I live in Germany, the weak Dollar threatens my ability to pay rent and buy food. My Bank was demanding $1.58 for 1 euro. I am also a retired Military person, my income has been cut in half
and it seems as if people are walking around wearing blinders, it is the cost of OIL that is wreckinbg the DOLLAR and sending the Euro to unheard of heights. Help!!
I can’t believe the severity of the obfuscation the government policy makers and the capital markets are shoving in the face of the american people. The economic situation is VERY bad. American addition to “things” on a pay later amortization schedule has its consequences, and the payback day is approaching. Folks, if you don’t believe America is at a potential bankruptcy point, your in denial…and I ain’t talking Egypt…
Now Playing in Ye Olde Capitol Gaming Parlor and Spa: the $200 billion 28-day performance of the master illusionist “Bail-Us-Out Ben”. Watch Ben display his all-new, one-month formula where US-Treasuries EQUAL Fannie-Mae EQUAL Liar-Loans EQUAL 8-the-hard-way. {Check here to see if this performance will be held over for another 28 days}.
The americans should learn the lesson, do not buy things you can’t afford and do not spend money you don’t have. And if you did so please be a responsible person, settle the problem you have created and do not leave it to the others to solve.
The US Dollar has lost 35% of its value from 2002 until today.
So $3.00 a gallon gas with a dollar 35% stronger would only cost you $1.95.
Keep printing those dollars boys. Make them worthless. A family making 60,000 now takes home 40,000 of funny money buying power.
Are we a nation of idiots to allow this? Every one of them should be recalled. The Constitution is a contract with us. Section 1 Article 8 says coin money, not funny money. Says congress not the fed which is a private bank.
Well I’m glad we impeach men who stain dresses and not anoyone who is going to ruin our lives and our childrens lives.
ever notice,
everytime there’s trouble with the stock markets, they find some reason to spend millions of dollars to shoot up a rocket to space? I think its all connected, follow the money, and its all linked to the white house too.
follow the money
($$ka-ching$$)
Jan 2006 Confirmation Hearing for “Bail-Us-Out” Ben
“If I am confirmed, I am confident that my colleagues on the Federal Open Market Committee and I will maintain the focus on long-term price stability as monetary policy’s greatest contribution to general economic prosperity and maximum employment,” Bernanke said.
Im actually glad prices are going up so fast. Before long, I can stay home with my family and let the mexicans and India grocery store owners pay for my welfare check. Don’t you just love america?
THE PROBLEM IS OUR CONGRESSMEN TAKING BRIBES FROM LOBIESTS TO LET THE OIL,DRUG AND EVEN THE FOOD COMPANIES CHARGE WHAT EVER THEY WANT. GET THESE PRICES BACK WHERE THEY SHOULD BE PEOPLE WILL HAVE MONEY TO SPEND. THEY WON’T BE LOSING HOMES AND THE ECONOMY WILL BE FINE PROBLEM SOLVED!
The price of fuel is wreaking havoc on the economy. I’m in the public sector, and fuel costs are negatively affecting everything from sanitation to treating wastewater. Unfortunately, we have to pass these costs along to the customer who is already strapped paying for every other basic necessities.
I find it ironic that the only presidential candidate (Ron Paul) that described perfectly our current problems (massive debt, falling dollar, inflation, wage deflation, starting wars we might win miltarily, but will lose financially) was marginalized and treated as a nut, before he dropped out. The American people are responsible for our current mess by not holding their government accountable for too long a time! I don’t expect that to change until the majority of the population really feels the pain enough so that they wake up and start to care about government spending, our debt, paying for wars again and again,sticking our heads in the sand with regards to alternative energy development etc…
We are a country of consumers. We have to have everything and we have to have it now, even if we can’t afford it. So we buy on credit. We buy things we can’t afford with money we hope we’ll have when the time comes. And because we get applications for a hundred different credit cards a week, we continue to live like that. WHat happened to checking credit references before issuing credit, loaning money for cars and houses? This is America’s bigget problem. Stop spending. Stop consuming. You don’t have to have the latest and greatest of everything. If you can’t pay cash, with until you can. If yo ucan’t afford a house payment, wait until yo ucan. And if you can’t afford to have kids, wat until you can.
