U.S. Economy is Barely Treading Water But There May be Positive Effects!

The US economy has been treading water for the past couple of years with conditions continuing to decline. Fuel costs and the foreclosure rate are acting as undercurrents. There are currently no economic indicators showing a light at the end of the tunnel. While this does not mean that relief is non existent, it is highly unlikely that conditions will improve in the very near future. These times may bring a sense of insecurity, however, they may also bring us as Americans back to a more conservative way of thinking.

As Americans we tend to live a bit beyond of our means. We have nice cars, decorated homes, stylish clothes and dinner at restaurants. We also carry credit card debt, second mortgages, home equity loans and save less than we should if anything at all. Due to the economy being so strained over the past couple of years and continuing to decline we are being forced into much more conservative spending habits.

Fuel Costs and the Foreclosure Rate are the two major issues on the forefront. Rising fuel prices are having a ripple effect. Gas prices are affecting overhead costs of businesses who are trying desperately not to pass this expense down to the customer. Trucking and delivery businesses are obvious examples but virtually every business is effected whether directly or indirectly, ie. the cost of suppliers go up for retailers.

We are being made aware of the rise in gas prices in all walks. Every individual, employer and place of business is being affected. It has a majority of us rethinking our spending and rerouting our errands! In an article written by Brian Carr in February 2008, he reported the results of a poll that asked “Have you noticed a change in your lifestyle due to higher gas prices?” as follows:

• 36% of people said that they have had to significantly reduce spending in other areas of their lives due to higher gas prices

• 32% of people said that they have not had to reduce spending or change their lifestyle

• 29% of people said that they have reduced spending, but haven’t made significant lifestyle changes

• 3% were unsure how higher gasoline prices have affected their lifestyle and spending habits

The foreclosure rate is the highest it has been since the 70’s. After a five year boom the housing market plummeted two years ago. People depend on their home as their major investment. In a time of need they were able to sell their home to help them get back on their feet. An estimated 15% of homeowners are finding that they now owe more than their houses are worth. This number is projected to increase drastically over the next few months. Furthermore, for most, the mortgage is the single largest payment they make per month and the percentage of mortgage holders who are delinquent in their monthly payments has also increased to a rate that is the highest on record since 1979. Homeowners are cutting back spending in light of the fact that their real estate investment has little to no current value.

A very positive result is possible to have a lasting effect even after the economy is back on its feet. A restored sense of financial conservatism is a plausible result. If you know any individuals who survived the depression you are sure to have noticed that he makes use of everything in his possession and purchases out of necessity rather than impulse. We as a nation were in desperate need of a reality check. Perhaps this period of time when we are forced to conserve, stretch a dollar and rethink our regular indulgences will help us readjust our wasteful habits.

The condition of the US economy is continuing to decline. Fuel costs and the disturbingly high foreclosure rate are major concerns. There are currently no economic indicators showing relief in the near future. These times may bring a sense of insecurity, however, they may also bring us as Americans back to a much needed more conservative way of spending.

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