6 Reasons Why The U.S. Economy May Never Recover

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6 Reasons Why the U.S. Economy May Never Recover

Commercial Real Estate

When questioning whether the U.S. economy may ever recover, look at whether refinancing obligations are coming due soon. If so, if the market for refinancing is still practically closed, we could be looking at a collapse. While its no news that homeowners are in big trouble with unprecedented amounts of foreclosures these days, commercial real estate properties with strong cash flows could start seeing a turn for the worse, meaning very bad things for the economy.

Adjustable Rate Mortgages

Is a big wave of Option A.R.M. resets coming? If so, is refinancing realistic for most homeowners, considering the drop in home prices? If not, were looking at an economic meltdown. When all of the Option A.R.M. resets happen, homeowners with these types of loans will be forced to either live with the higher payments or default on their mortgages. And if they default en masse, there will be a longer recession.

Global Food Shortages

Is the global food supply still on the brink of inadequacy? If it is and there is a major natural disaster, an upheaval in a producing country or a war in Asia, it could spell an economic crisis. With global food supply teetering, a shock to a major producer of almost any kind of food could cause prices to skyrocket as demand vastly outweighs supply. As a result, there could be a lot more problems for the economy.

Municipal Defaults

If a large state like California goes bankrupt, it could spell major economic disaster. If other states and cities rush to default as a result, it could mean a crash. A wave of municipal defaults would cause public works and spending to come to a screeching halt. After one or two major municipal defaults, other states, with no ability to borrow, will rush to default as well. Jobs, spending and growth would all decline at a rapid pace.

Runaway Inflation

If the Federal Reserve cant reduce the monetary base before all of that extra cash floods into the economy, prices could skyrocket. The Fed doesnt have a good history of reducing the monetary base before problems set in. If it doesnt get a handle on the current monetary situation before its too late, prices could go up in a shocking way. Many savings accounts would be rendered practically worthless.

Another Bank Run

If lenders and investors lose confidence in another major bank and people dont heed the lessons that the economy has already taught, then panic could set in. As unlikely as it may seem, if one of the major U.S. banks starts to lose the faith of investors or lenders, public panic could easily lead to another run on the bank. While congress could try to salvage things with more bailout help, the federal government doesnt have much ammunition left, and consumer willingness to foot the bill for another bailout will probably be nearly nonexistent.

So, whats next for the U.S. economy? Only time will tell, but lets hope the worst isnt yet to come.

Posted by: admin Tags: consumer spending, economy

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Rich

Nice graphic! I do feel more worried now though . . .

One thought, I wasn’t able to make the picture bigger on your website. I had to copy and paste it into another program to view it full size. The work is great, so make it easy for people to see!
Cole

This graphic needs to be resized.
David

I am not the brightest bulb, but for some reason the various graphs and articles are very difficult to read (blurry), and I do have my glasses on.

Thoughts?
Glenn

Picture squashed:

I’m sure others have reported this problem but running the latest Safari 4 on latest Mac OS x 10.5.7 all big pictures are squashed down so I can’t read anything unless I save the picture or drag it to my address bar. Maybe have the picture link to the actual .jpg so the browser can show it in the intended size?
bazzoola

you’re images are very difficult to look at. they are streched, squeezed, and impossible to read with normal eyes.
http://threefishlimit.wordpress.com/2009/07/14/6-reasons-why-the-u-s-economy-may-never-recover-visual-economics/ 6 Reasons Why The U.S. Economy May Never Recover – Visual Economics « Three Fish Limit

[...] 6 Reasons Why The U.S. Economy May Never Recover – Visual Economics. [...]
http://msog.blogspot.com/ M

I can’t read the chart.
Stan Gale

The graphic for 6 Reasons Why The U.S. Economy May Never Recover is compressed so that it’s not readable.
Tried this in Firefox as well as Explorer browsers.
Please fix it so we can read it!
Thanks
JLW

Maybe if I could read this this, I could comment on it. On my computer the article/picture, is blurry, just like our government.
http://whatsthediff.com Rebecca

I can’t speak for all the “tubes” on this inforgraphic, but the first two categories are unneccessarily alarmist.

