U.S. stock markets are surging because somehow our economic problems are behind us. Don't get caught up in this illusion for our massive problems are not being resolved and unless we as a people throughout the world change economic direction, the impact on us will be profound. These 5 brutal factors are confronting us:
1) The European Economic Collapse. It has already begun. European bankers and politicians tell investors the problems are under control even as they grow worse. For example, part of what drove up stock markets recently was the European Central Bank suddenly offering 3 year loans to help banks get through tough times. Unfortunately a mind blowing 523 banks rushed in to grab that money, yet in amounts not nearly enough to solve their problems.
To attract bond investors, European politicians are promising to slash spending and vital services and to hike taxes. In many nations their citizens will never allow it and mass rallies and strikes are already taking place. As the weaker economies are unable tor raise money and default on their prior financing obligations, their collapse will take down the economies of export driven powerhouses such as China, Japan, South Korea and Germany including their job markets, real estate markets and financial markets.
2) A staggering backlog of foreclosed homes with more to come. This will force housing prices and sales down and limit new construction while reducing real estate related jobs.
3) A job market on life support. In the U.S., Europe and elsewhere, many millions of people are unemployed or underemployed or no longer counted for having been out of work too long. And many of the jobs being offered are at lower wages than what jobs paid just a few years ago. This drains family finances and is bankrupting many families. This means millions of families are not spending big money on new cars, vacations and other luxuries that would have stimulated widespread economic activity.
4) Consumers buried in debt. Americans, Europeans and other consumers are choking on their debts, much like many of their governments. In the U.S. the government strategy is to build consumer confidence so consumers will buy foreign made goods they can't afford with money they don't have, all of it charged on their credit cards. To see what this silliness leads to, wait until consumers get the bills for all their Christmas spending and for those who did buy new cars, appliances and jewelry, the monthly payments and higher insurance rates.
5) Military spending. The U.S. is the global poster boy but many nations are also spending vast sums of money they don't have because military spending boosts employment and feeds the egos of political and military leaders, while scoring huge profits for military contractors. It is beside the point that it endangers the world and drains desperately needed resources from health care, including from the disabled, and from education, police and fire protection. We see it across much of the U.S. as even cash strapped states, counties and cities are slashing employment and much needed government services.
These are but 5 of the Mt. Everest sized problems confronting us. What can you do to protect yourself? At work, cross train and propose revenue generating or cost cutting ideas to make yourself more valuable to your employer. Outside of work, develop your income producing skills, whether with computers, electronics, cars or anything else that is legal and people will pay for. At home, slash your overhead. Sell costly items you no longer need such as an extra car, motorcycle, or boat. This might generate some cash and will get rid of monthly payments, maintenance and insurance costs. If you can afford it, pay down your credit cards. Those high interest charges alone will eat you alive.
It is human nature to be in denial of our problems hoping they will somehow go away. We all do it, as do our governments, which try to kick this ugly can down the road for as long as they can. But for us it is the time to act before the brunt of the storm hits. The good news is that economic crises are cyclical, people are resilient and they help one another through them.
Dick
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