I have been accused of being a half glass empty guy when it comes to the current economy. I do think that there are some good things happening, and I do not want to be considered an utter pessimist. I have studied some issues extensively and have tried keeping a neutral bias. One issue that keeps coming up again and again is debt and the health of the US Dollar. It is an issue that I have a real hard time trying to put a positive spin on.

The dollar’s value is a barometer of America’s balance of payments, and currently the balance is out of whack. Great sacrifices will need to be made to correct the situation. It is debatable whether Americans are willing to compromise their standard of living to fix things. The dollar and America’s perpetual debt financing are the most serious issues facing our country right now.

The U.S. Dollar has certainly fallen from grace in the past few years. In fact, it has been dropping now consistently since the end of the year 2000. Is this a good thing?

Yes and no. Here’s what’s vital to understand:

At present, the U.S. has $8.8 trillion in national debt, and its increasing $1.42 billion each day. The U.S. Government is in big trouble… the interest payments alone currently threaten to shut down operations. Congress has shut down before, and in order to make things work, it would simply raise the allowable debt ceiling. The US printing presses are getting a real workout printing all that paper money.

The Government has a plan however… devalue the U.S. dollar, and the debt will be cut in half. You read that right… and unfortunately that is the plan. If you owe someone $1 today, and tomorrow, that dollar is worth 50-cents, you’ve essentially cut your debt in half. But there’s something wrong with this scenario. A falling U.S. dollar only creates inflation, which is a mega-problem in the eyes of policy makers. And, when inflation rears it’s ugly head, the Fed cannot lower interest rates to spur borrowing. Thus, what we begin to see is a double-edged sword, where the money supply begins to tighten, while the greenback loses value. No matter how you slice it, this is a massive problem for the already faltering U.S. economy.

Did you know that ‘par performance’ for the U.S. economy is an annual GDP growth rate of 3%? And did you know that in the first quarter of 2007, U.S. GDP came in at 1.3%; far below where it should be. Let’s face it, the economy is like a very delicate glass house, and once the first stone is thrown, the whole thing could come crumbling down.

Information to put a smile on your face!! Yippy!

So what to do? Get involved by letting your public officials know that the belligerent, reckless spending needs to stop.

Add to your emergency funds some gold bullion or coins. I recommend www.kitco.com

Remember that your highest priority is to keep paying off debt. The government could learn a thing or two by following your good example.

You’ve probably already read about it in the news…the sub prime markets are a mess. The problem began after the turn of the century, when stock markets began to tank. As a result of the instability caused within the U.S. economy, the Fed began an aggressive campaign lowering interest rates. And while the rate cuts did salvage the major indices, the fallout was an unintentional real estate boom, as lenders began qualifying sub-par would be homeowners for mortgages they clearly couldn’t afford.

Making matters worse, many of the loans were Adjustable Rate Mortgages (ARMs), where after certain periods of time, payments increase with rising interest rates. By the end of 2007 many of these mortgages are designed to reset their rates, which mean higher payments. One trillion dollars of these ARMs will be raising rates requiring higher payments. Further complicating the situation, many banks also offered Home Equity Lines Of Credit (HELOCs), which in essence, mean the borrower’s payment is tied directly to the prime rate, constantly fluctuating as rates shift.

As a result, foreclosures are at an all time high, with 1.2 million filings in 2006. And that number is expected to double again in 2007.

In the history of the world, borrowers have never been further leveraged, and the toll it’s taking on the U.S. economy is starting to show.

Economics aside, the foremost issue facing you, the homeowner, is the devaluing of your property, as excess inventory continues to weigh down prices.

It’s a simple rule: excess supply means lower demand. And lower demand equals waning prices. In fact, in a recent article by Fortune, the magazine predicts 52 of the United States 97 markets will see 2% (or less) growth in 2007, with 35 of the nation’s real estate markets actually seeing price growth roll into the red.