I am more concerend about inflation. In fact, I believe that inflation would impact 100% of us whereas layoffs cuased by the recession would impact only a couple percent of population.
To Dragan from Europe. So you would like to see the USA fall and that we deserve it. Perhaps you should take a short tour of the U.S. military cemeteries in europe. They are full of Americans who did not want to see europe fall to the greatest mass murderers in the history of the world. Perhaps you should stand in one of these sacred places and think how foolish your statement is.
Dear Readers,
Rate cuts are not responsible for the recent rise in inflation although they may affect prices in the future. Current inflation is caused by rising energy prices – oil, coal, natural gas, etc., which are the result of our profligate use of energy as a society (SUVs and 4000-5000 sq. foot homes to heat anyone?) and the lack of an meaningful national energy policy.
Food prices are going up, not because of rate cuts but because of rising energy prices (food inputs) and a wrong-headed energy policy focussed on ethanol. This has caused farmers to take land out of food production to produce corn to cash in on the boom.
With regard to the so-called housing crisis, the number of increasing foreclosures will bring housing prices back to a place where more real families can afford them. Those losing their homes either 1) kept spending their home equity by borrowing it out, 2)borrowed too much to begin with, 3) thought they could flip real estate with little or no risk, 4) put no money down and lied about their income on loan applications. I have no sympathy for any of the above. Falling home prices will allow many new families with real down payments to buy homes they can afford. Nothing wrong with that.
The banks and the financial firms are being punished, along with the rest of the stock market, but this too will pass.
We need to demand more of our government and more of ourselves in the future.
Actually , im very pleased that a lot of people in the States see the problems the same as “we” foreign countries.As long as people give a voice to the problems,solutions can be found.If someone denies he has problems,you will never find a solution.
Its electionyear for you,make a wise decision, and lets here your voice !!
What we have is stagflation. This harkens to the adage guns or butter. The debt that is paying for “W” war is the catalist for this situation. When I studied economics the macro measure for an economy was GNP. Today the pseudo gurus use GDP, ommitting the all important (x-n). So without exports minus imports the real picture of the economy is distorted to the point where it becomes false. Then and there lies the crux of the problem. The U S economy is weaker than the official numbers by a quantity that if the public knew it would cause the system to collapse.
How bad is my credit? Try 520 from Transunion, just over 600 from the other two. Admittedly several factors contributed to this, not least the fact the bank I bought a foreclosed property from promptly transfered the foreclosure to me – but nonetheless my credit is in the crapper.
How hard was it for me to get a new fixed-rated mortgage, 3% lower than my so-called ARM teaser-rate?
Took me about a week, most of that due to using Turbo Tax to do my taxes, so the underwriters felt compelled to verify my taxes with the IRS.
End result – A 10.2% mortgage due to reset to 11% next year was turned into a 7.125% fixed rate mortgage.
So I have to ask, what credit problems? Nothing has passed Congress yet, they’re still sitting on the so-called bailout, no one had lent the banks $200 Billion and my credit was terrible.
Also my home went up in value, from 256K to 282K in the last 2 years.
Admittedly we haven’t had the ridiculous increases other states have, but I see no slowdown, I see no credit issues and no one is losing their job.
What is concerning me though, is the price of groceries, utilities and gasoline. These have gone through the roof in the last 4-5 years and show no sign of relief.
When GW got elected gas was $1.50 a gallon in Alaska – now it’s over $3.00. Mission accomplished I would say, for him and the oil companies that sponsored his presidency.
I’m a new home owner — I actually bought a house I could afford — and have a very good job. Yet, in Connecticut I have seen my electricity bill go up by 50%, my investments slide 10%, and my cost for gas – well, let’s not go there. My dispensable income is going to utilities So, what does the fed do, they pander to the investment bankers and corporations by cutting interest rates. They devalue the dollar and through their ignorance bring up the dreaded specter of inflation. Bernake doesn’t care about inflation or how it affects the average American. All he cares about is protecting Wall St. He is reckless as they come, but his actions based on ignorance and his lack of concern for the average American. And, guess what? Just like our ignorant president, he could care less if he can make a penny off it.
