More on Our Wobbly Economy…

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.

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3 Responses to More on Our Wobbly Economy…

  1. Emme says:

    I wish I could read the entire link at rgemonitor… I didn’t want to become a client…
    Perhaps we should hurry up and pay off our house!

  2. Bart says:

    I’m not a client either… it looks like an interesting article, but I’m guessing the subscription fee is in the hundreds of dollars like most investment newsletters are. The outline provides a lot of information as it is.

    I’m not in a hurry to pay off my house for several reasons… first, it’s not sustainable at all, so odds are good that we won’t be living in it once we truly enter the era of supply-constrained natural gas, which will be coming shortly after oil starts heading down. We could make all sorts of changes to make the house more energy-efficient, but the raw square footage is still too high to adequately deal with in the future.

    Second, even if I did determine that I could make the house energy-efficient and somewhat sustainable, we’re going to be entering a period of time where government is likely going to try and raise taxes to keep their entitlement promises to the Boomers. They will dominate our political scene for the next decade or more simply through the number of votes they represent, and I wouldn’t be surprised to see the government raise both income and property taxes to try and make ends meet. I’d prefer to have most of my assets liquid in that case…

    Long story short, though, I’m in no position to pay off my place unless we experience hyperinflation, so it’s a moot point for me.

  3. Robert says:

    I’m in the same boat on all fronts – serious economic dislocation down the pike and being woefully unprepared for it. As a boomer I have no greater expectation that the govt. will make good on it’s promises to my generation either when the you know what hits the fan. One thing that helps me with future scenarios is taking a socionomic perspective to understanding events and what’s really driving them – “Socionomics is a new theory of social causality that offers fresh insights into collective human behavior. Over twenty years of empirical research demonstrates that social actions are not causal to changes in social mood, but rather changes in social mood motivate changes in social action. Socionomics supports this research with the hypothesis that humans’ unconscious impulses to herd lead to the emergence of social mood trends, which in turn shape the tone and character of social action. This perspective applies across all realms of social activity, including economic, financial, political and cultural.” http://www.socionomics.org/ and for reports and insight try this link http://www.socionomics.net/archive.html

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