The Economy has "Chronic Fatigue Syndrome"

The Economy has "Chronic Fatigue Syndrome." Everyday I am asked my professional opinion about the Economy, specifically the Credit and Real Estate Markets. Since I like analogies, I have been trying to find one for the economy that we can relate to. I believe the economy has Chronic Fatigue Syndrome.

The economy is just "plum tuckered out", with no immediate relief in sight, similar to the illness CFS. As you may know, CFS can plague its victim for its entire life. The prognosis of CFS is noted as follows: "Many patients do not fully recover from CFS even with treatment, and there is no universally effective curative option" (from Wikipedia).The faltering economy is being treated with all types of "bailout medication", and the underlying problem is not really being understood or curable in the short term. It is basically on life support, with the symptoms being treated. The real problem is not fully understood and as Sen. Harry Reid said, "No one knows what to do."

After carefully looking at all the factors involved,  I believe that the primary problem is obviously jobs, but that equally involves real estate which seems to be the foundation of this economy. Unfortunately, real estate feeds the economy, much to the detriment of the economy that it bolstered all these years. Remember that mostly everything depends on housing sales; tax revenue, construction jobs, legal jobs, home improvement, furniture, linens, kitchen goods,etc., etc.

Without real estate turnover, the economy really suffers. Here's the problem
1.) Breaks in job history precludes a buyer from getting a mortgage or loans
2.) No mortgage results in no real estate closings
3.) If there are no closings, none of the activity mentioned above will improve and the cycle continues to deteriorate.

Everyone--individuals and government alike--has relied on real estate activity and appreciation as an income source. Our "homes" were not homes at all, but were converted to ATM machines. Until real estate inventory starts to move the economy will drag and drag. As values fall further (and they will fall further) equity will vanish, never to be recovered.

I personally have buyers that can't purchase investment property because their stock portfolios have been cut and they have no cash for the required down payment.

The same concept applies to vehicles. A lack of jobs or credit issues results in no credit to purchase vehicles: and so it goes, all down the consumable aisle.  

Job losses are expected to continue according to the administration, which leads to bankruptcies which are now surging; and again no loans are available.  The administration has the economy on life support, but the problem is - The longer this drags on – The more jobs will be lost and therefore more people will become unqualified to get any type of loan.  

Credit is available, but everyday less people and businesses are qualified to get loans.  Add to this the fact that credit scores are dropping quickly, putting prospects in the sub-prime category, which now means higher interest rates, and the cycle continues to worsen. Small business loans are now available, but Banks are only lending to businesses that have revenues.  No consistent revenues means no loans closed or loans with higher rates.

This is a real Catch 22 situation and “Main Street” is caught in the middle. I even heard that “Plastic Surgery” and elective operations are being cancelled. Not even the medical industry is safe. Add to this problem that consumer credit cards that we rely on heavily are now at the maximum limits and the rates WILL go up to all time highs, forcing delinquencies, and subsequently lower credit scores and the cycle continues with loan denials and no economic movement.

Delinquency rates are quickly increasing. The court clerks are being overwhelmed with lien filings and even tax refunds are late due to lack of funds in Federal and State treasuries.  I think you get the picture by now. I believe we are not even close to the bottom and when we finally reach it, the recovery will drag along until the anchor shakes itself free and slowly is pulled to the surface. 

Unfortunately, I don’t have the answer to this dilemma - I really wish I did. If you have a suggestion, please post it in the comment section – What do you think?  Will it get worse before it gets better. 

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