I forced to agree with Ron Paul – the Federal Reserve behavior border to criminal. They counterfeit our currency by so called “pumping” liquidity. And what happens with all the money they are giving to banks – they invested them into commodity market in another speculative gamble. And who is suffering – little guy. This gotta stop and Feds need to be made accountable for what they are doing.
Certainly more concerned with weak dollar and inflation. Rate cuts only seek to help bail out those who got greedy or did not make responsible financial decisions. Devaluing the dollar and turning oil into a high priced commodity does more to damage more people in the long run.
Is anyone *really* surprised by any of this?
We lived in an economy of “borrow now – pay later” – and oh, how you will pay! – where “Keeping Up with the Joneses” is still the order of business.
We have a President who is so corrupt or inept – take your pick, I claim equal parts in Bush’s case, the man is a drunk with deep pockets – that he cannot see or won’t acknowledge the monumental financial disaster he has allowed to happen.
Oil goes up more and more.
And why ever not?
The oil companies know the consumer needs their product, let them pay for it whilst our bottom line skyrockets in sympathy.
The truly dismal part is the contempt of the wealthy, railing ever on about economic realities and the heart of the American economy as justification and no end in sight.
Remember Marie Antoinette?
Perhaps it’s time the American public took a clue form history.
Inflationary trends are the largest concern at present. With food, energy,health care costs all soaring, and incomes barely increasing, the middle class is no longer middle class, but upper lower income class. Here is eastern PA, the local utility company, PPL Utilities is warning consumers of a pending 35% increase in residential electricity rates in 2009. How is a consumer supposed to budget for that?
What irritates me is the ignorance about what inflation and recession really are. Inflation is too many dollars chasing after too many goods. Rising commodities like oil is not inflationary. It is deflationary and will create a recession. When fixed incomes are forced to buy necesisary commodities then they must not spend elsewhere leading to deflation.
What is inflationary is the billions of dollars the fed is pumping into the market. What we have is a perfect receipt for stagflation and no one seems to want to address this.
Frankly I blame the fed for holding rates too high too long on the perception of “inflationary pressure” but no real inflation. The fed has crippled the economy trying to hold it back do to a preceived risk that did not exists. A rising CPI without a correspondent and greater increase in wages is deflationary not inflationary.
This brings us to the other necessary component of inflation. Without introducing more dollars in terms of increased wages there is no ability for too many dollars to chase after too many goods. We do not have that. We do not have that because we have imported millions of illegal workers in this country willing to do the same job for less.
Our long term survival depends on the middle class. Deflation is driving that middle class down. The middle class can’t spend discretionary dollars because it is too busy filling it’s cars up with gas and putting food on the table.
So I wish the media would understand inflation and quit calling rising oil a sign of inflation. It is actually deflationary and leading us to recession.
With regards to oil. It is over $100 a barrel for 2 main reasons. First because of the conflict in iraq. This alone is probably causing a double digit premium. Second, and most importantly, is the weakness of the dollar. Fix the dollar with fiscal responsibility from the government and the price will come down.
On housing… it is nothing more than a market correction. Because the market did not properly account for the risk and mortgages were relatively cheap, housing prices were able to inflate because there were endless supplies of both home buyers and mortgage investors. The tightening of mortgages washed out millions of prospective buyers. Now supply exceeds demand and home prices have to fall. Why? Because of deflation, not inflation.
Real estate will return, it always does. The economy will boom again, it always does. The federal government needs to exercise fiscal responsibility and not look for the “quick fix.”
Here is the way I see it:
1. Slowing (if not stalled) Economy
2. Weak Dollar
3. Rising Unemployment
4. Rising Inflation
5. Pull-Back in Stocks
6. High Energy Cost
The trouble with some of our banking institutions was caused by bad business decisions associated with an inflated housing market. It is not the responsibility of the Federal Reserve to focus their policies on a bailout for these institutions at the expense of the rest of the economy. The Fed should keep rates unchanged and allow current rate cuts to work their way into the market which they have yet to do. Reaction to this move will likely cause a short term pull back in stocks making them more attractive to buyers as well as strengthen the dollar. Money then gradually moves out of commodities, particularly oil, and into the attractive stock market. This should reduce energy costs to a reasonable level relieving pressure on businesses and consumers with the side effect of helping to control inflation. Consumer spending increases and the economy begins to speed up. I realize that this is greatly simplified and basic. However, maybe basics are where we need to be.
