I am in no way claiming to be a guru but something tells me that taken the way our economy is structured we need constant growth to enjoy our luxury cars and houses. We would need to add much more gov. regulation and restructure how social benefits are distributed for this dependency to break. But then it will not be exactly the country of opportunity and freedom we all know.

So provided we don’t change much the basics, we still have to break the dependency between the health of our economy and our consumption rates. Our growth cycles are already fewer and less in amplitude and it will take many years and a lot of tuning to get an alternative system in place (where growth is achieved by improving quality and not quantity). We have an advantage of vast natural reserves and low population, but we will have to do it sooner or later before we find ourselves hopelessly behind the rest of the world.

This is the big picture. Now, how does it map to our current time line? Will we have more good times before it gets worse? Is our economy flexible enough to undertake a smooth transition? One can only guess.

What the I-Bonds rate change highlights is that the government doesn’t know how to (or is not willing to) fix the bigger problem and instead applies patches they know have worked in the past. Is our economy in terrible shape? From the gov. point of view it is.

The economy is not in good shape, but considering we just went through a huge expansion a slow like this is necessary. There was still slight growth last quarter, which is amazing considering what’s been happening.

Yan:

I listen to CNBC during the day, and many analysts think commodities (which are at an all time high) are a bubble. It could continue to go up of course, but you are buying high, hoping to go higher in the future.

Given that, my investment approach over the past couple of months has been to:

1. stick to the stocks for long term investments, with 50% in overseas markets
2. buy high yield CD’s and I-Bonds for short term (I did manage to get into I-Bonds before the rate fell end of the month)
3. occasional strong stock picks (at weakness) for mid term investment

I still have not explored commodities, and I plan to devote some time into it. I have a strong feeling that soaring food prices are here to stay, which probably opens some new investment opportunities.