The time to start getting your financial house in order was yesterday. Here’s another short but precise perspective on our immediate economic future. If things play out as described, and I think they will, there will be no bailouts coming from overseas. We Americans have had a grand old time partying with other people’s money, and that joyride will be coming to an end soon. Where the blog posting refers to CDS spreads being close to junk status, those are derivatives he’s talking about, and as those suckers get written off, massive amounts of wealth will simply disappear. There are trillions of dollars worth of derivatives out there, folks, and it’s set up like a huge Ponzi scheme. One set imploding could trigger implosions in other sets, and so on and so forth. Considering how exposed major lending institutions and banks are to this stuff, it’s folly to think that there won’t be wide repercussions if this comes to pass.
Make moves to pay off your unsecured debts (i.e. credit cards & the like) as soon as you can. I’m no financial wizard, so do your own research, but I’m of the opinion that any paper assets will be vulnerable as time goes on. Hell, for that matter almost any assets are vulnerable, most likely. I agree with George Ure that for homeowners, you need to either own your home outright or be heavily leveraged. Any place in between means you could lose your home and all of the equity you have in it.
I’m not trying to be an alarmist, but it sure seems like we seeing more dissonance in the financial news concerning the overall health of the economy:
- The stock market is up, but so are prices for things like food & energy.
- Companies are reporting great numbers, but layoffs are starting to increase again.
- The subprime lending market’s implosion can be limited to just that segment of the lending business, yet many major banks and lenders have exposure to these radioactive loans.
Confusing, isn’t it? Most Americans aren’t paying much attention to this unless it directly impacts them right now. The sooner you’re on the lookout for these things, the better prepared you’ll be for whatever comes to pass. Hopefully things will settle down, but I’m not overly confident that will happen.