What's in Store for the Economy?
So does anybody really know where the economy is headed? For a little while there, things seemed to be looking up, thanks to improved stock prices. But with the market having slipped again and unemployment continuing to brew, it's hard to feel confident about the economy these days. Not to mention that we seem to be heading into round two of a stubborn recession, due to uncertain financial conditions in Europe.
How we perceive this economy is completely dependent on the needs of the politician that’s reporting it. What few people realize is that the Federal Reserve, the Secretary of the Treasury, and all those other economists and talking heads all have an agenda, whether it’s to bolster the confidence of the American people in the current Administration or to shake that confidence down to the core.
The truth is that the economy, just like a most other things in life, simply can’t be measured in straight line gains and losses. The economy is so much more than a line graph on a chart. It’s beyond stock and options trading and big corporations. It’s more than just mom and pop stores and consumers. It’s almost a living, breathing organism. The housing market, the stock market, the banks, the consumers, and the government all have a small but significant role to play in the equation and the contributions of each simply can’t be measured in finite terms.
For instance, let’s look at the housing market. Even though there seems to be more activity in the housing market when it comes to house sales, there is still an overwhelming number of houses falling into foreclosure. Does this mean that the housing market is recovering or that it’s still in dire straits? Big banks are finally showing signs of stability and their recovering stock prices prove it. But maybe it's because of the huge subsidies they've received. And is our economy really on the mend when small bank after small bank (somewhere in the neighborhood of 20-50 or more a month) continues to shut its doors?
And what about the stock market? Are we as consumers supposed to be comforted by the fact that the stock market has recovered nicely from its lows? If you notice the market's behavior, there have been equally as many "up" days as there are "down" days, and this is the normal ebb and flow of the ever-volatile stock market. We haven't really made as much progress as it seems.
And while the credit card industry looks to be recovering after a tough period of tight credit, issuers are still keeping an eye on the kind of customers they extend credit to. Getting approved for a prime credit card may be just a tad bit easier than it was a couple of years ago, but things certainly haven’t returned to those days of yore when subprime loans, easy credit and quick cash ruled the day. Those days won’t be back anytime soon, if at all.
So as far as the economic recovery is concerned, the truth is that we don’t know what’s going on and where this economy will be in the near term. I believe that the so-called financial “experts” are just as in the dark as we are. Sure they can look at their statistical data and make some educated guesses, but in the end, it’s really no more accurate or scientific than predicting tomorrow’s weather. Sometimes they get lucky and get some things right, but, more often than not, they’re nowhere even close.
So, I’ve vowed to take a step back from the overwhelming wave of “knowledge” and information being floated around out there about the state of our economy, and I've decided to make sound financial decisions based on what works for me. I’m no longer listening to the people who once told me that debt and leverage were the ways to get what I wanted out of life five years ago, but who are now telling me (in an about face) that no debt is good debt.
It would be nice to have that peace of mind of knowing that you can pay your mortgage with only one income if you have to. And wouldn't it be great if you didn't have to worry about losing your car because you hold the title to it? But here's the irony — if we work to minimize our credit card debt, cut down on spending, and make a commitment to live within our means, would we be influencing the course of our economy for the better? While becoming more financially responsible and putting a lid on spending may be what's good for our family budget, who knows what kind of collective impact such changes would have on our economy. After all, doesn't the economy rely on a spending, consumerist base? If we become a nation of hard-core savers, where does this leave the economy?