Sunday, October 10, 2010


The goal here is to educate, not to scare.

Before you have a reaction to this post, keep in mind that there are two sides to every coin.  You want a 30 year fixed rate at 4.25%?  I'm sorry, they don't offer those rates when times are flush.

We are arguably living through the most challenging economic times since World War II.

Check out the job losses associated with the Great Recession as they relate to other periods (chart from Calculated Risk): 

Tracing back 33 months, we see that we have lost more than 5% of the nation's jobs.  The only recession that comes close, by comparison, was when we went through a national recalibration immediately after World War II.

Now the issue we all have to decide upon - anyone who plans to participate in this economy - is whether the graph of this recession is ultimately going to look like a V, some form of a U, or an L. 

If it's a V (and it won't be), we're going to come launching out of this recession any moment and it will all go down as a bad dream.  Too late for that - didn't happen.

If it's a U, and there's evidence to support that's the direction we're headed, we're in for a long, slow period of recovery that may never actually get us back to where we sat 33 months ago.  If you work, improve and focus, you'll come up with the curve.  If you don't, the bottom of the U may be where you stay.

And if it's an L, 10% unemployment is the norm (17% - 20% if you count those who have quit looking altogether), the stock market will continue to deflate and the housing market will stagnate for years.

Would it be worthwhile to spend some time getting educated on what's happening with the economy?  Would it be helpful to know if we're headed for a V, a U or an L? 

Having an informed opinion about where we're headed is the difference between finding amazing opportunities or throwing good money after bad.

I have said for some time that one consequence of the Great Recession is that we're all going to have to improve our skills, our work ethic and our level of commitment if we want to maintain our current standard of living. 

We're also going to have do a better job of educating ourselves about economics, because the recovery that's coming is going to reward those who understand it.