The worst part of the housing decline is yet to come. Seasonality. I think that one word pretty much sums up what most optimists have mistaken for a resurgent housing market. There is the next tsunami of foreclosures just starting and have yet to peak (best guess – Summer of 2011), bank failures have yet to peak, the dollar crises is building, the true unemployment number is somewhere north of 20%. There will be no recovery on the backs of home owners for a long time to come. It will take many years for the housing sector to return to any semblance of normality.
Plus, The dollar crisis is building.
When it hits, interest rates will rise dramatically as the US struggles to finance its massive budget and trade deficits while the rest of the world tries to escape a depreciating dollar.
Since the spring of this year, the value of the US dollar has collapsed against every currency except those pegged to it. The Swiss franc has risen 14% against the dollar. Every hard currency from the Canadian dollar to the Euro and UK pound has risen at least 13 % against the US dollar since April 2009. The Japanese yen is not far behind, and the Brazilian real has risen 25% against the almighty US dollar. Even the Russian ruble has risen 13% against the US dollar.
What sort of recovery is it when the safest investment is to bet against the US dollar?
Much is said now about the state of the real estate market, the recent audacity by the fed chair, and how our dollar is being trampled on by the feds. Much is said about the lack of equity in homes and the lack of liquidity from the few available buyers out there. The economy is dead; all these foreclosures are ruining the state.
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In the end, the coming days, weeks, and months, it will become increasingly more important that The Federal Reserve and its policy makers in the government keep an eye on both Wall Street and Main Street. America is made of lot of little guys that make our economy run…… If the little guy has a problem in our economy, the Big Guys in our economy feel the pinch.
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As the Chairman of The Federal Reserve speaks about “Juicing the Economy” are we as Americans looking to what the long term will bring. If we keep making the dollar so easy to borrow as a short term stimulus to our economy are we not devaluating the current abroad making foreign products cost more to import?
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