Think the economic downturn is now only a temporary concern? Well, according to an authority on the history of financial crises—Carmen M. Reinhart, an economist at the University of Maryland—this country’s economy could suffer from super-slow growth and staggering unemployment for a full decade or more. This seemingly unending economic malaise remains a direct result of the collapse of the housing market and the economic turmoil that began some three years ago.
As a recent New York Times report explained, Ms. Reinhart’s paper (co-written with her husband, Vincent R. Reinhart, a former director of monetary affairs at the Federal Reserve) drew upon research she conducted with the Harvard economist Kenneth S. Rogoff for their book This Time Is Different: Eight Centuries of Financial Folly. “The Reinharts examined 15 severe financial crises since World War II as well as the worldwide economic contractions that followed the 1929 stock market crash, the 1973 oil shock and the 2007 implosion of the subprime mortgage market. In the decade following the crises, growth rates were significantly lower and unemployment rates were significantly higher. Housing prices took years to recover, and it took about seven years on average for households and companies to reduce their debts and restore their balance sheets. In general, the crises were preceded by decade-long expansions of credit and borrowing, and were followed by lengthy periods of retrenchment that lasted nearly as long.”
“Large destabilizing events…evidently produce changes in the performance of key macroeconomic indicators over the longer term, well after the upheaval of the crisis is over,” Ms. Reinhart writes. “Misperceptions can be costly when made by fiscal authorities who overestimate revenue prospects and central bankers who attempt to restore employment to an unattainably high level,” she warns.
If you don’t believe Ms. Reinhardt warning of continuing calamity with many financial leaders and policyholders as partly to blame, NYT also points to other economists who believe that consistent drops in inflation are causing economic deflation, a cycle of falling prices and wages, which could impact an already beleaguered economy in 2010.
So, what do these dire economic outlooks, conditions and trends mean for average families attempting to navigate their own uncertain financial times?
It means shoring up your financial foundation for the near (and possibly distant future):
Keep Your Day Job
While this may sound self-explanatory, doing what it takes to hold on to your job can be essential to keeping your head above water for the long haul. Working harder, longer, and even in multiple roles and jobs, is now the new norm of a not-yet-healthy economy. And, with one job available for every five people unemployed, if possible it pays to do what you can to keep your current paycheck.
Lessen Spending on the Luxuries
With back-to-school spending in full swing, and the holidays only months away, you may be considering some budget-breaking purchases. Take the time to reevaluate the essentials for your family’s budget, as well as more thoughtful gifts that may mean less wear and tear on your wallet.
Cut out Credit Cards
In addition to the traditional advice to stop using credit cards, in a tough economy it can also be a good idea to stop paying them. Spending hundreds, maybe thousands, a month on high interest consumer credit is money badly spent—funds that can’t be used to set up your savings for a rainy day (which in this economy could be “any day.”)
End the credit card cycle by joining the million Americans choosing bankruptcy this year, all to save themselves from another decade of debt. Your first step? Contacting a qualified bankruptcy attorney to help you regain control of your financial coffers, conquer creditors and get back on a better budgetary track—yielding all with the right kinds of support, information and insights during the coming years—come feast or famine. The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-888-234-4181, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.