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March 2009 Online Archives

Tue Mar 17, 2009

The 2009 Economy:  Why We Should Worry

Here is a list of existing and potential situations that could cause the currency and equity markets, and ultimately the U.S. and World economies, to further destabilize. Be afraid ....

Military situations:

  • Iran's stated intent to become a nuclear power (translate as Iran's goal to develop nuclear weapons);
  • Iran's stated intent to wipe out Israel;
  • Destabilization of the Pakistani government and subsequent threat of an India / Pakistan nuclear exchange;
  • Potential deployment by Iran of missiles capable of reaching Israel and Mideast oil fields;
  • A potential for Israel to launch a preemptive military strike to "take out" Iran's developing nuclear capability;
  • Continued terrorism throughout the world with emphasis on the Mideast and Pakistan;
  • Expected North Korean test of a long-range missile capable of reaching the U.S. West Coast (and the U.S. response);
  • Sabre rattling by China as it jockeys for position as a new global superpower;
  • Basing of long-range Russian bombers in the Western Hemisphere (Venezuela and Cuba);
  • Potential for a terrorist strike on the U.S. mainland (threat low but increasing).

Economic situations:

  • An emerging financial crisis in Eastern Europe;
  • A new wave of home foreclosures due to rising unemployment (Mortgage holders are not eligible for foreclosure assistance if unemployed.);
  • A commercial credit implosion (similar to the subprime crisis and having a similar result);
  • A potential dangerous increase in credit card debt defaults (underway);
  • Restriction by banks of consumer credit (specifically, credit cards), including reduction to customers with good credit records (occurring now);
  • One or more major automakers going bankrupt (GM and Chrysler are on the brink.);
  • Credit defaults by U.S. state and municipal governments (The stimulus package has delayed this.);
  • Economic blunders by major world governments (highly likely);
  • A growing tide of protectionism (This has already begun in the U.S. and will grow worse.);
  • Continuing political infighting and partisan politics by members of the U.S. Congress;
  • Ongoing disputes between Russia and its neighbors over oil and gas pricing and payments;
  • Replacement of the U.S. Dollar with a new world reserve currency;
  • Potential refusal by China to finance more U.S. debt (unlikely due to its financial repercussions, but now being used as a threat);
  • A major U.S. natural disaster greater than Hurricane Katrina, perhaps on the scale of the Indian Ocean tsunami (unexpected and unpredictable);
  • A pandemic or major health threat (unexpected and unpredictable);
  • Unrest among U.S. citizens over the ongoing economic slowdown and increasing government spending and taxation (potential uncertain);
  • Potential runaway inflation beginning in 2010 or 2011.

Note that equity markets tend to "climb a wall of worry." However, when confronted with a fragile economic situation, markets tend to react swiftly and negatively to unexpected economic and political shocks.

Have I missed any situations? Are these enough to make you worry? It's important for individuals to know and understand the financial threats confronting us, our families, our Nation and the World. Comment below.

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Posted by: The Spidermaster on Mar 17, 09 | 4:15 pm | Profile

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