Finance

The Recession Backlash

Written by Emily Ferreira on June 27, 2008 11:27 am EST

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We’re all feeling the painful impact of the current economic recession in one way or another…. I mean gas prices are now high enough to make you feel sick! But what’s even more ridiculous is when you take a step backwards and look at the bigger picture. Looking at the 2008 recession from a macro-perspective shows just how many facets of human life are feeling a severe blow below the belt.Okay, so where should I start?

The US dollar has depreciated significantly over the past several months causing us, as consumers, to buy less and causing businesses in assorted industries to experience a decline in sales and an overall negative impact on bottom line. Consumer confidence is now severely threatened as job security poses a risk for a multitude of professions and the exorbitant prices of gas and healthcare coverage are just plain scary. We, as consumers, are feeling the pressure of an unsteady economy which is causing an immediate impact on our jobs and living conditions.

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The housing and real estate industry are facing numerous mortgage defaults and foreclosures on a daily basis as interest rates have sky-rocketed and property values have fallen by approximately 10 percent. This has created a domino effect which has consequently caused the multi-faceted construction industry –roofers, builders, engineers, architects, and the list goes on - to experience a drought in projects and clientele.

Outsourcing has become questionable. The question still remains whether outsourcing will prevail (due to cost savings) or become completely succumb to the diminishing economy? IT Companies in countries such as India, South Africa and the Philippines that offer cheap labor and that provide the majority of outsourced jobs will also feel the economic backlash.

Lending institutions, such as banks, credit unions, mortgage originators, etc., have tightened their lending standards and the diminishing dollar is causing credit to become a scarcity. Lenders are blamed for providing too much financial leeway in the past and now are forced to turn their back on borrowers. The scary part about this is that the average American household holds about $8000 in debt, that is, in credit card debt alone. Inflation is certainly not going to ease that problem!

Gas prices have caused companies such as FedEx and UPS to lose out on revenues and automotive companies such as Dodge and Ford are having a wheel of a time try to sell the larger, gas-guzzling automobiles such as trucks and SUVs. Sales are consequently suffering. Wholesale and retail electronics companies such as RadioShack and Best Buy are not so impressed with consumers’ financial inability to purchase the “extras” such as TVs, computers, video games, and so on. They are also seeing low numbers.

Okay, I will stop now….I’m sure you get the point. Just thought I would share my thoughts on the subprime crisis and the recession and bring reality to the table just for a moment.

On a brighter note, at least the rich are suffering too! LOL