This, obviously, is my first post. I can't sleep after a disastrously bad day of flying, so here's what I was thinking while in bed. I don't even know if I will end up publishing this, but I want to get my thoughts written. Also, I'm not going for some beautifully written blog, full of poetry and consonance, so don't get distracted with my bad grammer.
What are our problems with the economy?
1) Unemployment - We currently have unemployment at 9%, a number that is most likely inaccurate (due to the terrible weather during January 2011, across the country, which prohibited hundreds of thousands of people from traveling - say to the unemployment line). My guess is that 2011 will be plagued with unemployment at 9 - 10 %. Additionally, underemployment is around what, like 17%? 17% of this country is not getting enough work. In order to have jobs, we need consumers to spend, which brings me to my next point.
2) Consumption - 2/3's of GDP is personal consumption. I believe this this THE most important contributor to economic recovery. If the people in this country decide to start spending, you WILL see economic growth. When personal consumption recovers, the jobs will soon follow. The problem, though, is that in order to get the people of this country to spend, the people need to have a job. So unemployment depends on consumption, and consumption depends on unemployment.
3) The housing markets - Both commercial and retail housing markets are the most depressed and dead industries right now. Housing prices continue to fall. Despite the overall positive economic news that we've seen in 2011, there has been ZERO improvement in the housing industries. I also think that there are millions of homes that have yet to go into foreclosure. If this is true, prices will continue to drop as supply for existing homes increases. So the retail housing prices, across the country, are down by about 30% from the glory days of 2006/2007, however the commercial industry is down about 40%! People don't talk about this enough, considering that the commercial real estate market is valued in the trillions of dollars. One of the more interesting things that I read in FORBES mag. is that despite these price troughs, the corporate lenders issuing these mortgages keep them on their books at original value (which for so many homes, is much higher than today's price). Most would agree that this is not a good thing.
4) The State and The Fed - Its not the fact that the deficit is out of control right now, its the fact we aren't doing anything to fix it. We cannot ignore a debt figure that is close to, if not beyond our annual GDP. Could you imagine having a credit card balance equal to a years salary? Im just saying. Guys and Gals, we will have to pay for this debt some way or another and that means taxes are going up! If you compare today's debt level to the debt level of around or near WWII, its nothing new. The problem here is that we don't have a WWII size project to help with production. We managed that debt level because we we're producing a far higher level of goods and services during WWII. Personally, I think that today's WWII should be cold fusion. If the U.S. was somehow able to rally, pull together, and isolate cold fusion, ALLLLLL of our financial issues would be gone; we could save the environment, and it would absolutely make the United States the most powerful and rich country in the world.
Addtionally, the states, taken individually, are broke. For some reason I think of the municipal bond market when I hear that. Could it be realistic that municipalities will default on fixed income debt obligations? Another thing we have to keep in mind is that as our states and our country maintain debt of this size, interest rates across the board will increase. Treasury rates (especially on the long end of the curve) will increase. A more extreme consequence is that the U.S. credit rating (S&P, Moody's) could be downgraded.
5) Weather and Revolution - because of these two, we have seen quite the scare in commodities' prices. Right now, I don't think anyone really knows where the price per barrel (of oil) will be in August of this year. On top of the oil fears, food prices are skyrocketing. Both bad weather and all the political turmoil in he Mid East are to blame. It's a bad problem for the U.S. but its a TERRIBLE problem for the emerging markets and developing countries across the globe. Now I'm not suggesting that it would be better to supress a revoltion for economic stability, I'm simply saying that there could be some bad consequences because of it.
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