Not that I need another reason not to buy a house right now, but the housing market is dropping like an anvil in looney toons, and it doesn’t show any signs of slowing up in the near future. For the first time in quite sometime, I am worried about the future of the economy and my investments. As an investor, the continuing drop undermines consumer confidence as well as the confidence of those countries that have supported our debt (China anyone?). Even if houses continue to fall in price, who is going to be able to buy them with credit being as tight as it is?
I’m never a doom and gloom kind of person, an optimist by nature, and so these sort of notions I can usually shrug off and chalk up to people worrying/complaining about everything. This feels different though..because it seems the pieces are lined up this way. The average consumer is overspent, with a negative savings rate since 2005. On top of this, our government has run up the largest deficit in history. Both of these things are unsustainable, sooner or later someone is going to say “You know what? You can’t borrow anymore” and call the tab. What happens when this occurs? Likely a recession, possibly a depression, but it is impossible to tell from here.
With the value of a dollar also falling like a rock, it is a tough decision as to where to invest. What good are government securities if the currency backing them is constantly worth less? As a response to this possible (note: not definitely going to happen) scenario, I’ve been looking into my options. It might be time to store some Euros and invest in some gold.
In times like this, it is all the more important to keep your finances in order. My emergency fund is that much more comforting.
-Xias