Blogs > Your Money

Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Sunday, January 16, 2011

Hopeful but Worried

Economic indicators continue to point to a slowly improving economy, yet there are still many signs that tell us to be cautious. Unemployment continues to be high and few expect it to drop substantially, anytime soon. There were worries about commercial real estate problems as well but so far it hasn’t become a big issue. Foreclosures on residential homes are still very high and there are still some concerns that some homes may have been foreclosed upon improperly. There is continued downward pressure on residential real estate prices and the expectation of more foreclosures in 2011 than in 2010.

The high levels of debt and projected deficits of the U.S. Government continue to worry us about higher interest rates and inflation, long term. Many believe that inflation will not be an issue in the near term. While there were worries about deflation last year, those concerns seem to be dissapating. Concerns about debt in Europe continue to surface periodically.

There is still significant uncertainty as a result of the new healthcare legislation and the new finance regulation. However, with the tax-cut and estate tax issues now resolved (at least for two years) and a 2% cut in Social Security taxes now in affect, we believe there should be some improved confidence in the economy that we hope will bode well for 2011.

So while there is a lot to worry about, there are also signs of improvement in the economy that gives us hope for a better year ahead in 2011. Yet, just as we see some light peak out from behind the dark clouds, another dark cloud is gathering - the threat of state and local government bankruptcies. We certainly hope our federal government doesn’t decide to bail them out. We already have too much debt at the federal level. Yet, we worry that if California and other states declare bankruptcy, it would spill over into markets other than the municipal bond market and could send the economy into a second recession. Let’s keep our fingers crossed that a double-dip can be avoided.


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