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When the world enters a financial crisis what does the investor, or the businessman or the family do? How do you ensure that you will still be standing when the moment of crisis moves past and the world begins to normalize around you? How do you ensure that you can profit from your position at that moment?

There is an old saying that “in times like these it is important to remember that there have always been times like these.” To my American readers: “Do you remember what it was like when the World Trade Centers came down? Do you remember the fear? The fear that even the most effective military in the world could not protect us. The fear that even two huge oceans couldn’t separate us from the terrorists. How many more planes were coming? Were there nuclear suitcases? Where were they planted? Could our economy ever recover? Would there be food on the supermarket shelves? For a short time we lived what many other countries have felt many times.

Yesterday, Alan Greenspan testified before the U.S. Congress House Oversight and Government Reform committee. He called this a once in a hundred year event and a financial tsunami sweeping the world.

But what happens when the waves of the Tsunami pull back? Will the world end? Or, has it already ended and we are just watching the conclusion on television

Pull out any general and basic textbook on business over 20 years old. That book will talk about business cycles. It will talk about the euphoria of optimism that sweeps through an economy when nearly everything goes right for a number of years. It will also talk about the necessary functions of the down cycle, of the recession. It will explain that a recession acts to bring that euphoria under control and that a recession acts to restore a respect for marketplace fundamentals. That book may well show your graphs of recessions going back two hundred years. The cycle up and the cycle down both inside a general long term cycle up.

In many parts of the world we have been living in a long term expansionary phase that goes back without a severe break for over twenty years. This is a very long time in business cycle terms. Part of this long term expansionary phase was engineered by Greenspan the U.S. Fed. They poured money into the economy at key points when very likely the economy should have been allowed to fall into a short term recession.

But this phenomena is also part of a long an extremely long term cycle phenomena. When the Information Age began to supplant the Industrial Age, the world and the business cycles of the world economy began to change. When the Internet began to rule the Information Age lightning transfers of wealth and information began to change the nature of institutions that we have counted on for centuries. In many cases this speed has brought both euphoria and profit to many investors. Combine Greenspan helping us avoid recessions for his 18 year tenure as Fed Chairman with the profit and euphoria of the growing Information age and you have the root of the issues we see sweeping the world today.

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This entry was posted on Saturday, October 25th, 2008 at 5:50 pm and is filed under Directory News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.