The Fragility of the Recovery

Nothing brings to mind how truly fragile this economic recovery is more than the news about Dubai. Now, because the debt in Dubai, the playground of the rich, has skyrocketed out of control, they are saying that the plummeting real estate values there, where they once could charge millions for even the smallest home and lot of land, and the fact that the debt has skyrocketed as well, could have very serious effects on world markets, which it already did the Friday after Thanksgiving when this hit the news. Not too badly though. I noticed some of my more fragile and volatile stocks did go down substantially, but my stable blue chips were fine.

But it’s not just the Dubai news and things of that nature, it’s also what’s happening here at home. It seems that we are constantly being warned that we are one news report away from the economy taking another nasty dive down to the level below. News reports that can harm the fragile recovery are things like consumer confidence being down, holiday sales being much less than expected, jobs reports being lousy, and other fun news like that.

Oh, and at least the housing reports have been coming in slightly rosier than they had been in the past, because that has at least added some sort of (albeit somewhat false) sense of security for those that are most skittish.

I still think that we will recover in the next two years at least mildly to where we see an improvement in jobs and a gradual steadying of incomes, but what of all the massive debt we have taken on as a nation, and the fact that China practically owns half of the US through the purchase of treasury bonds? There are many economists who think that the recovery will be greatly hampered by the fact that the US is largely under water to other countries and to itself with the massive deficits and debt we have taken on to unbury a lot of our financial institutions and prevent total and utter disaster.

The sad part is, there probably was no better way to do it, and since hindsight is always 20/20, we’ll never truly know what would have been the best decisions to make with the money we were given, it’s just going to have to do.