No market is resistant to a correction. On May 9th, Bloomberg released an article titled: Home Prices Fall in Rich New York Suburbs Once Immune to Slump. In 15 of the 24 New Jersey, New York and Connecticut areas studied, prices dropped as much as 18.8%, this year alone.

And, with the U.S. dollar moving lower, the Fed cannot simply lower rates to help aid those just inches away from foreclosure. You see, this problem is not going to end any time soon.

It’s time to face the facts, U.S. real estate markets could be in big trouble, and the very first stones have only now begun to be thrown. What we are witnessing could be a serious adjustment to the economy. Leverage used to excess contains the seeds of demise.

Debt is increasing at an ever growing pace. It is affecting many people from all walks of life. One demographic group to be affected is that of seniors. It is a disturbing trend. Senior citizens are resorting to using credit card debt to pay for basic expenses. One frustrating problem is the cost of medical care. . An increasing number of the nation’s elders are putting their homes, retirement savings and livelihoods at risk to pay the bills. The question is whether seniors have been blindsided by the consumer juggernaut or are they simply not prepared for retirement expenses. Senior citizens need more education to help them navigate through the different options of managing money rather than deplete their resources. According to AARP, retirees are facing some serious financial hardship.

•One-third of retirees described their current personal debt levels as a problem, and 7% called it a “major” problem.
•The number of people age 65 and older who filed for bankruptcy jumped 213% between 1992 and 2001, outpacing all other age groups, one study said. Health-care costs drove the trend.
•Debt levels for households headed by someone 75 and older averaged $20,234 in 2004, a 160% jump from 1992, the Employee Benefits Research Institute reported.

Many retirees have simply underestimated the costs they would have during their retirement years. Some have faced difficulty with the rising price of healthcare. I believe as more people reach retirement age, the press for change in the healthcare arena will become a top priority.

Many seniors have concluded that there are no options to help them navigate through the process of debt negotiation, or in more serious circumstances bankruptcy. The best thing to do is to consult with a financial planner who has expertise in helping seniors cope with these types of issues. If you feel that you are in this predicament and are a student of Prosper make sure you address this with your financial coach. He or she can guide you to resources which will help.

A very interesting a disturbing trend seems to be emerging. Young people seem to have been conditioned to believe that materialism is extremely important, and that financial success is a birthright. There is nothing wrong with wanting financial success but today’s younger “entitled� generation has it wrong. It appears that youngsters have heard about the Hollywood salary types as well as the high paid executives and athletes and now believe that this is what they want.
UCLA came up with its annual survey of college freshman, released last Friday. It found that nearly three-quarters of those surveyed in 2006 thought it was essential or very important to be “very well-off financially.� That compares with 62.5 percent who said the same in 1980 and 42 percent in 1966, the first year the survey was done. Nothing wrong with this per-se as financial literacy is sorely lacking in this country. But consider another poll:

Pew Research Center found that about 80 percent of 18- to 25-year-olds in this country see getting rich as a top life goal for their generation.

Researchers say materialism is an obsession that cuts across socio-economic lines for American youth.
David Walsh, a psychologist who heads the National Institute on Media and the Family in Minneapolis. Is quoted saying, “Our kids have absorbed the cultural values of more, easy, fast and fun,� He’s also author of a new book, “NO: Why Kids - of All Ages - Need to Hear It and Ways Parents Can Say It.�

Mr. Walsh believes parents have played an integral role in encouraging their children’s materialism. His research found that, when adjusted for inflation, parents are spending 500 percent more money on kids today than just one generation earlier. This fact is staggering and is clearly one reason why many parents are struggling to get ahead financially. Mr. Walsh suggests that parents have capitulated to the whims of their spoiled children. Parents are apparently giving their kids more “stuff� to supposedly keep them out of trouble, or to stop them from whining about what they don’t have.

Apparently many in the younger generations are believing that they deserve far more than they really do Jean Twenge says psychologist says, “There are a lot of young people hitting 25 who are making, say, $35,000 a year, who expected they’d be millionaires or at least making six figures.� These goals are attainable, but it requires hard work and discipline.