You are so right "Belly" the whole of the Western world has been living on a sea of debt. We become richer by producing things and offering services, not by borrowing and spending and manipulating money. It might be a very short term solution to lower interest rates, but as you say nothing is free. Everything returns to the mean and just because our house rises in price, we are no "richer". We just live in an unrealistic cycle of inflation. Governments try and offer short term relief by printing money. I doubt the Sub prime problem will be solved in the US by the Fed dropping the rate and pumping in money. It will further reduce the value of the dollar and it will just keep people borrowing and spending. As Bill Bonner so succinctly said "you don't help a dipsomaniac by lowering the price of whiskey." It needs hard decisions that cause pain to all those that created this irrational exuberance.

I truly hope GrahamY is wrong, but I have an awful feeling the bubble's going to have to burst sooner or later. Now that our individual future security is tied to the stock market via compulsory superannuation, there's likely to be many unhappy campers from my (boomer) generation in a decade or so.

Now that I think of it, we may be literally campers. Just as well we own a block of land to camp on!

On a lighter note, how nice to see that we've been revisited by one of our dottier crackpots - beware the barcodes and microchips of the Apocalypse! I don't suppose Gibo owns a mobile phone, and if so, is he aware that his every movement can already be traced (at least when it's switched on)?!

CJ Morgan wrote.....

"Just as well we own a block of land to camp on!"

As do I CJ, except that should my income fail for whatever reason, then suddenly the Shire Council will realise that I owe them lots of back rates and they may be forced to sell me up and leave me with no place to reside.

Don't forget, Shires charge exorbitant interest on unpaid rates. My Shire charges 17.5% and it wouldn't take many years to reach the stage whereby a person living on limited or no income would become unable to pay the interest let alone the rates owed.

So I ask you CJ, do we really own the patch of land we call our own?
Aime.

*Now that our individual future security is tied to the stock market via compulsory superannuation, there's likely to be many unhappy campers from my (boomer) generation in a decade or so.*

I would not panic just yet CJ. The stockmarket is based on greed
and fear, but because people are selling, does not mean they think
that companies have no value. They just think that if everyone panics,
they might be able to buy the same shares back cheaper, a bit down
the track.

To judge your investments, look at the underlying health of the
companies that your super fund money is invested in. Most are sound
bluechips, making sound profits on your behalf.

They include our major banks, miners, retailers etc. BHP, Woolies,
Woodside, Westpac, etc, your super fund would have a % of its
investments in most of them. The idea is to spread the risk over
a number of companies and a number of sectors.

If their price drops by 30% tomorrow, its really not going to affect
you in the longer term, although it might be an opportunity for your
fund to buy more sound stocks and buy them cheaply.

The people likely to lose bigtime in a market downturn are speculators
who have borrrowed to buy shares on margin loans. Banks will call
in their margins and they will be forced to sell, many losing their
shirts.

Your super fund might then well be able to pick up these shares in
quite sound companies, on the cheap.

Yes, the share prices will recover and there are buying opertunities
sitting there now.

However I heard an interesting interview on the BBC world service.
Many bank bonds and notes have their interest payments insured.
ie, if the bank cannot pay the interest they call on the insurance
company to make up the difference.
Some of these financial insurers are in big trouble and likely to go
down the gurgler, leaving the bank and the bond/note holder with a
piece of paper.

A further worry is that many banks have the debt of their credit cards
insured also and if things get really bad the banks and credit card
companies may be overwhealmed by the debt.

Sleep tight !

Grahamy raises an interesting point, one I am aware of, this baby boomer took whistle blowers early retirement.
It was followed by my landing in the safety net of the job I was made for.
On getting my super post 55 years old in 2002 I selected one of 3 country village homes.
Each had a value of no more than $45.000 one year earlier but value on that day was[country town] 2 bedroom small total refurbished $80.000
One home away 3 bedroom refurbished $85.000 mine 5 bed rooms refurbished[ all new roofs new brick piers new paint , all transported and rebuilt, $98.000.
In ten months those I did not buy sold for $185.000 each.
I was offered $240.000 but will not sell.
both others are on the market the first resold for $169.000
The second has not had a looker at $200.000 and its market value is not more than the first, mine?
Who cares not for sale, no homes have been sold here for 12 months few in surrounding villages.
No disrespect but Mac mansions are unlikely to ever bring the money paid for them the housing race is likely to stall.
We need to understand money is not worthless plan for things to go wrong , they will sorry but they will.
Country village life is not for every one but hard times may yet see our village grow.