With an economy that has been on artificial life support for the last five years, it looks like the government is finally going to pull the plug. We are probably going to be in for the ride of our lives on this financial rollercoaster and you may need a mattress to cushion the fall if you get thrown off.
Many of the benchmarks that are being considered to mark the need for the “taper” of stimulus to our economy may actually be false indicators of our true economic status. The jobless rate shows a decrease but is lead by an increase of part-time workers which is probably due in large part to the upcoming effects of the Affordable Care Act, many of which are probably as yet undetermined.
Artificially low interest rates are probably going to increase significantly and good luck in finding a bank that is willing to loan you money. Most banks are still fundamentally under capitalized and even with a rise in interest rates may be hesitant to loan money to the average individual who is likely to be reduced to part-time status in their job.
The low rate of inflation is also considerably inaccurate when you consider that food and fuel costs aren’t included in government statistics. It is hard to believe that the inflation rate can be considered to be under control when fuel prices have nearly doubled in the last few years and food costs are also significantly higher.
Let’s not forget about the significant increase of the number of individuals that now rely on some form of government assistance in order to merely survive. Many individuals have even dropped out of the workforce because the amounts of government benefits are greater that can be obtained from what used to be characterized as “gainful employment”.
The decrease in the median income of most families is not likely to improve, especially if they suddenly find themselves working part-time. A further reduction in income won’t offset the higher costs of individual healthcare that are also likely to occur. Unfortunately, it appears that our economy is still in a coma and has yet to wake up. It may turn out to be a very rude awakening for everyone.
Essentially, like any individual once removed from life support, you will be on your own and your survival will be at stake. It may be time to start stuffing the mattress to cushion the fall.
Staying above the water line!
Disclaimer: This is not to be considered financial advice of any kind and is only an opinion of this author.