Lyn
The real problem is that cell phones, cable, internet, efax, gasoline, power bills, HOA fees, movies, food have all went up over the last few years while incomes has been steady. To compensate, the rates went low and people’s disposable income was increasing largely because of the home equity they were cashing in on. It was false money.
Now that it is gone, inflation looks even nastier. Its always been there, it was just masked nicely by the never increasing wages.
As someone who likes to go to Russia once a year, I am concerned about the weak dollar. As a retiree, I am concerned about inflation.
As an empathetic human being, I am concerned about the slumping job and housing markets. Too bad, in regard to the later, we can’t find someway to punish the banks who engaged in outrageous sub-par lending. I also wish that it were only my fellow citizens who voted for G.W. Bush that had to suffer the consequences of this disastrous choice. But it is a fact of a democracy that the majority has the right to be wrong. I can only hope they make a wiser choice this time.
The main problem is, that the USA as a society has lived for 20 yrs on accumulating debt, wasting energy without even thinking about conservation programs, and spent billions (trillions?) on wars.
The current crisis is the knock off consequence from working less, spending every buck as soon it’s been seen, and extending debt without control.
Some economists see the $-value sinking another 25-30%, which will cause more inflation and ultimately lead into a depression.
The situation is rapidly changing from the absurd to the criminal. The public is being ROBBED with this evil policy of bailing out banks and lenders while millions STILL lose their homes. And 4600 grub money is an insult.
At the same time your pocket is being picked by inflation and a dollar that is in the sewer. Your 401k (retirement)has lost 20% of its value so far and continues to tumble.
All this while CEO’s get tens of millions as bonuses. WTF?
The system is broke and broke badly.
Let the worst off banks/brokers/hedge funds and the rest of the theives fail.Someone has to pay for this mess and it shouldn’t be innocent and responsible savers, stockholders and taxpayers.
Start rewarding savers and give tax credits to owners of fuel efficient vehicles. Stop lowering interest rates and heavily tax gas guzzlers. Punish the crooks who have deceived bond purchasers. This means jail time.
One last thing: Don’t expect any candidate currently running for office to fix things – they have been and will be part of the problem, believe me Obama will not lead you to the promised land.
You have to use your assets as a tool for change. Get what you pay for. I hope you get the drift.
I beleive we are in both! However the scale seems to be tipping towards the inflation side in my opinion. We are concerned about gas and groceries. With gas so high we had to cut back on travel and are more frugle with trips and now shop more at BJ’s and Sam’s to get more bang for the buck, also have cut back on how much we spend.
Another case of the people who exercise restraint and live WITHIN their means….getting screwed. Housing prices going down is not the end of the world…and if banks get stuck with some foreclosed houses…too bad. WE DO NOT NEED A BAILOUT.
Stupid is as stupid does:
Stupid: We have a strong dollar policy – (This while the counterfeit press in high gear as the government borrows 2 billion a day from China, prints tax rebates out of thin air and offers banks BILLIONS at auction.) Who is that a strong dollar policy????????
Smart: Gold backed dollar, dismantle the Fed, rein in the budget.
Stupid: America needs to cut its dependency on foreign oil (This while each day we – and China -buy more and more of it.)
Smart: Pass a law offering tax incentives to companies who mandate their employees work from home 2-3 days a week. Invest a trillion dollars in solar, America could be a manufacturing nation again. Pass a tax cut for those driving cars that get over 30Mpg and tax those that drive SUV’s and trucks (for personal use.) Offer tax cuts and cheap government loans to those who invest in alternate energy for home and business.
Stupid is us believing that all it takes to fix something is “someone” (W) saying that this is the way it is. Saying we have a strong dollar policy and not doing something is stupid. Saying we need to cut our dependency on oil and not doing anything is stupid.
