That’s what local financial advisors are saying about the current economic situation, as they discuss what’s going on in the world markets now.
“Every situation is different,” says Rusty Bynum, a financial planner and founder of Bynum Financial Group in Easley. People are talking about the economic problems of 1929, 1987 and 2000-2002, but each of those situations has been somewhat different.
“If you look back in history, we’ve had credit crunches before,” Bynum said, and then referred to the Great Depression, which today is one of the most discussed time periods of the United States’ history. Federal Reserve Chairman Ben Bernacke’s book, Essays on the Great Depression, has been widely distributed.
“Hundreds of banks literally locked their doors, and people couldn’t get money,” Bynum said. “The economy today is much different. The Federal Reserve has a lot of tools to stimulate the economy.”
And Americans have overcome other economic problems, Bynum points out.
“We’ve been in situations like this in the South, where we’ve seen the textile industry go away,” he said. “I don’t remember getting a large bailout at that time. If you look at it today, we’ve replaced a lot of those jobs.”
While certain aspects of the economy will remain uncertain and open to speculation, Americans have definitely begun cutting back on spending, local financial advisors say.
“The call volume has increased, and people are a little more concerned than they were,” said Bryon Culbertson, a financial advisor with Investment Concepts in Powdersville.
The average family and consumer has begun cutting back on spending, trimmed inessentials and started borrowing less, he says.
”Some people aren’t affected nearly as badly,” he said. People nearing retirement age who’ve experienced a dwindling cash supply are probably being hit the hardest, but younger families with steady jobs could actually benefit from the lower stocks now.
Both Bynum and Culbertson referred to basic supply and demand concepts, saying that eventually, companies will begin too see a turnaround and begin hiring more people.
But for now, companies will start to trim spending, lay off workers and give more tasks to the employees it retains, he said. Eventually, when the companies’ profits mount and the demand increases, the market will begin to turn around.
“The economy does pick back up, businesses do create more jobs,” Bynum said.
The real estate market is a prime example in which companies overestimated their inventory and found that the demand isn’t quite as high as they had predicted or hoped, he said.
“Until we get to the point where the demand is equal to the supply, we’re going to see housing prices go down,” Culbertson said.
Until then, the nation could be facing some relatively lean times.
The credit crisis makes the depth of the recession harder for economists to measure, as several banks have either declared bankruptcy or received a massive bailout by the federal government. The banks that are still operating are tightening their standards, making it harder for some to borrow money, he said.
“I think we’ll see a faster recovery in the market. ... We may not see a change in the credit situation until 2011,” Culbertson said, adding that the credit crunch may actually have a permanent effect on consumers’ borrowing and spending habits.
“Are people’s spending habits going to be permanently changed? I think, to a certain extent, that they will,” he said.
In a way, the credit crunch has made a positive impact in families’ spending habits.
“Sadly, the cost of living has become all you can make and all you can borrow,” Culbertson said. “We have got to increase savings rate in America. … And right now, they are.”
In the end, it’s hard to predict what will happen exactly in the next few months or years, and not even economic experts can know for sure, Culbertson said.
“I believe they will be fixed. I don’t know how long it’s going to take,” he said.
Post a Comment
