My article talked about the “perfect storm” in terms of what the auto-industry was experiencing in the credit markets, but that is probably more apropos of what is going on in the economy as a whole. Housing is suffering, retail, including auto, is suffering, and jobs are being eliminated at an alarming rate. Most troubling – these are not short term problems and even with a new president these aren’t going to be resolved over night.
First a little history, the phrase “perfect storm” originated with the 1997 book The Perfect Storm, and was cemented into most minds by the 2000 movie of the same title which starred George Clooney. The phrase the perfect storm refers to the simultaneous occurence of events which, taken individually, would be far less powerful than the resulting combination of events. Such occurrences are rare by their very nature, and any slight change in any one event would potentially lessen its overall impact.
Fannie Mae and Freddie Mac are offering early holidays gifts to Americans on the brink of foreclosure. It was announced today that both lenders would put a temporary halt to foreclosure sales and evictions of occupied single-family homes during the holiday season. Probably makes a lot of sense considering that this is the real estate slow season, anyway.
Experts are predicting that there will be somewhere between 3 and 5 million foreclosures next year alone. These figures amount to somewhere between 8,000 and 14,000 people evicted from their home every day. This is obviously not a small problem and with the continued acceleration of foreclosures it is very unlikely that it’s going to get better any time soon. Something has to be done; the situation has gone from bad to worse and the world economy is now free-falling into a global recession unlike anything imagined before.
I’ve already expressed that Henry Paulsen is not able to help the economy and I believe that time will show he prolonged and worsened the problems that he/Goldman Sachs helped create. I’m hopeful about Barack Obama coming into office because I believe that the world needs change and hope to empower the average citizen to help with improving the economy – to help the consumer believe. Unfortunately, I don’t think that Barack Obama will be enough and that’s where I believe the United States (and the world as an extension of the US) needs a bailout/stimulus plan that helps stabilize the markets while simultaneously improving consumer confidence. Some components should include:
Amid increasing turmoil, the financial sectors continue to get battered with ever worsening statistics, facts, and losses. Even once steadfast companies like Citigroup are seeing lines of of defaulting homeowners looking around for help and their share of the bailout. In what may be good news for some of these homeowners, Citigroup has announced that they are putting a temporary moratorium on foreclosures for all clients who are willing to work in good faith to restructure and repay their mortgages.
Some experts contend, and I would assume that they are correct, that the 158 year old Citigroup is simply postponing the inevitible if things don’t change in the economy as a whole. Of course, it will curb the ever increasing number of foreclosures, but until the underlying problems get resolved its impossible to know what the long-term benefits of this halt will be.
The stock market volatile – imagine my surprise – but a recently headlined article on Marketwatch.com reminds us that consumers think it’s going to get worse. Of course consumers think it’s going to get worse – the media keeps telling us it is going to get worse. Even good news is buffered by some footnote as to why this is an exception to the bad that’s yet to come. And if the media tells enough people, and talks about it long enough, eventually the American public begins to believe. After all, if it can work for presidential candidates like John McCain…
So is the economy bad? Yes, it’s terrible. This is the worst thing that could have happened to America at the worst time. It’s caused market upheaval around the world and some analysts think that it would be worse right now if we knew what to look for. Fortunately, or not, depending on your view, the Wall Street shenanigans are as difficult to unravel as they were successful in their profiteering during the good times. But, the media is missing something very important – we, as people and as a country, will recover. And if history serves as a measuring stick, we will recover relatively quickly.