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Tuesday, August 05, 2014
Look, I'm not trying to scare you here and I'm not implying it's the end of the world. The sky is not falling. What you need to know is that we're facing some very tough economic times ahead that will likely last for years. Europe is leading the wave and the rest of the world will fall like dominoes behind it.
Did you know that according to CNN, 20% of homes in Spain are unoccupied? 20%! Can you imagine just how long it will require Spain's economy to grow to absorb all that overspending? At a 2% per year growth rate for GDP, we are talking A decade. And Spain isn't alone.
Meanwhile, half a world away, China is sitting on a massive property bubble themselves. Just type in "China Ghost Towns" in Google and you'll find story upon story of cities created to hold millions of people that are sitting empty. You remember what happened here in the US in 2008 when our real estate bubble collapsed. We brought the world right into a global recession. Guess what is coming as Europe continues its collapse?
How Many Bubbles Can We Pop At Once!
You may think things are better here in the US. They are not. At a meeting a while back I heard David Walker, former Comptroller General of the US, report that our financial status is worse than every other European country except for Greece. As he put it, we are the ostrich having its head underneath the sand and a semi truck is coming directly at us. What's happening here and all over the world?
In my opinion (and David Walker's opinion as well), it all boils down to governments spending money they don't have. The boom times of the 1980's and 1990's made people believe that they could just spend more money now and earn more later to pay for it. When that all came to an end in the 2000's, you and I started scaling back. Governments did not. They actually accelerated their spending.
It doesn't take a genius to know that you cannot spend more than you have for very long before the proverbial economic "he**" breaks loose. We are there. You should expect many more years of economic turmoil as the entire world goes through various austerity programs to pay back all this money that has been already spent, yet not earned. We are seeing it in Europe, we'll see it in China, and we'll see it here.
It's simple math. You can't spend more money than you make for very long before it has to be paid back. And the payback period is painful. Expect very little from the markets going forward. Make sure your personal financial house is in order if you want to survive and thrive during the upcoming years.
Matt is an Investment Advisor Representative and the Chief Advisor of Aaron Matthews Financial Resources headquartered in Elk Grove, Ca. Simply click right here to learn more about Matt..