Monday, November 26, 2007

The U.S. Economy: Trying to Guess What Happens Next - New York Times

The U.S. Economy: Trying to Guess What Happens Next - New York Times: "Economists have long intoned that somehow, some day, the United States will be forced to settle up and stop depending upon the largess of foreigners. The basic laws of economics say imbalances are eventually balanced. Some have warned of a worst-case scenario where the foreigners holding American debt get spooked that the value of the dollar is about to plummet and dump the currency in a self-fulfilling prophesy. This would jack up the price of imported goods in the United States, making it harder for Japan, China and Europe to sell their wares, and delivering a global recession. "

Much as I would like to believe that a gradual correction will take place, history doesn't bear it out. History shows us that things tend follow a boom-bust cycle. That is just the way it is. Things have been way up of some time and it is far more prudent to expect a sharp correction then a gentle one.

It is actually rather easy to get in shape for such a correction:

One gather all your income and assets and put it at the top of a spreadsheet or ledger.

Then list your debts and obligations under them.

Starting with your smallest debt pay it off and start on the next one up.

It usually only takes a few years to retire all debts if you aren't incurring new ones.

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