Rich Sage Comparison of Economic Conditions: 1933 vs. 2008

Today’s economic situation, while serious, is minor compared with the financial collapse of 1933.

• That year, about half of mortgage debt was in default.
• On Dec. 31, 2007, serious delinquencies in the United States were 3.62 percent of all mortgages. That rate may rise a little more and top off early summer, but the rest of the year the trend will improve.

Although, the housing market will continue to go down in some markets, there are signs now that buyers are starting to step in and make purchases. In many college towns, the prices have actually held pretty steady or gone up!

More comparisons between 1933 and 2008…

• In 1933, the unemployment rate had reached about 25 percent.
• Compare that with 4.8 percent today or around 5 percent –It’s true that many of us have to hold down to two jobs or moonlight with an online income to make things work. In an economy that has expanded for 5 years a bit of a cooling period was needed. Now we have it.

However, for the educated with jobs that demand expertise, the times are never better. The global economy will keep burning ahead as more and more wealth is generated in the emerging economies.

• In 1933, thousands of banks and savings and loans had failed.
• The amount of annual mortgage lending had dropped about 80 percent, as had private residential construction.

At the same time, States were enacting moratoriums on foreclosures. Borrowers who were refinancing were two years’ delinquent on their original mortgage and about three years behind on property taxes!

The reason we’ll not repeat such events from 1933 are:

• The situation didn’t get out of hand as much as the doom-sayers had predicted.
• We are now living in a global economy –it’s true that the borrowing in the USA got out of hand. I talked about that in 2006, when NINJA LOANS were “given out” (NINJA LOAN: No Income, No Job, Here’s Your Loan!) and I predicted that in 2007 the “house of cards” would take a nasty tumble. Money cannot be created out of thin air. Those times are over, thank God.
• The US economy is not isolated as it was in 1933. As the dollar goes down, exports pick up greatly. I noted that Economists predict Boeing will sell 600 to 700 planes in 2008. They are nearly half way there after Q1! I think they will surpass 1,100 again. All kinds of exports will pick up greatly.
• Those companies doing business overseas, like NIKE and AAPL, will see a great influence of currency exchange benefits on their balance sheets. Additionally, when currencies increase in value, American made products are cheaper.

All these conditions are going to turn the economy around by the late summer, and things will pick up further as the election brings in new leadership. I have no idea “what kind of change” will take pace, but I have high hopes for a competent one.

While these market conditions “play out” and the economy regains it’s strength it’s time to evaluate your make money online success and plan to do much better when things rebound. Think positively and those times will be here!

Carpe Diem,

Rich Sage