Monday, January 5, 2009

Bright Future Ahead

Okay, you can stop laughing now. The future doesn't look to promising in this New Year, but there just might be something that won't be as bad as predicted like the housing crisis mostly manufactured by the media. It is true that the media inflated the market and is doing its best to pop the housing bubble at every turn. In some areas the housing market is going to suck big time because of all the overpriced McMansions, but in areas with more modest homes things will be about the same. Slow long term equity growth caused by paying off your mortgage is the only true home equity. That is awful hard to come by in the age of magically mortgage financing, but it is the way it has been done for many years. This flip the house and make a killing is pure insanity and needed to end. The era of 25% home appreciation is at end and for those who cashed in great and for the rest that played the game it is time to pay. This may be an end of an era, but it opens the door to reasonably priced homes and affordable realistic mortgages.

Another bright spot will be the Congress will be full steam ahead for good or bad. They will be moving (hopefully in the right direction) and enacting lots of legislation. I can only hope that the more moderates win the debate on a lot of the issues and keep the spending to a minimum. Obama wants to cut taxes $310 billion, but this makes little sense with skyrocketing deficits. We need to reign in spending and with that accomplished pay down the national debt and when that is paid off then we can cut taxes. I know a lot of people disagree with the idea of no tax cut, but it is only doing what all the experts say to do with your personal finances. You need to stop spending, pay off debt, and start saving for a rainy day (fund SocSec and Medicare). I don't know if it will happen, but it could and that is at least something to hope for this year.

As for the rest of it, I can't say that I am too optimistic. The military is going to take it in the shorts to fund a lot of the social programs. This could be both good and bad because the Generals need to focus on what is really important and not keep chasing after bogey men. We need a modern well equipped military, but we don't need super cyborg soldiers of the future, sure we could use a couple but at what cost. We might get a whole lot of government spending that will eventually bring this country back to the late 70's or worse the 30's, but I am not counting on WWIII to return us to prosperity. I have zero idea what is going to happen, but it sure is fun or not so fun to think about it. Planning anything is going to be very difficult because huge factors could completely rearrange the puzzle.

Enjoy the shiny new year and lets hear what you think is going to happen in the next twelve or so months.

1 comment:

  1. I agree with you about gov't spending and even more importantly controlling the money supply. We are heading for a hyperinflationary crisis.

    It's not going to happen. Bush has put into play an inflationary spiral which now will play out.

    Watch North Dakota. It is a State which never really recovered from The '30s. No big cities. Fewer people live their now than 1929. Really, look it up. They have farming in the East, ranching in the West and oil shale. Not too much debt, small government. Housing prices there are pretty stable and were always reasonable. If they come out of this OK, there may be hope for some of the rest of us. So far, they are doing pretty good.