Thursday, October 30, 2008

how can we improve our economy?

After the Feds second interest rate cut in a month Wall Street is feeling better. The governments GDP report has also showed that the economy contracted in the third quarter by less than expected. Although the numbers show that the nation's economic output since 2001, the Commerce Department said that gross domestic product fell at a rate of 0.3 percent annual rate instead of the expected 0.5 percent.

In my previous blogs I have been discussing how bad our economy has been and how we are in a recession, this blog I am trying to lighten the mood and talk about the good that is going on atleast for now. Wall Street seems to be going up as on Tuesday the Dow Jones industrial average got a 889 point surge. With the actions the government has taken to lift our economy and the GDP figures not as bad as anticipated, investors are drawing some confidence. Chief economist, Michael Strauss from Commonfund contends that we are seeing a transition from "don't buy" to "maybe we buy somethin".

Even though the stock market has been rising little by little investors just want to see the market holdup and be more consitent. The rule of thumb for a recession is back to back quaters of a decline in GDP we have suffered our first one this quarter and hoefully we do not have a second one in the final quarter of 2008. If we want to prevent a deep recession we, consumers, need to start spending money again. Banks need to loan money again, and unemployment numbers need to go down. Consumer spending accounts for about 70% of GDP and it has fallen 3.1% this quarter, the biggest drop since 1980.

With unemployment and low bank confidence the economy is not going to be spending money as it needs to. The goverment is taking steps in the right direction by supplying banks with money and the Fed interest rate cuts to try to spark the economy. I just hope that they can continue working on it and I am confident that times will hopefully change soon for the better.

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