So Greece is having its economic challenges, and now other European countries are wavering. They're a long way from Edmonton, what possible effect could their economies have on our real estate values? Lots.

Now there is an old saying that we all rise to our level of incompetence and I think me disucssing world economics is probably rising way past my level of incompetence...but what the heck. Let's see how far into trouble I can get myself.

I do not know how much trouble the European countries are really in, but I know that Greece is in it pretty deep. With our shrinking world and our economies more intertwined than ever before, when Greece sneezes we can all catch a cold. If one country slows down buying goods from another country, the other country slows down buying goods from another country, who slows down buying goods from another country, and round and round we go. This kind of thing generally slowly spirals downwards until we hit some sort of bottom sooner or later. These cycles can last years and even a decade or longer (the dirty thirties (for a great book on the Canadian experience in the dirty thirties, check out "Ten Lost Years")).

Conversely, things could stabilize and we could be off to the races again. The trick lies in making the right guess as to what will happen.And yes it is a guess. Economic systems are just too complex to accurately predict over any period of time, but I do know this. We are coming off one of the greatest economic parties in a long, long time. Money was everywhere which led to fraud everywhere, which led to stock markets and real estate markets rising dramatically and then falling dramatically. The bigger the party, the bigger the hangover.

Okay,so the bottom line is that there are far more negative economic factors  out there right now than there are positive economic factors. I do not know what will happen tomorrow, but I do know that I am going to recommend my clients keep their real estate investments at a level of leverage (debt) that allows them a margin of safety should things deteriorate further before they improve. An ounce of prevention is worth a pound of cure.