Lately there has been quite a bit of good news about the economy. The stock market is up. Housing sales volume is up. Corporate profits are up.
But I don’t think the economy will improve any time soon. The collapse in the housing market touched off the crisis, and I don’t think the housing market will get better soon. With rising unemployment, there are still way too many sellers. And, the majority of adjustable rate mortgages have yet to readjust. That will happen in the next two years. Therefore, over the next two years the housing market will be flooded with still more foreclosures.
What about another bailout?
Well, I suppose if Obama makes it possible for all the people who stop paying their mortgage to stay in their houses, then it may be a different story. But that may not happen. Public opinion is moving away from approving more bailouts. And, the consensus is that the results of the last one were disappointing. People are beginning to figure out that the bailouts benefited the owners and managers of failing businesses, at the expense of the people. Who wants that?
Another problem is that the bailouts may not have their intended effect. The $8,000 first time house buyer tax credit has caused many people to buy homes. The majority of houses purchased the the last year was by these first time buyers. But I don’t know if it is really a good idea to get people to buy into a falling market. Especially people who, in theory, did not have the resources to buy before the bubble.
No one can say for certain whether the economic collapse is over. For every person who says that it is over, there are others who say it is going to get worse. Each person has their reasons, and both sides are valid. The only real solution is to set ourselves up so that we can succeed financially, regardless of what happens in the economy.