As the Euro Zone confronts a possible Depression with governments in Portugal, Ireland, Italy, Greece and Spain slashing spending and hiking taxes, lenders are facing huge write offs and are tightening credit standards and in some cases calling in lines of credit. This credit tightening is also taking place in Britain and in the U.S. where in the U.S. some giant lenders are calling in lines of credit or sharply raising fees and interest rates to small businesses. Small businesses are the U.S.'s job engine and if they don't prosper, neither will the U.S.
The result in these nations will be layoffs and non-hiring. As that happens, consumers will cut-back on their spending. In addition, people will buy fewer homes and cars and not spend lavishly on restaurant meals, jewelry, vacations and other non-necessities. Meanwhile, they face the rising cost of medical care and higher education. In the U.S., which has the world's biggest consumer market, 1 in 6 people now receive food stamps and/or go to food banks and that number will rise. Export giants like China, Japan, Germany, South Korea and Brazil are going to find fewer buyers for their products. What does all this tell us? That 2012 is going to be a very tough year wherever you are.
Please take protective action. Payoff or pay down your credit cards if possible and also if you can, set aside some savings for a rainy day for that rainy day is coming. If you have a home to sell, check with your local real estate professional but sell it now before prices drop further. If you have a car, boat or motorcycle or some other expensive item you no longer need, sell it now for its value is declining but its cost of maintenance and insurance are not. And at work, cross train and help others to do their jobs better, for these things will make you more valuable to your employer. Together we will eventually get through the brutal economic times to come but now is the time to take preparatory action and if you can afford to, please be generous with offerings to food banks and other charities.
Dick
To learn more, please see "Austerity Reigns Over Euro Zone as Crisis Deepens," New York Times (1/2/12) http://www.nytimes.com/2012/01/02/business/global/in-euro-zone-austerity-seems-to-hit-its-limits.html?_r=1&nl=todaysheadlines&emc=tha2 "Car Sales Fall Sharply In France and Spain - The Wall Street Journal" http://www.supercars.com/news/car-sales-fall-sharply-france-and-spain-wall-street-journal and "Bank of America abruptly severs some small business credit lines," Mail Tribune (1/3/12) (from the Los Angeles Times) http://www.mailtribune.com/apps/pbcs.dll/article?AID=/20120103/BIZ/201030303
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