Tomorrow Is Dawning
"Opinion"08/25/2010
Paul Munnis
Good economic news is quietly building but not without pain.
American credit card debt, bad loan debt, and foreclosures are being zeroed out thus acting to clean up the economic profile of many American citizens and putting the economy in a strong position to exit recession.
When an individual loses his home then that debt is wiped out. When a bad debt is resolved then it comes off the books. When a credit card balance is paid down then the individual has resolved their debt and has strengthened their personal balance sheet. We have posted a story today that the credit card debt in America is at a level not seen for 15 years. Home foreclosures are slowing and so are job losses slowing. In a sense the splatter from the housing and Baby-Boomer bubble having burst is starting to get absorbed by the economy.
The result is stronger individual balance sheets.
As Baby-Boomers sell off their homes and prepare for retirement then we are seeing a further debt reduction as they move towards paid up housing. All in all, Americans should exit this recession in a strong position for the future. Savings should rise and debt should drop as a result.
It is starting to dawn on young home buyers that there is a buyers market, lots of properties, good prices, low financing. But good credit is mandatory and so is a good job.
Fortunately our younger generation has done a lot to prepare themselves for the job market; we have a solid group of college trained workers now applying for work and there is a long line of qualified workers coming on behind them.
As Baby-Boomers ramp down and a new generation of workers ramp up, then there will be a worker shortage filled by technology used to raise American productivity and thus close the gap. That is what we are now seeing. The future for American competitiveness is looking up and the awareness by Americans on the need for an improved public school system is also helping.
The recession is doing its job, forcing people and businesses to balance their budgets and to use credit responsibly, forcing people to think about tomorrow, and redefining the way in which personal wealth is created.
People are adapting to their new economic circumstances.
I doubt that the go-go days of real estate in America will return yet I don’t think that the industry is dead either. It’s just that the days of buying real estate as an investment then flipping it for a quick profit is over with. The days of buying a home and living in it for many years then recovering all of the costs of that house are over with too. Americans can no longer live virtually rent free.
Reliance on real-estate profits for retirement wealth was yet another mistake as was reliance on the stock market as a savings bank. These bitter lessons have been learned the hard way.
The stock market is also consolidating as investors adapt to the new economy.
Economists can say what they want but inflation is building and we can see it here on Main Street as local government mutters about needed tax increases, as the State talks about higher taxes, as the cost of utilities and services climb, and as people and families living on fixed income feel the pinch. Can inflation be far behind when the talk is of increased taxes? Businessses pass those tax increases along in the form of higher prices.
With wages frozen it is not just senior citizens who are living on fixed income – it’s also middle-class America.
Yet there are counter trends too – the forces of disinflation are at work to contain retail prices yet food shortages are resulting as this summer leaves behind flood and drought damage across the globe. It’s pretty hard to forecast the future with certainty but better individual balance sheets for Americans is one good sign of what lies ahead and permits us to face tomorrow with strength on our side.
Hopefully once this mid-term election is past then Congress will settle down and get back to a pro-American agenda. We need to choose our Representatives to Congress wisely.
This is an important election