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.

Thursday, October 16, 2008

recession?

After the U.S government passed a bill to help bussineses in distress it seem like we are still headed in the wrong direction economy strength wise. Noone is expecting change this quickly but thing are just not improving as expected. I guess we can start asking ourselves not wether we are in a recession but rather how long will this recession last for. As credit is drying up thanks to the market freeze and consumer confidence is shot it is inevitable that we are in fact in the state of recession in my eyes. Financial panic began when fannie mae and freddie mac became national. Ben Bernanke, the chairman of the fed, does not label this a reccesion but he does believe that the economy will operate below potential for some time.
As a consumer I am very worried not only about my consumption but when will businesses begin to gain their confidence. Until that happens our economy will not be at full strength because they are not willing to spend money. With many financial istitutuions going down like Washington Mutual and Wachovia people are questioning the viability of other global financial istitutions. Noone want to do business with companies that may soon be out of business. Interbank lending has been severly cut back and the libor average has reached extreme highs. Employment fell by 160,000 in september while vehicle sales fell to lows unseen since the early 1990's. People are countinuing to see the house market prices go down and are realizing that their investments are worth less than they were a year ago.
Our economy is in complete disarray and more action will be surely needed if we want to crawl out of this hole. We need to continue looking at consumer and business confidence levels as well as bank's ability and willingness to loan money to consumers so that our economy can start moving again.

Thursday, October 2, 2008

Economy!

Our government has recently proposed a bailout plan for our hurting economy. As the stock market crashed people around the country are worried about what a plan like this could do to tax payers. Gas prices are already at ridiculous prices and Americans are dreading having to pay any more money on anything. With the money market down employment is hard to come by as well as loans for those people looking to borrow money from banks ot other credit unions.

The senate overwhelmingly voted the 700 billion dollar plan in to action on Wednesday making it the biggest federal intervention in our economy since the Great Depression. They have changed the bill from the initial proposition making it clear that tax payers and businesses will be provided with protection and incentives. Americans at first were not happy about the proposed wall street bailout plan but something must be done eventually.

The revised bill incudes millions of dollars in tax breaks for middle class tax payers, $3 billion dollars for rural schools over the next 5 years. Barack Obama realizes that the bill is not perfect but he also states that "from my perspective we need to do something to prevent an economic crisis from turning into a catastrophe." After The Dow Jones Industrial Average plunged 777 points on Monday, draining $1.2 trillion off the value of U.S stocks something needed to be done. Millions of Americans lost up to 10% of their assets in one day which is not good at all.

A senator from Tennessee described this recent downfall as a "wreck in the middle of the economic highway" I think this is very suitable for what the economy is going through. If we cannot not get our economy over this wreck then what is going to happen in our future? All we can do is wait and see. Add your comment to this blog and let us know what you think about what is happening in our financial industry

Finance Tip of the Day