ECONOMY CALLED WORST SINCE 70"S - FINANCIAL DROP IS STEEPEST SINCE 2000. BUT - This is a long way from recessions of early 1980's! And, this is no where near the beginning of a DEPRESSION!

The rapid erosion in confidence in Freddie Mac and Fannie Mac, and Congress's passage of additional funds for them is but one indicator of US Economic Conditions. Their stock prices lost nearly half their value a week ago, but regained somewhat after Congress acted.

Then gas prices went through the roof with no indication they will return to prices we have grown to expect. And governmental requirement of Ethanol usage has caused food prices to go up dramatically throughout the world.

U.S. stock indexes have fallen 20% from their peaks in October. Yet other country's stock indexes have fallen as much as 30% and 45%.

Many experts in the mortgage / real estate fields don't expect a return to normal until as late as 2012. Real Estate prices might stabilize in a year or two.

The current economy is incredibly strong! We have higher oil prices, housing imploding, with large layoffs in affected industries: Autos, airlines, construction, mortgage banking. YET US output in the first quarter of 2008 was actually 2.5% higher than a year earlier! Orange County is suffering a lot, but we aren't collapsing in spite of substantial economic problems.

Credit Card spending is down and Debit Card Spending is up. High end restaurants are down 20%. Car sales are down. But Orange County keeps going!

The Great Depression of the 1930's had unemployment peaking at 25%. 40% of banks failed.

The back-to-back recessions of 1980 and 1981-1982 unemployment rate peaked at 10.8%. Nothing like that had happened since the 1930's!

In June, 2008 unemployment was 5.5% which is slightly BELOW the average since 1960 of 5.8%. Banks have suffered large losses. Yet the banking system seems fairly strong overall. After writing off $37 Billion for loan loss reserves, banks overall still made a total of $19 Billion profit!

What can you do? Curb discretionary spending. If you buy real estate, expect it to go down in value before it goes back up. "Weather the storm - as we have done before." We are going through another economic cycle.

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