How is it we can spend 2 trillion on a war against terrorist and not even get the country right? America can’t generate 1 trillion to dig us out of this mess?
well, I’m more concerned with the American people thinking with their pocketbook and not their head. USA Banks have no dollar cause they are all overseas and until the consumer quits buying cheap foreign items the dollars will continue going over to foreign hands. It’s all about greed, greedy corporate CEO’s, greedy brokers on Wall Street, greedy self-centered politicians on that big hill and a greedy American consumer talking “I’s” and never “WE.” America is in sad shape when the biggest employer is a dang 5 & 10 cent store and the government is second….and neither make anything. This so-call global free trade crap could be fine but if America doesn’t make anything for the World it will never get those US dollars back. A child with a 3rd grade education knows that and if that child has a lemonade stand and that glass of lemonade don’t sell for a quarter per glass he/she is gonna lower the price until it does sell. The America consumer needs to pay more attention to the child with the lemonade stand cause it’s all about supply and demand.
This economy is entering into the “perfect storm” of high inflation, increased unemployment, and critically weakened currency. To refer to the looming crisis as a potential recession is softballing it. To speak frankly, a depression is on the horizon, and cutting interest rates, or issuing tax rebate or any other silly gimmick the government can think of will be of no effect. The chickens have come home to roost, and an American we have never seen before is beginning to emerge.
What else can we expect though when a country elects unqualified leaders simply because they feel he’d be a cool guy to drink a beer with. We have got the government we deserve, and the price of this blunder will be more than we are able to pay.
Hang on, the ride has just begun. Trust me.
It seems to me that the low SHORT TERM interest rates are causing the current weak dollar, resulting increase in commodity prices — particularly $108 oil — and overall inflationary pressures. Not long ago, 1year treasury was yielding 1% and the 1yeare libor was also at about 1%. Today the 1yr t is at about 1.6% and the 1yr libor is about 2.5% — a whopping 80% premium!! Even before the Feds started lowering the short term rates there was a 50% premium. If there is any corellation between these rates and the $ v euro it is not surprising that the euro is trading at about a 50% premium since its days of parity to the dollar.
I would venture to say, that in fact the weakness in dollar had prevented any new money coming into the United States mortgage markets and this is reducing the liquidity. Is it not surprising that since the Feds started lowering the short term rates the mortgage rates have actually gone up — most definitely for all conforming loans.
So the question then is — who is benefitting from this Fed handout!? It is the big B’s — yes the big banks. Who in their right minds would actually go through major restructuring and bonus resuctions to get back into profitability when they can be equally profitable by simply maintaining the high operating margins. So the borrowings are at lower rates and loans are at higher rates. It seems like minus the losses on bad loans, banks are operating at all time high margins!!
So that brings us to the final question of the great altruistic mortgage/housing bailout for homeowners that just isn’t! Homeowners is a misnomer in these instances. They are merely LOANOWNERS. A typical person in that situation in the San Jose bay area may own a $600k home with a $600k loan on it. Market rent for such a property about $2000/mo. Payments including interest, taxes, insurance, maintenance $5500/mo. Income maybe about $8500/mo. Tax break maybe about $1500/mo. With a net cost of $4000/mo instead of renting for $2000/mo. If this loanowner were to let that loan go and was not enticed to holding on to her/his property(loan) at this time, they could actually become a homeowner 5 years from now with a down payment from thier saving of over $100,000 in their account in that period. In fact, they could probably buy that same property for about $500,000 with a $100,000 down and a loan of only $400,000.
Increased competition for survival and the prospect of loses on loans are the only things that will actually make the banks turnaround and make good business decisions.
It’s the job market. You keep your job, you can always find a place to live.
You lose a few dollars on your house or through inflation, it’s bad but to think that’s comparable or worse than being out of work is showing at least a lack of imagination.
The suggestion that the “Foreclosure problem could be resolved by coming up with a MANDATORY for converting the failing Mortgages to 50 Year Fixed Loans” is what other societies ascribed to to fix their problems. It’s called communism. If that’s what you want, there are still a few countries out there that would like your support.
The the dollar will callapse completely, then the Euro will take over, for about maybe approx three months then it will callapse. I know I know, I appear as an alarmist and so on. Just 6 months ago I warned persons and had a survey performed, regarding how many believed that a world wide food shortage would ever happen and would there ever be a shortage of wheat, most stated never, never will happen, only 2% agreed. Now you can see riots and social unrest arising from the shortages! No glory to me… You see, its who you know, what you know and how you know it, but there are some powerful players out there so understand what I am saying. Good luck and best wishes in the future.
