gloomy financial forecast

Posted on July 7, 2008

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US banking system is doomed (thank you for the link).

Last One Left, Please Turn Out the Lights

Considering the recent huge increases in fuel and food prices, and the ripple effects on the price of everything else, it is surprising that the Federal Reserve has yet to raise interest rates (which would strengthen the falling dollar). Inflation benefits debtors; the USA is a debtor nation and the financial services industry is a debtor sector, which may explain the Fed’s slowness to act. When interest rates finally do rise it may be just the push that results in the financial sector’s complete collapse, and that could set the current recession into a downward spiral that will turn into an economic depression. For anyone wishing to place a bet against the financial sector the ETF (electronically traded fund) ticker symbol is SKF (UltraShort Financials ProShares).

Up to now NYC’s home prices have barely felt the downturn experienced elsewhere, and in Manhattan prices have actually risen buoyed by foreign buyers taking advantage of the weak dollar. But when the financial sector collapses the effect on NYC’s real estate market will be ugly for sellers and home owner’s and provide an entry point for first time buyers who had been previously priced out and manage to remain employed. Maybe it would be wise for Shoshana and I to sell our apartment, rent, and wait for prices to fall, but we have to live somewhere, and we like our apartment, neighborhood and community, so we’ll stay put and ride it out.

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