Canary in the Coal Mine

If a canary were in a coal mine and stopped chirping due to lack of oxygen, it would let the miners know that they needed to get out of the coal mine to avoid death.  This analogy can be applied to the present situation with European and American economy.

World financial crisis is caused by very bad decisions by the government, banks, and investors.  Any economist believes excessive spending to turn the economy around could have catastrophic consequences. They believe that the problems in Europe could be a “canary in the coal mine” for what lies ahead for the United States.  When Greece was bailed out earlier this year by the European Union, they were concerned that there would be a domino effect with other countries.

Now that the EU had agreed to give Ireland up to $115 billion dollars to keep the banking system healthy, they are concerned that Spain and Portugal may just be around the corner, while Greece is going to need additional funds as well.  How severe are the problems, how can they be solved, and how many years will it take to fully recover?

Are Greece and now Ireland like “canaries” for the United States?  These economists also feel that additional deficits spending by the Fed could lead to terrible consequences.  Consider that according to the Congressional Budget Office, the deficit has reached almost $14 trillion dollars, compared to just $6 trillion dollars a decade ago. This doesn’t take into considerations the additional $600 billion dollars that the government plans to spend to stimulate the economy, nor the cost for healthcare and social security payments.

According to NAR, approximately 12% of the people that own homes would sell if the economy were good, excluding exiting listings.  Homeowners and sellers alike that are thinking about waiting for the economy to improve may in for a rude awakening.  It may be many, many years before we work our way out of the mess we’re in.  Use this information with your sellers and in social discussion.