Economic Downturn

If any of you follow the stock market, you know of the recent weeks' trouble over the looming global credit crunch and the collapse of the housing market in the U.S.. However, stocks are back up this week, and investors are beginning to call the crunch a simple bump in the economic road. Easy Parcheesi right?

Wrong. The current credit crisis is much larger than most people believe, and things arent getting better, they are about to get a whole lot worse.

Economic Woes

In history large years-long credit booms like the one we've seen in previous years have often been followed by significant market corrections (see: recession). While it is too soon to tell if the current boom will lead to a U.S. or heaven-forbid, worldwide economic recession, there will be significant financial bumps ahead. Lender's continue to have major financial problems, and jobs are starting to be cut in the industry. The credit crunch is particularly significant in the United States because so much of our economy is driven by consumption and construction, both of which could be harshly affected by the shrinking housing market. U.S. citizens still spend a significantly larger amount that they earn, and the collapse of free equity will have major impacts on consumption.

The big question is how much consumption will be affected, and how long the credit crunch will last. If not just homeowners but companies and corporations continue to have difficulty accessing capital to grow, this combined with a lack of consumption could lead to a major economic contraction.

Auto Sales

Job Woes

Additionally, dismal construction performance in the summer months prior to this will lead to major problems this winter, typically slower months for the industry.

Right now, honestly, I think we're in for a lot more "bumps" in the economic road, and unfortunately, the lower and lower-middle class will be the hardest hit.