Asset Values vs Standards of Living?
Disclaimer:
As always AND before I go on, I’m not offering financial advice; you should always get qualified professional advice when making financial decisions. What I am doing is letting you know what has worked for me and giving you the opportunity to check it out for yourself. This message is intended to provide general news and information only. Readers should rely on their own enquiries before making any decisions regarding their own interests. Please do not rely on any part of this message as a substitute for specific legal or financial advice. All material is copyright 2008
You may recall last month I shared with you the article on “Australia’s Financial Tsunami” well I thought you would find this article just as thought provoking… enjoy! From Glenn to George:
True wealth (in my opinion) is being in the position of working, only because you want to work, not because you have to. This is a personal measure, I’m sure some have decided that social security satisfies their definition of working only because one has to.
By any measure though, this means an income from another source has-must be achieved so one does not have to work. It could be dividends, interest, rent or whatever. In building wealth that produces income many Australians have relied on capital growth to achieve their goals. It seems that while assets both rise and fall the trend has been that of a steady rise in the long term. Will this trend continue? Must it continue? And are standards of living linked to asset appreciation?
Many observers and economists hold the belief that asset appreciation will always have an upward trend due to human progress which is built into the natural state of human beings. I beg to differ. From a western developed nations standpoint, asset growth is in my opinion linked to population growth, without population growth assets may not appreciate.
As you can see Japan’s population growth has been in steady decline. Simply put and for example, you don’t need more housing if the population is static. As an economy becomes more advanced the components that make up GDP alter significantly. Industry declines and services pick up. In our own country for example our GDP (gross domestic product) is derived roughly 70% from services, 26% from industry, and 4% from agriculture. This is to be expected. Human progress has meant that robots build cars and computers and cad machines design them. In competitive industry there is always drive for efficiency and productivity increases, more is done by machines (and other technological advances) and less by people to produce the same amount of goods and food. So it is natural phenomenon more activity shifts to the service sector. One does not have to be Einstein to figure out that one of the primary ingredients for successfully growing the service sector and increase GDP to sustain economic growth is the number of customers available to the service sector, and that gets down to population and population demographics. So how does Australia stand up? Will asset prices grow in the medium and long term in
Will we have to save for our retirement or will asset growth help fund it? We will talk and look at these questions next time, in the meantime I hope this has provoked you enough to really think about it and we will see if you have drawn the same conclusions I have. Until next time! Yours with Ethics and Passion
George Mihos
Disclaimer:
As always AND before I go on, I’m not offering financial advice; you should always get qualified professional advice when making financial decisions. What I am doing is letting you know what has worked for me and giving you the opportunity to check it out for yourself. This message is intended to provide general news and information only. Readers should rely on their own enquiries before making any decisions regarding their own interests. Please do not rely on any part of this message as a substitute for specific legal or financial advice. All material is copyright 2008
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment