Economic Downturn Gets Worse

We are entering a recession here in America as the bad economic news keeps coming:

• General Motors is going to run out of cash in early 2009 and will go bankrupt if the government doesn’t bail it out.  I hope the government let’s it fail, so that a more efficient company like Toyota or GE can buy the remaining pieces and introduce some real changes.
• The Dow is all the way down to 8,200 points… a 5,800 point drop since the beginning of the bursting market bubbles.  My guess is that it will stabilize somewhere between 7-8,000 points, though our country is in such a precarious position it could crash further.
• Citigroup announced plans to cut 50,000 jobs.  Many other companies are announcing similar plans.
• The national debt in the United States continues to rise at a breakneck pace as the Iraq War and and bailouts continue to suck down your tax dollars.

I strongly suggest that all my readers cut their costs in whatever way you can and start saving a rainy day fund, because it looks like there is a financial hurricane headed our way.  The likelihood of an inflation/deflation scenario has risen significantly lately and many, many people will lose their jobs.  If you already have a job, stick with it until you find something better.  If you don’t, then take something until you can find employment elsewhere.

Personally, I am planning to downgrade my apartment to something cheaper.  I also am going to significantly cut my biggest spending area of entertainment.  No more regular bar hopping or expensive restaurants until I am much more secure financially.  I am going to continue to drive my fully paid-off Ford Contour for quite some time.

If you are smart and start saving a healthy fund now, you will be in a great position to buy a house for dirt cheap or to launch a business when everyone else is desperate.  At the very least, you won’t be living in your car stealing potatoes to feed your babies.