The Global and U.S. Economies Will Continue to Get Worse

I have written several articles over the last few weeks regarding the U.S. economy where I stated that our economy would fall to depths far worse than most people expect. I feel that there are many more economic surprises ahead of us.

Since I last wrote on this subject, it has become apparent that many sectors throughout the global economy are seeing dramatic downturns. This includes the equity markets, residential housing, commercial real estate, commodities, currencies, bonds, and almost all sectors.

The United States is in the process of pumping well over $1 trillion into our economy to save banking, brokerage, insurance, and automotive companies. All over the globe, countries are joining together in an ambitious rescue plan.

Most people probably feel that our world leaders have this financial crisis under control. Most people in the United States are not happy that they are bailing out the people and the institutions that caused these financial problems in the first place. But I think that most feel that the worst is over.

Here is the way I see it. We have been through many years of financial excesses. There is no way that these financial sins can be overcome in just a few weeks of government intervention.

Even if all of the “current” bad debt situations are taken care of by our government (and there is no way they will come close to doing that), there will be more “new” bad debts to deal with.

There will be more homes foreclosures. There will be more defaults on other loans including credit cards, car loans, and corporate loans.

Our government will continue to try to save everyone. They will inject money into bankrupt banks, brokerage firms, and companies considered too big to fail. They may try to rescue individuals by pumping money into the mortgage and real estate markets.

But at Some Point, the Government will Realize that They Can’t Save Everyone

The federal government must borrow money to finance these bailouts. Foreign countries such as Japan and China, make up a large portion of our country’s debt. Those that lend us money are smart people and institutions. They will not allow us to continue throwing good money after bad.

A federal bailout of some sort was probably necessary under the circumstances. But I don’t think we will see the end of this crisis until we allow the natural market forces to take over. This would result in the values of all real estate, both residential and commercial, and other assets to fall to their true value.

Only at that time will people start buying houses because then they would be fairly valued. Our equity markets, including 401K plans and IRAs would begin to increase in value.

This process will be painful for many people. Many will lose jobs. Some companies will go out of existence. I greatly empathize with all those affected.

Our economy goes in cycles. Having an economic downturn or recession is perfectly natural. It is actually a healthy process for the economy. It is not necessarily a bad reflection on a president or his administration. Most people don’t realize that.

Moderate reduction in interest rates and tax reduction by the federal government are many times helpful in reducing the pain of a downturn to some extent.

However, the unnatural “propping-up” of the economy is not healthy. This is what we have seen in the past several years and are seeing today. This makes the downturn worse and prolongs it in the long run.

The Worsening Global Economy Will Have Negative Consequences on Many People

I am certainly not an expert on predicting movements in the stock market and will not give you any suggestions there. However, I do feel that we will see a worsening global economy and that many people will be adversely affected by this financial crisis due to job loss, company failures, and reduced wages.

I feel that it is absolutely critical that we have a Plan B, a back-up plan, to fall back on in case of these unforeseen circumstances.

I wish you the very best.

Scott Hubbard has retired from 25 years as a Chief Financial Officer in Corporate America. He now enjoys teaching corporate professionals and network marketers how to apply attraction marketing online and how to generate free qualified MLM leads on the internet. 

He is happy to give a free consultation for those having a serious interest in being an entrepreneur.  You can reach him toll-free at 877-878-4036 or by email at Scott.Hubbard3@gmail.com.  You can learn more about Scott by going to his blog at http://www.YourGuideToRetirement.com.