I am more worried about inflation and a weak dollar since we are retired and live on a fixed income.
Recessions, I believe are a natural reaction to economic imbalances. What Mr. Bernanke is doing I’m afraid will only make matters worse. The United States needs a recession for it to get healthy again.
The housing market would never have collapsed if the FEDs didn’t keep systematically raising interest rates to “cool the housing market & control inflation”.
Now rate cuts are a step in the right direction butlending terms are too tight for many borrowers to qualify.
It looks to me like Bernanke did more damage to our economy since taking over from Greenspan than even 911.
No wonder foreign investors are reluctant to invest in our economy and the U.S. $ is at record lows.
If the Feds want toget out of this mess they need to increase conforming loan amount mortgages limits and jump start the real estate market or else things will get worse.
First off, just admit that we are in a recession. Quit moving your lips without saying something, like the truth. The Federal Reserve needs to stop lowering prime as it will weaken our dollar even more. What has it done in the past several cuts besides nothing. What we need is lower interest rates on long term rates to get the money moving again and for investors to buy the surplus in homes. Who is going to want to buy these homes with high interest rates? Washington has deep pockets and somehow they are sleeping at night. What a shame the economy is in and what a joke the stimulus package was and in what month is that coming? The only safe place for money is in the bonds. This is a true state of emergency. Who is going to rise and take charge of this once great country?
It isn’t easy to differentiate between these conditions when all of them contribute to what will likely become a perfect economic storm. Government’s traditional efforts to control and stimulate our economy is already hamstrung by a national debt that grows steadily toward ten trillion dollars. Little headroom remains with which to pump dollars into our sagging economic corpse. Efforts by the Fed to do so by lowering interest rates make great headlines but while the banks pay less, favorable interest rates that could help consumers buy down the housing inventory are non-existant.
Inflation can’t be stopped while the cost of virtually every basic commodity spirals upward. Every expense category in my business seems to increase each month, led by transportation. Meanwhile, consumers are spending less or not spending at all.
The unhappy fact is this–we need a significant, international, sustained, economic correction. I believe we’ve finally reached a point at which it’s impossible for Federal intervention to prevent it. Besides, we already have so many bandages in place that we can’t see (or remember) why we started bleeding.
I am a responsible house owner and have paid off my mortgage and have savings in the bank. I am now being asked to receive a drop in the interest income because of irresponsible people who went and bought houses way beyond their means with little or no down payment. I have done what the fed wants me to do. Move my money outside the US to currencies that pay me higher returns and thus causing a further drop in our currency. We will now import huge inflation and very soon the feds will realize you CAN NOT reduce long term interest rates! In fact 30 year fixed rates have INCREASED. No foreigner will give their money away for a pittance. So the feds can keep printing worthless US dollars and try to hive off the papers to foreigners, but very few will keep buying junk bonds. In short 1 year from now, inflation will eat up federal and state budgets and we will have stagflation all because we are trying to delay the inevitable – trying to rescue people who should not have been signing on to bigger loans then they can afford. No use blaming the “greedy” bankers as some on this board are doing! If my house price falls, so be it, that is the price we all have to pay because the inflated values are thanks to Greenspan who was responsible for both the tech bubble and then the housing bubble. Bernanke will be known in history for the massive inflation that he will cause. Our politicians ofcourse will keep asking the feds for more paper to be printed and throwing their largesse to their constituents and which will depress growth for a long time. Get ready for foreign “sovereign” funds to buy up our jewels for the cheap because all our money is now held by China, Japan and other creditors.
Here’s how I’m dealing with “Bush’s” inflation mess. I now skip breakfast and lunch and for supper I have a bowl of soup and a hot dog to save $$$. I wear a T-shirt and two sweat shirts as I have my thermostat set at 52 degrees as I sit here in the dark. When the outside temperature reaches 53 degrees I open the doors and windows to “warm” up the house. I now ride my bicycle to work and to the grocery store to buy my soup and hotdogs. I cut the TV cable down to basic. I wash with cold water. I get my clothes now at the Salvation Army “superstore”. Soon I’ll be cutting my phone service and using the internet at the public library. Now all I have to do is to get a couple of goats to keep the grass “cut” this spring and summer. When the property taxes get finally get too high and they take my house I’m not worried as there are a lot of bridges around here to sleep under. So, Mr Bush, I’m all set. You’ve knocked me down but not out.
