Gloom and Doom: US Economy

Let's face it. We've been pretty lucky with our economy so far. But like the real estate, the bubble could burst real soon.

Part of that is due to the real estate market itself, especially in light of the the sub-prime mortgage crisis. There's a fair number of financial institutions in serious trouble now that the foreclosure rate is at all-time high. Home values (which were artificially high to begin with) are dropping, and entities such as local governments and school districts who depend on property taxes are hurting. Personally I'm glad that a lot of these fly-by-night mortgage companies are going under. Their morals and ethics are as sub-prime as the mortgages they pimped on the unwary consumers they victimized. Unfortunately, many are losing their homes because they can't get a mortgage they actually have to qualify for.

Oil prices are another big factor. Osama bin Laden has hoped that oil would reach $100.00 per barrel. Well, we're right about there (in fact, it has reached $100.00 briefly). Gasoline is at or near $3.00 per gallon, and $4.00 per gallon is foreseeable. All transportation - not just the family car - is affected, as well as our utilities. All of this translates to higher prices for everything. Some economists predict that $100/barrel oil will be a psychological breaking point for our economy.

The weakening dollar - which is affected by our trade deficit (including tainted Chinese goods), the wars, the mortgage crisis, and oil prices - is also a major concern. I work in an area that deals in foreign currencies, and over the years I have witnessed firsthand how the US Dollar is weakening. The Euro started out at about $0.88 to the dollar - now the ratio is turned the other way, but even more so. The Canadian Dollar is about the same as the US Dollar (and it has exceeded the US Dollar on recent occasions).

Ironically, oil prices which affect the dollar, are affected by the dollar. Saudi Arabia now fixes their price of oil on the dollar - they refuse to take a hit because of a weaker dollar.

The best remedy to this problem is to export more goods. Gee, do we make any goods anymore? Seems like all we have are goods made in China and serviced in India.