Political Disputes

The U.S. economy, trapped in the iron grip of one of the worst housing recessions since the 1930’s, could be worse and likely will be before it gets better.  The current economic climate may look grim to the average consumer but the jobless rate actually fell .1% in March, consumer spending increased slightly and the GDP, though weak, showed growth of .6% for the first quarter of 2008.  That’s not great news, but it appears that the economy isn’t quite as bad as the average wage earner might think.

One concern for many experts is the housing crisis.  Because of the proliferation of sub-prime mortgage loans, more people than ever “own” their own properties.  As the number of homeowners increases, so too does the number of foreclosures.  The housing boom and subsequent rise in price listings attracted a record number of many unqualified buyers.  By lending money to such buyers, the mortgage loan industry took on tremendous future losses that affect the economy of today in an alarming ripple effect that will be difficult to overcome.  Some estimate that losses from subprime mortgages may eventually be as high as $400 billion dollars.

The main problem with the economy, however, appears to be consumer debt that’s run rampant in recent years and a personal savings rate that is the lowest since the Great Depression.  For some time now, consumers have focused on the appearance of wealth rather than true financial security.  As debt rises and real assets drop, the economy suffers proportionately.  The current inflation rate certainly doesn’t do much to encourage an increase in savings.

It will take some time and patience to recover from the latest economic setbacks but with a little common sense on the part of consumers, it may not be such a difficult recovery as some think.