Why it is imperative for you to cut expenditures,
pay off debt and save.
You do not have to be a worshipper of the evening news to know that our economy is in a world of hurt. But it is even much worse than what you might know or have been led to believe. The financial demise in 2008 was one of the worst on record. However, 2009 will be much worse according to many analysts and economists. Despite the continuous gloomy financial news in 2008, it is going to get much worse in 2009 and 2010 and perhaps for years to come.
Here’s a few reasons why:
· At last count, the Federal “bail-out” commitments and pledges exceed $7.7 trillion. You read it right, that’s “trillion.”
· The Federal budget deficit is topping $1 trillion/year. This is without all the bail-out obligations. This is absolutely unsustainable.
· The Federal trade deficit has been consistently running near ¾ of a trillion dollars/year for a number of years. That’s money that never returns to the U.S.
· Over 3 million homeowners will face foreclosure in 2008 and experts say 2009 will see a further increase.
· The much ballyhooed multi-billion dollar bail-out for foreclosed families has helped no one. Complicated regulations and high fees and the lack of interest and cooperation from lending institutions has caused the program to flounder.
· On December 16, 2008, the Federal Reserve dropped the Fed Funds rate (the key lending rate between banks) to a record low 0-.25%. They can’t go lower than zero. If this doesn’t loosen up credit, where can they go? Despite this and previous decreases in the Fed rate, major banks, financial firms and credit card companies are not following the Fed lead, but to the contrary are further tightening the credit market.
· According to financial experts, in 2009 there will be many more banks, major corporations and other firms failing and filing for bankruptcy. Unemployment will dramatically increase, the commercial real estate bubble will burst, personal debt will mount and consumers will greatly reduce spending due to tight or non-existent credit.
· Despite the Fed Funds rate dropping to zero, many credit card companies are raising their rates and reducing lines of credit by 30-40%.
· Many states and communities are facing insolvency or bankruptcy, the most notable is the state of California. At the end of 2008 there were 44 states facing budget deficits. For the next three fiscal years (2009 through 2011), the combined three year deficit for the 44 is estimated to be $350-370 billion. That is conservative. Further downturns in the economy could send those estimates skyrocketing. The six states not experiencing deficits are Alaska, Montana, North Dakota, Texas, West Virginia and Wyoming. To cope, many deficit states are looking at selling or leasing state-owned assets such as bridges, parks, zoos, toll roads, international and regional airports, etc. to the highest bidder. The problem: who has the financial resources to buy or lease such American assets other than foreign entities?
· To keep the country afloat the Federal Government has borrowed trillions from foreigners, including our avowed enemies (notably China and wealthy Muslim countries).
· Our infrastructure – bridges, turnpikes, tunnels, buildings, shipping terminals and virtually everything else are for sale by states and the Feds to the highest bidder from abroad to raise cash to stay afloat.
· Faith in the U.S. dollar has crumbled as it grows weaker by the day.
· An estimated $60-70 trillion in derivative securities that have been sold worldwide are about to collapse.
· Before all the new bail-out obligations, a financial analysis of the U.S. Government using GAAP (Generally Accepted Accounting Practices) determined that in 2007, with all its financial obligations, the Feds were indebted by $59 trillion. The U.S. is fundamentally bankrupt.
· Three major industries that drive our economy are experiencing the worst financial downturn since the Great Depression: Construction, Real Estate (both residential & commercial) and Automobile.
· The really bad news looking forward is this, that it’s all bad news.
The list of gloomy news is endless, but you get the point. The U.S. is in a world of financial hurt and it will take years to recover. Recovering depends on the powers to be in Washington doing all the right things and not make the situation much worse. They do not have my vote of confidence. Do they have yours?
There is good news – if we chose to seek after it. We can always pray and seek the face of Almighty God; repent of our wicked ways and He will hear our prayer and forgive our sins and heal our land (2 Chronicles 7:14). Combined with the resilient spirit of Americans that has been evident since America was first founded, anything is possible.