7 ways a recession could be good for you financially

[Hoodat]

7 ways a recession could be good for you financially

Michelle Singletary - WaPo  |  Sep 28

In his first inaugural address in March 1933, President Franklin D. Roosevelt said: “So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself.”

It was the Great Depression. The unemployment rate was over 25 percent. An estimated 12 million people were out of work, about one-fourth of the civilian labor force.

“More than 11,000 of 24,000 banks had failed, destroying the savings of depositors,” according to the National Archives.

Fast forward to now, and as bad as things are — rising interest rates, high inflation, stock market tumbling — the economy hasn’t imploded as it did during the Great Depression.

I have to say this because, as Roosevelt pointed out, fear itself can lead to actions that worsen your finances. While many people are hurting, there may be ways to cushion the downside.

Here are seven silver linings if we are heading into a recession.

1. Housing prices may finally come down to reasonable levels.

2. Savings rates are up.

3. I bonds inflation rate might go even higher.

4. The dollar is king.

5. Unemployment is still relatively low.

6. Your used car is worth more.

7. Student loan forgiveness is coming.

https://www.msn.com/en-us/money/markets/7-ways-a-recession-could-be-good-for-you-financially/ar-AA12lgAD

[Hoodat]

Taking them one at a time:

1. Housing prices may finally come down to reasonable levels. The average rate for a 30-year fixed mortgage jumped to 6.7 percent this week, according to data released by Freddie Mac.

Higher mortgage rates may result in sellers in many markets lowering their asking prices so that buyers can qualify for the loans.

Never mind that higher interest rates will offset the lower asking prices when it comes to qualifying for loans (i.e. overall monthly payments will still be higher).  These are the same people who have been motivating first time buyers to buy, buy, buy.  Except that these new homeowners are about to become upside down on their homes, owing more than the homes are worth.  Yet this Democrat editorial spins that a positive.

[Hoodat]

2. Savings rates are up. At least one bright side of the Federal Reserve raising rates to fight inflation is banks are paying people more to hold their money. My credit union has a special 20-month offer on a certificate that would pay me a 3 percent annual percentage yield.

A three percent yield while inflation hovers near double digits.  This is a huge negative, not a positive.  In a normal economic world, interest rates will ALWAYS be higher than the rate of inflation.  But as long as this government prints its own money to finance its excesses, it doesn't have to compete for your dollars.  So interest rates remain artificially low while inflation continues to rise.

[Hoodat]

3. I bonds inflation rate might go even higher. The Series I Savings Bond was created as a hedge against inflation. Until the end of October, the bonds are paying 9.62 percent.

By saying "I bonds inflation rate might go even higher", you are essentially saying 'inflation might go even higher'.  Not really gaining anything here.  You are basically tying up your money for the next 30 years, only to break even with the value of the dollar.  In other words, you gain nothing.

[Hoodat]

4. The dollar is king. Although a lot is in flux, if you have plans to travel overseas, your dollar may go a lot further.

Sure, this will be great if you are some rich liberal elitist with enough cash on hand to jet over to Europe to escape the unwashed masses here in the US.  But most Americans are fighting to scrape up enough cash to buy food, pay their utility bills, and gas up their cars.  Overseas travel money is in short supply, especially during recessions.

[Hoodat]

5. Unemployment is still relatively low. People with jobs and money to spare can spend on luxuries such as a vacation.

Despite higher prices and rising interest rates, millions of Americans have been taking leisure trips.

More than half of Americans plan to travel for one or both of the holidays this year, even though airfares will be 43 percent higher than last year

Sheer idiocy.  People with jobs can simply take vacations at 43% higher cost!  And only if they have money left over after filling their gas tanks, refrigerators, and pantries.  Why didn't we think of this sooner?

[Hoodat]

6. Your used car is worth more. If you’re looking to upgrade to a newer car, and your car is in fairly good condition, you’ll get more for your trade-in.

Used car and truck prices jumped 7.8 percent, according to the latest data from the U.S. Bureau of Labor Statistics. Unfortunately, new car prices were up 10 percent from a year ago.

OK, so basically what he's saying is that you have lost 2.2% of the value of your trade in.  That is what is known as 'bad for you financially', not "good" as the title suggests.  Also, it means that people who need cars but can't afford new ones will now have to pay 7.8% more for a used one.  Also bad.

[Hoodat]

7. Student loan forgiveness is coming. Roosevelt used his executive power to wage war against the economic emergency gripping the United States.

President Biden is doing something similar by forgiving student loan debt to help struggling borrowers.

This doesn't have a damn thing to do with a recession.  They just needed a 7th thing to round out the list, so they threw this in.  Of course all the responsible people out there who worked to cover their own college expenses or pay their loans off on time get screwed, while all the irresponsible people who lived off of the hard work of others get a windfall.  Sounds just like something a Democrat would spin as a good thing.

[Hoodat]

H/T to @Slide Rule

[catfish1957]

@Hoodat

Great takes to the aspects overall.

OTOH, if you do your homework and research, know what you are doing, and
* "buy low"
* Cherry pick oversold sectors
* Skim Bond diiferentials

 

I cashed in big in '87/88 and '00-'02.

'08-'10, on the other hand?  Outiside political insiders no one came out very good.  My net worth went down 0.9% during the Great Recession.

In the present house of cards, all equities without fungible value and need are suspect.  All should proceed with caution, Defense is key word.