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Investing and Economics Blog

The Economy is in Serious Trouble

It doesn’t take much effort to notice the economic news is increasingly dire. And this is not just a few alarmist reports, the economy is in serious trouble. The decades of spending beyond their means (for consumers and those the consumers elected to run government) are creating a very difficult situation. And the credit crisis precipitating the current slide has brought to light many failures to properly regulate the economy. U.S. Slump May Be Longest in Decades as Growth Fell Off ‘Cliff’

The U.S. downturn will be the longest in three decades, and the drought in consumer spending may be the worst ever, according to economists surveyed by Bloomberg News.

The implosion of credit markets last month will cause the economy to shrink at a 3 percent annual rate in the fourth quarter and decline at a 1.5 percent pace in the first three months of 2009, according to the median estimate of 59 economists surveyed Nov. 3 to Nov. 11. Following last quarter’s 0.3 percent drop, the slump would be the longest since 1974-75.
…
Falling demand will cause an even bigger increase in unemployment than projected last month. Economists surveyed forecast the jobless rate will rise to 7 percent in the first quarter of 2009, up from last month’s forecast of 6.6 percent. The rate will climb to 7.7 percent by the end of 2009, the highest level since 1992, the survey showed.

The jobless rate rose to 6.5 percent in October, the highest since 1994

There is little doubt the economy is in for serious trouble. What investment moves are wise now is less obvious. I have been buying during the decline and continue to do so. I bought some Google yesterday at the same price I first bought Google for several years ago. I think in 10 years that will pay off quite well, but time will tell. My purchases of Google earlier this year would obviously have been better if I had made them yesterday than when I did.

I discussed the Economic Crisis on my Curious Cat Management Blog last month:

With personal finance I still believe the same smart personal financial decisions last year, or five years ago are wise today: avoid credit card debt, have an emergency fund of 6 months of expenses, save for retirement, have proper health insurance, don’t buy what you don’t need and can’t afford… The biggest change I see is that the risks of failing to do these things (and the risks of failing to have done them in the past) are increasing greatly.

One of the challenges with personal financial matters is they are by nature long term issues. What you did over the last 5 years cannot be fixed in a few weeks, most likely it takes years.

Related: Stock Market Decline – Bad News on Jobs

November 13th, 2008 John Hunter | 2 Comments | Tags: Economics, quote

Comments

2 Comments so far

  1. Google’s Energy Interests at Curious Cat Investing and Economics Blog on December 6, 2008 3:00 pm

    […] wisdom says they should not. I believe in Google more than the conventional wisdom. And I have been buying Google stock as it has declined the last 6 […]

  2. First Quarter GDP 2009 down 6.1% at Curious Cat Economics Blog on April 30, 2009 9:22 am

    First Quarter GDP 2009 in the USA was down 6.1%. This is after a revised 6.3% drop in fourth quarter of 2008…

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