Cheers and Fears For Our Economy
by We are moving from one major problem to another. To make matters worse, a new attitude about government is coming along which could really mess things up. Time for financial self help.
The banking crisis is over. Everyone can breathe a sigh of relief, but make it a quick one because there is a recession coming. Governments all over the world have thrown everything but the kitchen sink at the recent banking crisis. This calamity which was primarily caused by liberal politicians who wanted EVERYONE to own a house and by unethical mortgage salespeople, who placed unsuspecting clients with huge mortgages, is being put behind us because the government is going to step in and take the heat for the losses.
In the weeks ahead, we will see banks returning to normal lending and doing deals except for prospective borrowers with poorer credit and small down payments. In short, banks will return to lending the way it used to be, to qualified borrowers. So with the huge banks and insurance companies enjoying bulging balance sheets thanks to the government, the rest of us have to work through a recession of unknown severity.
This recession is caused by consumers running out of money and nerve to continue spending. As long the value of their home rose, there was more to spend with each refinance of the home equity loan. With residential real estate falling in value, the source of funds is gone. Also, higher energy prices caused consumers to prioritize their spending and gasoline always won. The change in spending habits has increased unemployment and the consumer’s attitude becomes one of apprehension, fear and a definite lack of desire to spend money frivolously.
Retail sales are falling and most retail companies expect one of the worse Christmas shopping seasons. To top it all off, we are going to have a new president next January so the degree of uncertainty rises. As it appears my choice for president will be returning to be part of a shrinking minority in the Senate, the next few years look somewhat dismal.
So, we need to consider the survival tools through a recession. First off, cash is king. If you have money in the bank, leave it there. Do not be thinking you can make a quick buck by catching the stock market at the perfect moment. One might as well go to the nearby gas station and buy some lottery tickets. The chances of success are about the same. However, if there is savings in process in a 401(k) or other similar savings tool, keep it up. All the stock funds are having a sale on low priced stock.
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