The poor state of the United States economy is inevitably reminding Americans of the Great Depression of the 30’s. However, the conditions are not nearly as dire as most American consumers might be lead to believe by panicking news channels and a multitude of failing businesses. It will, in fact, get worse before it gets better. Nevertheless, denizens of the States will be relieved to hear that the unemployment rate dropped a tenth of a percentage point in March. Consumer spending also has increased, and even the GDP is showing glimmers of optimism as it rose 6% in the first quarter of 2008.
The housing crisis is a cause of alarm for many experts, because more people own their own properties. The cause of this is the sub-prime mortgage loans. With more homeowners, there are inexorably an abundance of foreclosures. When the mortgage loan industry had to respond to this by giving out loans to unqualified buyers, it takes an enormous toll on the economy. Some approximate that the total losses obtained from sub-prime mortgages can skyrocket to $400 billion US Dollars.
The consumer debt and low personal savings rate is the biggest concern. With consumers turning their attention away from true financial security, and focusing mainly on the appearance of wealth, debt is on the rise. Today’s rate of inflation is also discouraging savings. However, this so-called economic meltdown is not the end of the world, or even the country. Recovery will be easier with consumers who can use common sense to heal the ill economy. It is not the best it ever has been, but it is definitely not the worst.