I work in the finance industry and the truth is people are refinancing in record numbers. The market is far from closed. In fact, it’s quite the opposite. Rates are at their lowest in years and people are taking advantage of that to their financial benefit. Some property values do keep people from refinaning, but the govt bailout plan does have a provision that gives those that owe a little more than their home is worth a loophole, allowing thousands to refinance under nontraditional guidelines.

And yes, it’s true option ARMs are due to reset, but those people will also be sitting pretty when their 6% mortgage resets to the current rates, which are in the low 5% range. Anyone with an ARM resetting these days is in a very good position, as the Fed is keeping rates artificially low to consumers’ benefit.

These skewed facts lead me to doubt the other categories that I know less about.
Dennis

Greetings,
Your website of Visual Economics is just brilliant! Described some of the major challenges in a nutshell. However, please explain (illustrate) what will happen when people catch on that the Federal Reserve (cartel) is at the center of this economic superstorm and is responsible for the majority of their troubles. Please include all the bitter details; also include the FEMA detension centers in the scenario, if you will.

Peace
http://www.houseoftaaj.com Bagus

In some Asia countries, situation is not that bad. But surely they need to be careful monitoring the more developed countries since it affects their situation.
http://www.whatareyouwatching.uni.cc Television Spy

Perish the thought, but the housing market isn’t really stable or close it any time soon. They’re hoping to artificially restore the damage but honestly it’s in a state of very serious disrepair.

Houses were being sold way past their prime with bloated figures and real estate agents made a killing. They’re going to seriously suffer as a result now.
Steve

Didn’t see this one in the list but it is part of the reason why we are there. Companies are more worried about Quarter to Quarter numbers and the Global Economy rather than on the US job force and reviving our economy. Where is the social obligation lie with these companies?
Jeffrey Henderson

There are all symptoms of the real problem, fiat money and a privately owned central bank.

Having real money would fix all of this.
Ilverin

Can you please remove the ‘no’ option from the “Are people stupid?” box.
Dangerous Dave

The lesson here is:

1. Not only are economic projections subject to a host of unpredictable factors…

2. Even graphic representations of economic projections are affected by unpredictable factors.

A little voice is telling me that Americans must experience the true misery of a Jimmy Carter-like economic catastrophe to fully appreciate the value of the Ronald Reagan-style free market that should (one might hope) follow on its heels.

One can hope!
http://www.usbanksters.blogspot.com/ Graintradr

The Fed is at the epicenter of every bubble that has ever been created. They believe in intervention with either artificially low interest rates, or even quantitative easing, (printing money), to benefit the consumer as stated in the previous post. This happens even in smaller recessions as attributed to Alan Greenspan’s %1 Fed Funds rate throughout most of the 90′s, which he agrees, was a major contributor to the recent free-fall of our markets. Furthermore, he admits that the Fed is responsible for the bubbles that happen in our markets and the system can’t work forever as each time a bubble bursts, our currency takes the biggest hit, besides the loss of work and growth. Low interest rates is a form of money printing in our system. A question to Rebecca or anyone for that matter, What good does it do for a person who has an arm about to reset, if in a few years, or months even, if the purchasing power of their money depreciates. To me it offsets any gain one might have in saving on a mortgage payment, if the overall cost of living goes up? I don’t see the advantage. Nice chart at the top. Seems like a plausible scenario. The food situation scares me as with a cheaper dollar, those commodities become a heck of a lot more attractive to importers. Agriculture is our biggest export…..jeeez.
http://www.lifeaftertheoilcrash.net/ Aaron Wissner

Another item that could trigger a collapse would be stagnation or decline in global oil production, which, if the economy were on the road to recovery, would cause the price of oil to rise back towards 5-7% of GDP, which leaves much, much less money to service loans…

Not only may this recession not be close to ending, but this recession may never end, at least not until a new banking / money model is instituted, which can maintain price and employment stability despite a declining global availability of petroleum and other non-renewable resources.
C$

I can’t tell if this is serious. Is this a real graphic or some sort or satire? Please say it’s the latter. Rebecca, you are on to something.