Are we experiencing an economic downtrend?

The economy could be on a downtrend - The Writing Could Be on the Wall. Recently we learned that American Home Mortgage has filed for bankruptcy and maybe closing its business. Countrywide the Country’s largest U.S. home loan lender said that they are experiencing loan defaults not only from subprime loans as previously thought but also from prime loans. Countrywide stock price has been down big. Wells Fargo increased their prime interest rates to 8% and strengthened their down payment requirements on new loans. In July the U.S. stock market experienced a 5% to 7% reduction in value.

Therefore, things could be pointing towards a downtrend in the U.S macro economy. If what’s happening to the housing market an example for what’s to come then we can most likely see other lending companies and banks follow the example of Wells Fargo and raise their interest rates and strengthened their down payment requirements. If lending institutions tighten their lending practices then the housing market won’t be the only industry under serious pressure.

All business industries will be under attack especially businesses heavily depended on the U.S. consumer, businesses such as residential cleaning services also known as maid services. Consumer heavy businesses will be hit from both sides meaning they won’t be able to get loans from lenders and the customers they count on will have less money at their disposal. The company I own (AW Cleaning Services) that is part of the maid services cleaning industry has recently experienced a 5% decrease in new business doing the past month – The Writing Could Be on the Wall.

When lending institutions tighten their loan practices then the money supply tightens and easy money dries up. As the easy money supply dries up so will consumer confidence. Companies depended on consumer spending like house cleaning companies might see sales down for the foreseeable future. I am betting on the economy to be ok for the consumer and on the Federal Reserve stepping in and lowering the prime interest rates if things worsen which should help with lending practices and consumer confidence.