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The largest developer in Dubai has notified creditors that he will not be able to make his payments when due. The economic crunch has even hit the seriously rich.
You may be wondering when the stimulus package will really start to shake things up here at home. That is a mixed response question. The stimulus spending is just starting to trickle out and its impact won’t really be felt for a few more months. Despite the Administrations claims of jobs saved (a tough number to substantiate) the stimulus bill hasn’t yet kicked in. Cash for Clunkers revved up the auto industry a bit but it may have been too little, too late. The housing credit program did the same for housing (re-sales mostly) but again it wasn’t targeted as broadly as it could have been. The extension that Congress passed will be broader and may be more helpful.
I wish that the politicians would stop the partisan nonsense and focus on what is really important to resolve the economic issues. Health care isn’t one of them. Housing, that is foreclosures and value stabilization, is the foundation on which the American sense of security are built. Until those are stabilized, the American consumer will stay frightened and consumer spending will stay depressed. Forecast for economic growth suggest that we could slip back into recession in the first quarter of 2010. That is not good news if you are looking for a job. On that note, now is a good time to go back to school to update your skills whether you are working or unemployed, so that you are better prepared for the future.
Unemployment predictions are that it will remain over 10% through June of 2010. The last time unemployment was this high was in September of 1982. It stayed there for 10 months then took until June 1984 to decline to the low 7% range. That was a period of nearly two years. Looking forward we can expect that we won’t see significant job growth for a similar time frame. That would put us somewhere around June of 2012. Remember 7% isn’t where we were before the financial crisis hit. We were below 5%. It took until March of 1989 for us to get down to 5%. Based on that, it may well be 2017 before we get there again.
The US dollar is falling in value against many currencies around the world. The most common comparison is the Euro, where the dollar has sunk from parity (one for one) to US$1.50 per Euro. That is a 50% decline in purchasing power. Looked at the other way, it makes US produced goods and services much cheaper on the world market. That should be a good thing for the export community and the balance of trade (fewer dollars flowing out and more of the other currencies flowing in).
The stimulus bill that was passed last year was tail end loaded, meaning that a lot of the spending won’t occur until 2011 and 2012. That, coupled with the normal recovery of a free market may accelerate the job growth. If it accelerates too much we will have either runaway inflation or we will have a credit crunch that will rival the one we are currently clawing our way out of (remember the 1970’s wage and price freezes and the 1980’s 16% mortgage rates?).
So my message is the same as it has been. Hang on were in for a bumpy ride. Save your money, invest wisely and remember the old adage, “waste not, want not”.
