Tough (Economic) Love | Mortgage Lender Atlanta

Peter Schiff wrote a compelling article spelling out the possible scenarios for the economy. I have linked to it above, and I hope you will go and read it. I think you will find it compelling; even if, in good Peter Schiff style, it is spelling out the worst scenarios and makes you shudder a bit.

After briefly recapping the subprime and credit implosions, and pointing fingers of blame where due, he asks if on a grander scale the US Government is not falsely propping up an economy of consumer excess? Then, if you accept that premise to be true, what would happen to immediately bring our economy to it’s knees – or put us on life support – if foreign governments stopped buying our debt in the form of bonds.

Well, admittedly it would not be pretty; and it would be painful.

But beyond Schiff’s facade of being Paul Revere in this whole economic mailaise, he, too, is an optimist. I think Schiff believes, as I do, in the American spirit which accepts adversity and grows stronger and flourishes from it.

If the worst in the economy is ahead of us, here’s what I would suggest:

Credit will tighten more. Right now if a borrower has decent credit, it is quite possible to get a very favorable rate on a home loan. That would change, largely due to the false lows in mortgage rates going away as the Fed would stop buying Mortgage Backed Securities.
Goods and services would escalate in price, due to inflation and the rapid constriction in free-flowing credit.
Many companies would simply have to shut down, and jobs would be lost.

If all of that happens, then there will be no more ‘keeping up with the Joneses’. Maybe we will focus on simpler pleasures in life, while shouldering the responsibility of rebuilding an economy based not of consumption, but on savings and industry. It would not happen overnight, but you would be surprised what a decade can do.

So, hope for the best and prepare for the worst. How? If you are in a position to purchase a home around Atlanta – do so now. Because home prices are down to the lowest levels in decades and long-term fixed mortgage rates are also at their lowest levels in decades. That will not last.

And, simplify your lifestyle. Cut back where needed in order to save and sock away more.

Peter Schiff would tell you to invest in Asian stocks. Fine. If you want, he probably has very good advice there. I say, there will be strong survivors in the US economy. More importantly, there will be new businesses and industries popping up, run by new entrepreneurs. Be nimble and ready to capitalize on those, as well.

No one said that being part of the greatest nation on Earth would be easy. Because a nation is made up of people, I believe that Americans will be just fine, and we will show our true colors as we – potentially – lead the world out of this recession and rebuild on a stronger, more solid economic footing.