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Financial & Economic Crisis: Are We at the End of the Beginning, or the Beginning of the End?

Economics / Recession 2008 - 2010 Apr 27, 2009 - 12:16 AM GMT

By: Kevin_Geary

Economics "Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." Winston Churchill —at the Lord Mayor's Luncheon, Mansion House following the victory at El Alamein in North Africa, London, 10 November 1942.

Are we at the end of the beginning, or the beginning of the end? When I look at all the economic data from various countries around the world, it really is difficult to determine whether we are truly seeing the beginning of a turn- around or the beginning of a further collapse. Russia, the UK, Ireland and Japan are virtual "basket-cases" for instance, any one of which could easily go completely bankrupt, like Iceland or Argentina.

If you are one of the many recently unemployed, and there are now millions of you, then it is difficult to see any light at the end of the tunnel. If you work for the Auto industry, then you are simply awaiting the inevitable bankruptcy, and wondering what you will do, and if there will ever be a turnaround or upturn in demand for any new cars ever again, as the figures go from bad to worse.

If you are a German industrialist, you apparently are beginning to feel optimistic again about future sales and demand, yet if you're a Japanese industrialist, you are wondering if there will ever be a turnaround or any return to demand for your goods.

And if you're an investor in the stock market, you might already (if you were savvy) have made 300-400% return on buying the knocked-down financial stocks over the last 6 weeks, but are now wondering if you should take your cash and run, or wait on the sidelines, or jump in with both feet and fully invest, riding the upward curve.

But the fact is that we are in a period when the only certain thing is uncertainty. Just when things seem to be improving, like a modest uptick in housing sales, the following month produces an even bigger drop than the month before the one month uptick. Consumers are being squeezed, especially by the banks who are making credit card users' lives miserable just when they most need help.

Small businesses are still finding it virtually impossible to get even small loans. As one friend said to me recently, who has a small business, which is still successful here and who has great credit and payment history with his bank, "If I want to borrow $1,000, which would have been a simple signature loan just a year or so ago, today, I have to almost deposit a blood sample with the bank! And they've known me for years, and know I'm a great risk. And they're a smaller bank. It's become a nightmare!" This could be said by thousands or millions of businesses throughout America.

A mortgage broker I know has said that it's still virtually impossible to write new mortgages, even to fully credit-worthy clients, and even when he does get an approval, there's a 98% chance that the bank will rescind the decision a few days before the closing.

Wealthy people I know are hardly spending any money at all; some still-employed people are buying up bargains, providing that it doesn't cost too much, and they can pay cash. And the few houses that are beginning to sell here, in Sedona, are largely being purchased at knock-down prices by people with cash, who don't need a mortgage.

So, whilst there are some signs of modest recovery (depending on where you look), it's just as easy to see signs of more impending doom (the coming massive credit-card defaults, for instance) and so it's almost impossible to determine whether we're at "the end of the beginning, or the beginning of the end."

By Kevin Geary

Kevin Geary is an artist who lives in Sedona, Arizona. He was the youngest political cartoonist on the Financial Times at the age of 19. He had his first one man show at 20, opened by the prime minister of Great Britain, Harold Wilson. He has had over 60 exhibitions of his work; has work in several major museums, including the National Portrait Gallery in London, and his work has sold at major auction houses, such as Christie's, in London, Whyte's in Dublin and Doyle in New York.

He has followed politics, history and economic history for many years, and has also written about it elsewhere online. He predicted this depression long before it happened, timed the collapse of the stock market in June last year, long before it happened, and his stock picks have often been very accurate. The four stocks he picked on January 1st, 2009 to do well (Amazon, Apple, Baidu and Google ), are all up from the beginning of the year. He does not offer specific public advice about stocks, but he has written from time to time about long and short term trends in the political and economic realm.

© 2009 Copyright Kevin Geary - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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