A tidal wave of difficult economic times is rushing towards us. Its arrival appears to be inevitable and the preliminary effects are already lapping at our shores.
During the past twenty plus years, we have experienced two major economic bubbles. The dot com, and more recently the real estate boom, generated a great deal of wealth for a large number of people.
Despite the corrections and mild recessions, the economic cycle has been “livable". Most people's lives continue as before. The only things that change are the value of their “nest egg", be it stock, or the worth of their home.
I have a nasty feeling, that this time, it might be a little worse. The real estate bubble was intertwined with the sub-prime lending fiasco. Home loans were made on very loose criteria. Then, those questionable loans, in effect, were used as collateral for all kinds of other financial transactions...A veritable “house of cards"...
In addition, the high price of oil is adding a very tangible additional cost to everyone's daily budget. This is having the effect of a regressive tax, forcing some people to make decisions based upon the cost of driving .This can have psychological as well as economic implications and ramifications.
The price of gasoline is adding inflationary pressures through out the economy. Anyone involved in running a business, has long been familiar with the term “gasoline surcharge". Inbound... Outbound... Anything that has to move or be moved is getting more expensive.
Add to the mix, the falling value of the American dollar which has been on a downward slope for several years now. When the dollar's value falls, the price of commodities goes up. (Everything is traded in dollars) We make it very easy for the commodity traders and manipulators to push up the price of oil, wheat, corn, copper and any future's traded item.
If you have gone food shopping recently, or been to a mall, you know that inflationary pressures are happening now. If you go to work in an office, retail shop or a mall, you know that business has slowed down. The phone calls are less frequent. The foot traffic is reduced and the buyers are more selective.
The Fed has been dropping interest rates to help stave off that recession, but at this point, continuing to lower the interest rates will further weaken the dollar. This will cause commodity prices to go up, resulting in more inflationary pressures on the economy.
The American economy, for the past 100 years, has largely been dependant upon consumer loans, as its fuel. Buying on time, credit cards, auto loans, etc..., has been the grease that kept our factories rolling. Today, consumer loans are more difficult to obtain and interest rates are higher.
Consumer confidence is falling, along with the value of their homes, leaving people cautious and concerned. NAFTA is having the feared effect. Our jobs and our manufacturing is lost to cheap Labor, South of the Border. Anyone breathing realizes that we are in economic distress and getting worse.
There is a name for an economy that is in the initial stages of an inflationary jump, and, at the same time, drifting in the beginnings of a recession. It is called Stagflation and it isn't that much fun........ For anyone.
Higher costs... lower incomes... a shrinking dollar... all of our manufacturing jobs elsewhere.... More and more of our money sucked out of our wallets and sent to our enemies as oil tribute, so that they can afford to try to kill us...Sounds like a mess to me.
There is an unknown factor waiting to send this economy off into uncharted waters. I noted earlier, that the past 20 years have been economically bearable. We live in a world of plenty, a country of safety and comfort. We are used to personal wealth and freedom.
Even the bottoms 50% of us economically have a T V and are able to feed and clothe our families. Our standard of living is better than most of the rest of the world.
However, there is a whole generation of young adults that have never experienced hard times. Lines at the gas pumps... Inflation as a regular fact of life... Not being able to afford things.
Having to make and keep a budget...Middleclass teenagers having to get a job to help pay for things... How will people react to difficult times and hard choices?
There are no easy answers, just hard questions.
This article is an attempt by Keif Lewis, to explain some of the economic dangers and pressures that are beginning to strangle American society. With the help of presidential write in candidate Charlie Champion, he is struggling to change the inevitable disasters which are looming at our gates. To read more about the economic crisis and political blunders that are threatening to ruin the United States, visit http://CharlieChampion.com
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