Reality check
Since last year, there have been serious indications of a severe recession. In 2008, the eternal optimists of 2005 – 2007 could no longer call the weakening real estate market and underlying economy just a pause in the never-ending
growth of the economy. In 2006, the chief economist for the National Association of Realtors, David Lereah, was often quoted as predicting a continued run of real estate appreciation. He even wrote a book that year called “Why the real estate boom will not bust – and what you can do to profit from it.”
In promoting the book, he was quoted as saying: “We are experiencing a historic wealth-building opportunity, says David Lereah, chief economist for the National Association of Realtors. As Lereah has predicted, the double-digit appreciation boom-far from a real estate “bubble”-is winding down to a healthy real estate expansion that will keep the long-term fundamentals for housing strong into the foreseeable future.” In October of that year he said ““Considering that existing-home sales are based on closed transactions, this is a lagging indicator and the worst is behind us as far as a market correction – this is likely the trough for sales.”
Who is today’s David Lereah? We have heard about “green shoots“, and other optimistic projections. Especially over the past 30 – 60 days, it seems that the flood of bad news about the economy has subsided. Well, in relation to the 6 months prior to that, it has. The problem is that the underlying, fundamental problems have not changed.
The nation is still deep in debt at every level. Individuals, businesses, states, and the federal government itself are all 
leveraged. The outward appearance of an improvement may be an illusion. In fact, some mainstream news reporting is asking this same question. A Reuters financial article today is saying that investors need to “face up to their losses inflicted by years of reckless lending and spending.” The news service observes that many are still in denial are failing to cope with the bitter reality that property values and the price of debt are unlikely to see 2007 levels soon.
“They don’t know when will banks will learn to trust borrowers again or what is going to happen to their local or global economy. This is causing widespread price deferral and will take some time, maybe even years to resolve,” Howard Roth, global head of real estate at Ernst & Young, told Reuters.
Until investors find reassurance, this stalemate in the global property sector is destined to prevail.
In a separate piece, they note that the market is having “second thoughts” about the concept of a recovery taking place. “Markets have woken up to a world where a lot of the ‘green shoots’ arguments are starting to look very questionable,” said Citigroup technical analyst Shyam Devani in London. “The market is uncomfortable and price action is beginning to reflect that.”
Bloomberg news notes that any recovery in housing is an uphill battle, stifled by foreclosures and unemployment, neither of which show signs of abating. “Clear signs of a recovery have yet to emerge, and job losses and the steady stream of foreclosures are keeping many markets under pressure,” researchers for the Cambridge, Massachusetts-based center wrote. “Sales of both new and existing homes continued to struggle to find a bottom.”
When the United States worked its way out of the Great Depression of the 1930′s, it had the following important factors in its favor:
- A culture of citizens with a “get-it-done” mentality, accustomed to self-sufficiency and adversity after decades of living a life of daily struggle to survive in a depressed economy, without modern conveniences.
- A blossoming manufacturing capacity, producing goods needed around the world.
- The challenge of a World War, and the patriotic pride to dig in to prevail against national threats.
- Very little national debt, and almost zero consumer debt.
Each of these things individually were critical factors in motivating the country as a whole to produce our way into greatness. Indeed, merely 20 years later, the nation found itself in the 1960′s as a world leader in industry and national strength. Together, these 4 factors were the cataylst to make that happen.
To extracate ourselves from this current challenge, we will need to find strength or advantages in other areas, as the 
the current consumer-minded mentality of modern society largely does not appear ready to roll up their sleeves and do whatever it takes to make the country as great as it can be.
Even those few who are ready face the challenge of not having resources to compete in the world economy. The nation has few products to offer the world. Most manufacturing has long been exported to mostly the far east, and the remaining auto production is a paper tiger at best. Our expertise in managing financial mechanisms has proved to be inferior, and the banking and finance industry exists in name only. We have some natural resources, but they are small in quantity compared with the rest of the world, and we are not yet anxious to go after what we do have.
At the same time that the United States is paralyzed by the current crisis, other countries are charging ahead. The 
countries of eastern Africa have just installed broadband internet. At the same time, China is surging with growth. The nations capital spending is increasing, and soon will be larger than that of the US. China has a substantial obstacle to overcome due to its decreasing export business, mostly because of the western recession. However, China, Russia, and even India each have certain windows of opportunity to claim global dominance over the next 20 years.
At the inaugural meeting of the BRIC nations, The Economist noted that the largest emerging markets are recovering fast and starting to think the recession may mark another milestone in a worldwide shift of economic power away from the West. Estimates for their national incomes in the first quarter were better than expected. In the year to the end of March GDP rose by around 6% in China and India. The two accounted for no less than half the world’s increase in wireless-technology subscriptions in that period.
What job does America want to have in the world economy? Right now, most of the world needs little of what we have to offer. We can only sell stuff to each other within the country for so long. We still have a head start, but in the race to world leadership, there are new competitors on the heels of the US.
[...] http://awarebrain.com/2009/06/23/reality-check/In 2006, the chief economist for the National Association of Realtors, David Lereah, was often quoted as predicting a continued run of real estate appreciation. He even wrote a book that year called “Why the real estate boom will not bust … However, China, Russia, and even India each have certain windows of opportunity to claim global dominance over the next 20 years. At the inaugural meeting of the BRIC nations, The Economist noted that the largest emerging markets are … [...]
» Quick Roundup ashleyredman said this on June 23, 2009 at 3:06 pm |
[...] gone. Industrial production, mining, engineering, and even technology has largely moved offshore. The reality check which the county must face is to consider what job we want to have as a nation, and what we wish to offer the global [...]