While the focus of the world is still on the ructions surrounding Wall Street, and the ripple effect through global sharemarkets, it won't be long before the long-term impact on the way we live will start to sink in.

I've been talking about these social changes for a couple of months now, but the events of the past two weeks mean they are now certain to become a reality rather than just a possibility.

The key is not to fight the changes but to adjust our way of thinking and go with the flow. In other words, accept that the world has changed after the past two weeks.

I just wish the fancy Wall Street financial gurus would do the same rather than arrogantly trying to maintain the old regime of outrageous excess.

Their arrogance last week was stunning.

The US Government had courageously agreed to spend at least a trillion dollars (that's a thousand billion dollars) buying the dodgy mortgages which were sending American banks to the brink. Mind you, it's a small price to pay to save the American financial system from toppling over the brink - we're talking Great Depression scenarios.

Even so I didn't think it was unreasonable for American congressmen (on behalf of the US taxpayer) to agree to the plan with a few provisos including taking equity in the firms they bailed out, expecting regular updates on their financial health, and having a say in the level of executive salaries of those who lost the money in the first place.

The big Wall Street investors squealed about the conditions and wanted to extend the plan so the American taxpayer would buy other dodgy assets, not just mortgages. They basically wanted the US taxpayer to sign a blank cheque to buy all their bad investments and they'd continue on as if nothing happened. I don't think so. Times have changed.

As I've said before, Australia is in much better shape to cope with these changes because we have a well-managed economy, a Federal Government with a lot of cash, better regulated banks and plenty of room to cut interest rates. We're in better shape but not completely immune from the changes.

But while many are solely pointing the finger at the credit excesses of the US for these problems, Australian consumers can't throw too many stones. Over the past 10 years household debt in this country has skyrocketed as we've gone on our own debt binge by racking up big balances on our credit cards while eating away at the equity in our homes by using it to pay for consumables such as holidays and cars.

It's crazy stuff when people start converting capital (such as home equity) into depreciating consumables (such as trips and cars).

Corporate Australia was just as bad, with so many business empires built on debt and which have now become a financial house of cards. The end result is the events of the past two weeks. It shouldn't have come as a surprise. Now we need to make the adjustments. Those adjustments will be driven by the banks. It's too early to judge just how conservative our banks will become but they will play a crucial role.

Think about it. If the banks tighten up on credit it will become harder to get a home loan, to get financing to grow a business or the extra cash to buy that big-ticket item.

That means there will be fewer people who can afford to buy a new house, fewer buyers means less bidders which means falling property values. If banks tighten their lending to business then bosses get scared, they don't add jobs (and may even cut them) and unemployment goes up.

If consumers can't get access to credit they stay away from the shops and car yards, who cut their orders to suppliers and all cut costs and staff. A drop in profits leads to a drop in share prices. It can be a vicious cycle.

For six months I've been saying cut debt, stand on the investment sidelines, cash is king and be conservative. I still think it's the best strategy. Sure there is a lot of doom and gloom at the moment and history tells us that's the best time to invest. But I don't think there is any need to hurry because I have this feeling that it may not be the end of the pain and there could be another leg down.