A Different Way

to look at Life, Health, Business and Politics

What’s going on with this economy?

Posted by Marietta chiropractor on March 7, 2008

A friend who knows my background in business asked what I thought is causing this slump in the economy.  So, I thought, I’d share my insights.

I attribute most of this to a few things.  Probably the biggest factor is the housing collapse.  There are several reasons for it, of course.  But, the fact is the market is correcting an overheated, prolonged boom fueled by easy lending.  Anyway, When housing slumps, jobs back off in almost every sector.  I believe one of the reasons the labor force shrank is that alot of those immigrants we’ve been bitching about, packed up their families and went back to Mexico.  AND this thing has been sliding for at least a year now.  It’s about wrung out.

Another is the oil situation.  With gas at the pump now over $3 a gallon and headed to $4, it’s really eating into discretionary income.  There’s no extra money to spend.  AND with the Government steering farmers to agriculture for fuel instead of food, the cost of groceries is moving up steadily further stressing the family budget.

I think uncertainty over the election is forcing companies to thin their ranks BEFORE the Administration changes.  Also, uncertainty over possible tax increases forces folks to hold on to what they’ve got “just in case”.

Finally, the so-called “wealth effect” is working in reverse.  When times are good and stocks and home equity are increasing, people “feel” like they have more.  They borrow against that equity.  The spend more.  And, the cycle feeds itself.  When values and equity are shrinking, just the reverse is true.  DEBT is killing the consumer.  So-called bankruptcy reform makes it easier for the banks to dump credit cards on the market, impose usurious fees and collect hard.  Consumers can’t bankrupt as easily.  So, more income is directed toward debt reduction.  I think we’re gonna see a wave of bankruptcy that is staggering.

Might take a year to pull out of this.  It will be a good time if you’ve got cash in the bank or buried in the back yard.  If not, it might be a challenging time.  Pity the old guys who’ve been downsized and actually NEED a job.

In the words of Tim McGraw, “Would you like fries with that?”

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