Who in their right mind actually thought that there was any justification for the DOW being over 14,000. Prior to 9-11 the DOW was hovering in the 11,000 to 12,000 range and every body thought our economy was just fine. We are know nearing those same numbers but everybody is crying and singing the blues. We Americans need to shed some fat and get back to basics and everything will be just fine.
What is happening in today’s USA economy is the creation of about 400 new billionaires and about 400,000 new impovished souls.
The country is in need for an overhaul; a “Re-tooling of America” and not more “change”.
Two immediate solutions:
1. Legislate or Regulate Sub-prime mortgage lenders to immediately offer long long term re-mortgages to sincere homeowners who are attempting to hang on to their homes. i.e. 50 year mortgage at 5%-7%, enabling them to keep their homes and have future options when/if the economy improves.
This would keep far more people in their own homes who are motivated to maintain them better, as opposed to renters. And, as other bloggers mentioned, would give some degree of comeuppance to the predatory lenders who lured them into the dead-end tunnel, without requiring taxpayer intervention.
2. As the world will continue now and into the foreseeable future to run on petroleum, immediatelly legislate to increase the production and refining of
needed petroleum products from all sources within the control of the U.S., i.e. ANWAR, Offshore, etc., wherever it can be found. Turn the “Greedy” oil companies loose to race to get there “firstest with the mostest”….The best way to arrest inflation and boost the economy is to create a surplus of oil in the market as fast as possible.. The market runs on supply and demand, and prices always drop under a surplus.. Supply side economics always works….. ..
Then use surplus supply to underwrite the realistic research of all the “pie-in-the-sky” alternative energy sources..Some will eventually pay off and supplant some petroleum. Meantime let’s get off this hysterical rush to send most citizens back to living in caves, while the few self-annointed elites live the good life while devising ever more lame excuses to raise taxes and fees on the middle-class to finance their hare-brained schemes…….
Inflation is the real danger here. There is no such a thing as ‘short term inflation’ and what is happening now is definitely not ‘short term’.
Millions are on fixed income. Those who were wise enough to have some savings are now being punished for the guilt of irresponsible who borrowed as if there is no tomorrow.
This what happens when government just ‘print money’ to fund things and schemes we have no money for. Imagine if normal people were allowed to print their own money whenever they needed. We can expect individual to be responsible when their government is not.
This administration brought the strongest economy in the world down. Bin Ladin must be smiling, a bunch of idiots are ruining America and doing more damage to its economy than was ever possible for any power in the world. Instead of killing a ‘bug’ that infested our home in 2001, we burned our home down.
But wait, our wise government has the answer! They will “print” $600 for each family to spend. This should save us and correct everything …
It was a terrible mistake to elect bush in 2000, it was a total disaster to elect him again in 2004. We are now paying the price.
Inflation is by far the more serious problem. The ECB has only one mandate: control inflation. Why? Because Europeans have experienced severe inflation and realize that it ruins everyone. The unemployed can be helped through government programs. The weak dollar does result in some inflation, but no one seems to be talking about how using feed grains (corn) to make ethanol to put in our cars has driven up the price of grain and thus bread, meat, milk, and many other foodstuffs. And making ethanol will have no depressing effect on oil prices for years to come. It is a great boon for the mid-west farmers, of course. And, trust me on this, most of the profits will go to giant corporate farms, not “family farms.”
There was a time when the US was in a position to affect the price of oil by reducing our demand. But now there is such a high worldwide demand that cutting our consumption by 10% would have so little impact on overall demand, and thus price, as to be negligible. We can try to strong-arm the producers, but we are no longer in a position of power when we need them more than they need us. We need to realize that we are no longer in charge of the oil market and start to act accordingly.
Tbe weak dollar and inflation should worry us more. These will reach everyone and hard. The housing might have influence the economy but for the most part will affect those who got themselves into this mess, the home buyers. They took a risk at buying a house and now they are paying for it. The rising prices will affect everyone-from driving a car to buying food to buying clothing.
