There is an old saying that I learned from a teacher of economics and it goes like this; As America goes, so goes the world. I think that it is poignant to point out that since the Credit Crisis started in January of 2007, the U.S. economy has been in a slide. This downward spiral precipitated a weakening dollar, which in turn helped to hyper inflate the already increasing per barrel price of oil and the rising price other 'dollar denominated' commodities.
As third world economies evolve into the next higher tier and as second world economies grow into the first tier, their appetite's for fossil fuels and raw materials has grown. Soon other countries and nation groups like the EU will be in direct competition with America for the title of the world's largest consumer. This rampant consumption of the world's natural resources is causing a cycle of inflation that can no longer be constrained by the actions of our Federal Reserve Bank or the Central Banks of other nations.
So while the future of economics for the world is unpredictable, one factor continues to hold true. The economies of the largest nations on this planet follow what happens in the U.S.A. Just a little over 2 years ago, our economy hit its zenith. We had a meteoric rise that started approximately 8 months after 9/11/2001 and we continued substantial economic growth for almost 6 years before the credit crunch brought us to a screeching halt.
Beginning in March of 2008 our economy was brought to it's knees. In 5 years from now, when all the data is in and analyzed, many economist believe that history will show that our economy has been in a full blown recession that may have started as early as January to March to of 2008. They also believe that the catalyst to get the economy moving again may be the Federal Governments decision to take over the mortgage behemoths, Fannie Mae and Freddie Mac.
Today the EU reported that inflation is on the rise and that economic growth in the EU Zone is slowing. The EU Central Bank believes that Germany, Spain and Great Britain are in or will experience a recession this year. France and Italy will stagnate and inflation for the zone will remain at almost double the 2% target.
These reports are very timely and they follow a pattern that has been true for many, many years. I take some comfort from all of this. While it appears there is turmoil in the market place (and believe me, I agree that there is), there is also the return of some underlying fundamentals that is very promising.
While the stock marke is still very volatile, the price of oil and other commodities is starting to drop. The bond market is starting to act in a more stable and normal fashion. The spread between the yield on U.S. Treasury Bonds and Mortgage Backed Securities has started to narrow. All of this bodes well for our economy and creating the stability that is necessary to bring us out of the current economic cycle. The final sign of good news is a strengthening dollar. Hallelujah!
So take a deep breath, start making your plans and get ready to go! Because as our economy starts to claw it's way back, there will be loads of opportunity for independent thinkers and entrepreneurial minded risk takers in the very near future.
Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please contact Mr. Gross on his direct line at 770-350-7373 or via email at mgross@dividendamerica.com
