The U S gross domestic production contracted by 5.7% in the first quarter of 09
The World economy is forecast to contract by 3% for all of 09.
In a world of steady population increases, and a standard of living which has been improving worldwide for the better part of 20 years, a contracting economy is dramatic and dangerous.
In the U S , real estate values have been the savings account, which gave people the freedom to borrow and spend. Home equity was alway an easy loan in a market that increased steadily .
Retirement funds have been traditionally augmented by the cushion that our home equity provided.
The crashing real estate market has been a severe blow to our psyche.When the steep decline in Wall Street wiped out our retirement savings, we could no longer look to our home equity as an alternative hidden cushion.
Defaulting loans and home foreclosures has left many parts of the country looking like ghost towns, and the ripple effect has affected all aspects of our economy.
Every reported slight increase in pending home sales is examined with wishful optimism, but the sad truth is , any glimmer of optimism is fueled by short sales and foreclosures sold by the mortgage companies; most at a loss.
The economic recovery can not begin until home prices stabilize and begin to recover.
With the inventory glut of available homes equal to almost a full years supply, values are still falling.
Property values can’t begin to recover with the economy stuck in a cycle of higher savings and lower spending.
The stagflation which we have talked about many times, is getting a stranglehold on any recovery.
World wide, factories have a glut of excess capacity, built for the bubble economy, which is now deceased.
With the Democrats agenda of big spending and massive stimulation, the Treasury Department is running the printing presses on a 24/7 basis.
This excessive growth in the money supply has only just begun to trickle into the general economy.
This trickle will soon become a torrent, as the Fed hopes to pay back the $ trillions in borrowed funds with inflated dollars. The potential for this unprecedented money expansion to trigger a hyper inflation recalls visions of modern day Zimbabwe, and post WW I Germany. Both resulted in scenarios of wheel barrow loads of paper currency to purchase a loaf of bread.
If you depend upon a fixed income to survive, be very cautious.
More later