2008 Recession?

There have been so many mixed signals about the state of the US economy lately. One day a pile of negative reports is released followed by a couple of positive ones the next. I do not like being an alarmist. I am not a negative person by nature. In fact, I try to maintain a positive outlook. That being said, I also don’t believe in slapping lip stick on a pig.

I am not an economist. As I have stated before, I do read a lot and pay close attention to what’s going on around me. For some time now, it sure seems as though the negatives are out weighing the positives as far as the economy is concerned. Here are several key points that have been on my mind lately:

  • Oil hit an all time high today of $135.09 a barrel, before falling slightly.
  • Gas prices are approaching $4.00 per gallon.
  • Annual inflation is running at 6.5 percent, excluding food and energy.
  • Eggs, milk and wheat prices are up more than 30% this year.
  • There is a world wide rice shortage, yes I said rice shortage.
  • The housing market is in turmoil, with prices in some markets down 20%
  • The sub prime mortgage fiasco continues
  • Personal bankruptcy filings were up 28% in January compared to a year ago.
  • Mortgage foreclosures surpassed 200 billion dollars in 2007.

I am not telling you all this to get you depressed or worse, for you tune out and shut down. I think it is important to understand what is happening to our economy. In order for you to make wise financial decisions for your family, you need to be aware of what is going on.

The question of whether or not we are in a recession keeps rearing it’s ugly head. I have read several economist opinions that have stated we are indeed in a recession. However yesterday, the government released a key economic indicator that says we are not in a recession.

Here is my take:

We are in a recession. It is just getting underway. It will get much worse before it gets better.

Why do I think this?

The two previous US recessions 1990-91 and 2001 were very short lived. Many believe this was because consumer spending held up. Put simply, people kept buying and buying and buying. This time around, most consumers are strapped with huge amounts of debt. Because of the housing crisis, most people cannot tap any more home equity. Because of the rising cost of gas and food (and just about everything else) most people have much less disposable income. These three facts combined will make it extremely difficult for the US consumers to bail us out of this economic downturn.

What Next?

So what should I do, you may be asking. I would say, expect the best, prepare for the worst. I am not suggesting locking yourself away and becoming a penny pinching miser. No! Or No! Not unless you want to! As I have stated before, I would recommend the following:

  1. Do not enter into any new long term debt, right now.
  2. Try to pay down any high interest debt, such as credit cards.
  3. Look for ways to trim your expenses.
  4. And if at all possible, start putting away some money in savings.

Conclusion

It remains to be seen whether we are really in a recession. And things could change tomorrow. But even if things do continue to get worse, you will be in a much better position to deal with it if you educate yourself about the basics of our economy and take some steps to tighten up your personal finances.

Misc Info:

Goldman Sachs predicted this month that oil could spike to $200 a barrel

About Housing:
“This year and next are going to be tough as home prices find bottom…
The housing market is in its most severe slump since the Depression, a crisis which we’re likely to be about halfway through right now.”

- Fannie Mae’s president and CEO, Daniel Mudd

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