“The people have spoken”. Not about the presidential election, but more importantly about their financial well being and our economic future. Consumer spending which makes up approximately 66% of our economy was well below forecast last week and represents the largest downward slide on record. The financial hangover has finally reached the US consumer as unemployment rises to historic levels and their is no end in sight to the implosion of domestic banks and businesses as the current lame-duck administration continues to forsake Main Street and hands out your tax dollars to “the chosen Banks” on Wall Street like a drunken sailor on shore leave. Banks don’t create jobs and now they don’t even lend money-their primary purpose for existence at the behest of the Federal Reserve and the FDIC and the reason the Fed chose to dump $350 billion of your tax dollars into the hands of Wall Street banking executives . Who are they? Just look at President Bushes’ speaking schedule next year and see who the hosts/sponsors are. This epitomizes trickle down economics that does not work. If you work as CEO of Chrysler for one dollar a year and Chrysler fails, you are fine because you are Bob Nardelli who resigned last year from Home Depot and left with $210 million in his pocket. But, if you are a 30 year auto factory worker paying the bills and saving a little of your $60,000 a year salary, you are out of a job. All of the jobs in your area are gone and you may have the bills covered for a couple of months. Then your house is foreclosed on, your unemployment kicks in, and if you miss a credit card payment your interest rate increases to as much as 30% and you begin to incur late fees and penalties as well. Or how about the small business owner who supplies parts or services to the factory or its workers with a home, a stake in the community and over $100,000 in small business loans that he/she can no longer pay because his/her business dissolved with the closure of a factory. *Meanwhile the bank that provided the small business loans and the credit card has received a portion of the $350 billion of your tax dollars for rescue purposes and the income of the bank employees, who received an average bonus last year of over $500,000 and are expecting bonuses again this year, will most likely not be affected.
I digress. My hope is that this represents a fundamental shift for the American consumer back to saving money and buying more of what you need with cash and not necessarily what you want. This could have far reaching overall positive effects on our economy. Some of which are already surfacing. State governments are now having to cut spending and tighten their belts because with less spending comes less state sales tax in states where sales tax is included in the retail sale of most every item. There are concerns. however. After all, most people don’t change. So the next credit card company, bank or auto maker comes up with a way to obtain more credit with less income and assets; we’ll be back to driving a new Mercedes Benz and living in a rented apartment because the home foreclosure has not yet dropped from our credit report. Let’s hope that we have learned our lesson and my last comment refers to a small percentage as it did in the past.
Continue to expect wild swings in our economy and the markets throughout the holiday season and well into 2009. As I have always said for those who have kept their powder dry and their credit score high, this is an outstanding buying opportunity in real estate with solid long term equity gains now that deflation and recession are present.
During these uncertain economic times it is imperative that our clients and colleagues keep their personal and professional finances in peak operating condition. Call the David M. Damare’ Team for a complete mortgage analysis and basic financial advice to ensure your short and long term goals are being met so as to secure your financial lifestyle.
“Mortgage Lending is Our Business: Customer Service is Our Passion.”
Stay tuned and stay in touch with your mortgage professional. Thank you for the opportunity to serve you and your clients. David. 919.851.0999.
* Associated Press. Ellen Simon. November 17, 2008. Also, CBS New November 12, 2008.