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Is this the first real economic dip for Generation X?

Guest post by: Bryan Garner

Article Overview: From gas prices to bank runs; this has been the first real economic crisis for my generation. As I look back over the last few years I have noticed that my generation has never really experienced any of the financial challenges that we are seeing currently in the world today.

Is this the first real economic dip for Generation X?

From gas prices to bank runs; this has been the first real economic crisis for my generation. As I look back over the last few years I have noticed that my generation has never really experienced any of the financial challenges that we are seeing currently in the world today. I do remember my parents talking about the gas shortages in 1977 & 1978; but 1978 was the year that I was born! I now have friends here in Texas where I live that drive across the border into Mexico to fill up on the weekends. Gas is often as much as 40 percent cheaper in Mexico than it is in the U.S., thanks to a Mexican government subsidy that keeps prices down across the border. Most of us just have to grin and bear it though because what other option do we really have? I am all for Green energy, but if it works so great why don't the politicians that support it use it? I am very far from being an expert on any of these topics so I will just keep moving. I can say that our gas budget went from $150.00 a month to over $300.00 a month.

Food Inflation; I have never even thought of such a term as this. The U.S. is wrestling with the worst food inflation in 17 years, making families cut corners on nutrition. I have read about parents who are giving their children sodas, because it's cheaper than buying milk. This is just plain ridiculous; parents need to step up and get a second or third job if need be, and shut off their cable or cell phone for awhile. I have always believed that family comes first and I would never compromise on that. With the ethanol usage increase we are single handedly creating the global food crisis. Turning our farm land into something for fuel is messing up the farming systems in other countries. Again I digress and I will move on for now.

Everyone has at least heard about the mortgage crisis that now spans across America, into Europe, and Asia. Being in the debt management field myself; I hear from many families that are absolutely struggling to find a way to make ends meet and keep their home. It's sad that lenders have been getting flat out rich for the last 5-10 years with their structured investments and alternative mortgage options. The subprime mortgage crisis is an ongoing economic problem manifesting itself through liquidity issues in the global banking system owing to foreclosures which accelerated in the United States in late 2006 and triggered a global financial crisis through 2007 and 2008. The crisis began with the bursting of the US housing bubble and high default rates on "subprime" and other adjustable rate mortgages (ARM) made to higher-risk borrowers with lower income or lesser credit history than "prime" borrowers. Loan incentives and a long-term trend of rising housing prices encouraged borrowers to assume mortgages, believing they would be able to refinance at more favorable terms later. However, once housing prices started to drop moderately in 2006-2007 in many parts of the U.S., refinancing became more difficult. Defaults and foreclosure activity increased dramatically as ARM interest rates reset higher. During 2007, nearly 1.3 million U.S. housing properties were subject to foreclosure activity, up 79% from 2006. When the numbers come out at the end of this year we will have set a new record for foreclosures.

My parents were affected by the savings and loan crisis of the 1980s and 1990s which was the failure of 747 savings and loan associations in the United States. The ultimate cost of the crisis is estimated to have totaled around USD$160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government (that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts), which contributed to the large budget deficits of the early 1990s. It was the breeding ground for the bank and mortgage crisis that we have now. What the heck was the generation before mine doing? I should not say too much because we are probably going to look back in ten or twenty years and see the same pattern from my generation. The whole "apple not falling too far from the tree", line of thought.

Banks have sought and received over $250 billion in additional funds from investors to offset losses so far in 2008! Recently we have experienced a good old fashioned bank run of our own; Indy Mac. California-based Indy Mac became the largest bank to fail in two decades after a bank run depleted its deposits. Now, the Federal Deposit Insurance Corp.-which took over what's left of Indy Mac-says that 90 financial institutions are on its secret list of "problem" banks. Bank depositors rushed to withdraw money from the bank, even though such deposits are insured up to $100,000 by the Federal Deposit Insurance Corporation. Every single fractional-reserve bank is at risk, of course. The feds bailed out this criminal institution, which promises to pay what it cannot pay, but even the feds cannot handle all the bank failures that are coming. At the very least, you well-to-doers, have no more than $100,000 in any one bank at a time.

So for what it's worth I think that if our parents, whose generation invented

MS-DOS can (1981), can get through an economic crisis then we can too, remember that we invented the I-Phone!

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