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Critical warning number6

By Michael Lombardi for real estate investing | Feb 5, 2013

The United States is straining under the overload of swarming problems today. The main reason is the devaluation that its dollar is facing in comparison with other major currencies of the world. Many of its sectors are looking lack- luster with growth in them being almost static and sedentary since the financial crisis that paralyzed the nation in 2009. Well, this was to be expected! The number of rounds of quantitative easing that the Federal Reserve employed in order to provide monetary stimulus to the economy has been the main culprit. The following warnings are indicators of the grave situation in the U.S Warning Number1 The housing market is slowly limping back to normalcy, but it will certainly take considerable time for total semblance. For the time being it looks like a pale apparition of its once-robust- self. Warning Number2 Generally, the months of November and December in the U.S. are considered to be quite profitable for retail sales as they are the festive months and consumers tend to make more purchases. And when consumer spending is high, it bodes well for the good health of the economy of any nation. But the year 2012 was not so bright for the same and this is a worrying factor indeed!

The trend for higher consumer spending uplifts when the rate of employment of the country increases. When more people are employed, they have money which they can spend. But the rate of unemployment in the month of December refused to budge from the figure of the previous month of 7.8%; which also has remained almost constant since September (Source: U.S. Bureau of Labor Statistics) and the number unemployed too is unchanged at 12.2 million since November 2012. Thus the jobs sector is also in a tremulous state. Warning Number3 The monetary easing that has been mentioned above has been worth trillions of dollars. Instead of uplifting the U.S. currency, it has been the cause of its adversity; deeply affecting the appreciation of the U.S. dollar. No wonder then that liquidity has arisen and made the path smoother for the onset of inflation in the nation. And this is what is causing a big hole in the pocket of the common man. Warning Number4 Bigger holes will burn once the averted spending cuts that were delayed recently are again presented for discussions in two months time. It will be a decision concerning approximately $110 billion! In addition it is feared that many companies are thinking of forcing some of their employees to take a few weeks of unpaid leave and naturally this has contributed to a leading fear amongst the people; an insecure feeling, which cannot contribute to any positive statement with respect to the economic forecast of 2013 or to the growth of the gross domestic product. This is turn has impeded the consumer confidence levels and prompted a drop in the same. In December the level was 65.1; a drop by 6% from that of the previous month. Such a low level had not been seen since August 2012. This is a measure of the shaky faith and distrust of the common man on the U.S. system and in its inability to avoid the fiscal cliff. This is also significant as the growth of the gross domestic product becomes distressed because of the same. Warning Number5 With no spending cuts and with the increase in taxes, there is the expectation that only a little revenue will be brought in. The bigger issue is that of government spending associated with the budget deficit. And a staggering $3.9 trillion is the approximated addition to the same in the next ten years or so. Further, the economically stilted growth of high income nations of the world has forced the World Bank to degrade the economic forecast of 2013, which speaks volumes about the volatile conditions persisting in many nations in the world today.

It is not helped with the recent down-gradation of the forecast in 2013 for the global economy by the World Bank owing to the ongoing vulnerable condition of lack luster growth and extreme volatility faced by the high-income nations. Critical Warning Number6 With so many issues plaguing the United States, its once-leading manufacturing position has been taken by China. The U.S. does not have sufficient funds to see it cruise smoothly through the next recession. Its credit rating has been downgraded. With forty six millions depending on the Foods Stamps Program, the nation is certainly staring at depression in the face. The near zero interest rates that are being provided so that consumer spending can be encouraged need to be lifted sometime in the future. What, then, will be the scenario of the housing market, the rate of unemployment, the U.S. dollar and the economy of the U.S. as a whole?