Yes, the $ 173 billion Greek bailout has been approved, and while this is important, what is the one indicator we need to watch most for the health of the economy and the real estate market? The oil price. And the oil price is soaring again even though demand in the US is dropping, surging economies in emerging markets continue to increase the world’s demand.
Was it not just a few years ago (2006)that George Bush uttered the un-thinkable words ‘We are addicted to oil’? Yes, a Republican president, from Texas, said these words years ago, and to-day with a Democratic President in office for over 3 years, we still do not have an energy policy in place to fully address the longterm mess in the making. The subject made headlines around the globe (the Economist cover is proof). While the US is indeed addicted to oil, the rest of the world is consuming more and more of the stuff. China alone will add over 10 million NEW car drivers this year. The oil price is the most damaging of all taxes on the US consumer…..when they have to pay more at the pump, consumers have less disposable money to spend in the economy: rising transportation costs for all products boost their cost on the shelves….even less disposable consumer money. Now throw in reduced corporate profits (except of course for energy companies!) and you can expect hiring freezes, layoffs and rising unemployment…..
So the biggest threat to our economy right now is the price of oil. The lack of a comprehensive, longterm energy policy is a disgrace. And we may all be sent back to re-hab when this neglectful political ineffectiveness takes its toll. The only upside is that with rising oil prices comes a higher prospect for inflation. And real estate is a great hedge against inflation.