in Business Week is based on the US market the unemployment rate in Europe is high, and increasing at a furious pace, and that will have an impact on the economy in all european countries. With the social safety net in Europe it will take longer for the purchasing power crunch to surface, but it will show soon enough, and it will have a major impact on the economic growth in Europe.

Another paralell with the US market is the boomer generation, 79 million people in the US that now is cutting down on their spending and saving more, all together taking about 400 billion USD out of the market. The same generation in Europe, born 1946 - 1962, is most likely taking a hard look at their spending pattern and starting to be more careful in their spendings.

So, it will be worse before it´s getting better!