Lowering the interest rates is equal to pumping “empty” money into the economy. This must cause inflation. Conversely, not pumping the money means stagnation. There is only one way out of this dilemma – stopping depriving the economy of REAL money (money being equivalent to real goods or services), and that means lowering taxes and curbing wasteful government spending.
I’m more concerned with the falling dollar and the Fed’s lowering its interest rate. Where’s Andy Jackson when you need him?
Not concerned with lower interest rates. Actually the lower the better. The less I pay for interest on my house the more I have in my pocket. The interest rate can’t control the price of oil. The price is the same world over. As for the job market it has been bad for awhile. Many are underpaid or out of the job market. Illegal immigration hurts the lower unskilled pay and outsourcing hurts white collar jobs.
Massive layoffs hurt the most by flooding the job market with thousands of people, hurting morale and buying power. Emotion is key more than the math in many instances.
There’s a reason why our founding fathers wanted the printing of money handled by the congress. First, that the people should understand finance directly – that the people would elect the BEST from amongst their ranks to not only handle the needs of the population but also the DEFENSE of the population through the dollar. The FED is constitutionally ILLEGAL, read it for your self, congress is SUPPOSED TO PROVIDE for our monetary needs, not a private banking cartel. The FED also breaks multiple Anti-Trust laws, it’s terrible. Until the FED is abolished and until we are placed back on a gold/silver standard, our dollar will erode as the FED continues to print worthless paper backed by promises of future american tax value, which in turn, sucks the wealth from our nation – how many older folk now realize, they can’t retire, thanks to inflation? Inflation is not proper, it is an undue and artificial expansion of the money supply. Everytime the fed allows more money into the system, they’re dropping the value of the fiat dollar. The wage and price spiral, which is merely a consequence of inflation, is being blamed AS THE CAUSE, which deflects the blame from the real culprits – ineffectual damaging government, ignorant of fiscal practice, and the banking cartel privately held who insures that there is no safe store of value (remember when gold was confiscated?).
While we may have backed ourselves into a corner where rate cuts are the only option. The fundamentals of our spending-based economy are all wrong. Americans need to save more, spend less, and our government needs to find a way to decrease our deficits, i.e. tax more or spend less, or both. While I would not vote for Ron Paul, his ideas were right on fiscal policy.
all of you who want the government to assist those with poor credit and financial problems need to read Adam Smith. We are moving towards a socialist economic system and away from a capitalist system. Read your history books, the new deal did not help the economy, the WW II did!
Let’s end this mess. Iraq needs to foot the bill and pay with oil money for the: 1. ecomonic costs that our taxpayers pay, and 2. the loss of life to the families of our american heros!
Every great empire in history has fallen……that is to another great empire.
Let us hope that America (our great country) has not started its decline from its 200+ year lofty perch. Lets act as a unified nation and correct our ways. Everyone is culprit! The fact that most Americans are “Keeping Up with the Jones” has created much of the credit crisis on all levels (Mortgage, HELOC and Credit Card). I agree with all the posts on this forum. Well spoken and I back the majority of the feedback. The irony here is that the majority of people willing to post on this topic are the smart ones in America. The majority don’t have a clue. Time for change. I predict not only a bad recession but a possibly mini “greater” depression as alluded to by Glen Beck on a recent CNN article he wrote. It doesn’t look good! Luckily I sold out of the market near 14,000 (DJIA). “You can’t time the market” but its easy to apply common sense! Ladies and Gentlemen…there is more room to fall…Its going to get rough…hold on!
Recession should be considered first and foremost by every person. The rate cuts will keep the investors liquid to carry the debt load brought about by all the defaults. The Feds need to control inflation so we can continue to survive in this country. If they don’t regulate prices as a nation we will not be able to afford anything therefore bringing the continued downfall to the economy. Retail revenue will continue to reduce as we channel our funds to survival. This is where cuts are needed.
The article is right on. Inflation is the bigger problem so I hope the Fed only cuts a half point. If we can stay above 2% for the year, we should be OK. Tough love, though.
We have to allow all the remedial efforts to work. We are in a recession – I know what they look like. The difference in this one has a mortgage/credit crisis – that is a variable, the depth of which is yet unknown and we don’t know how long it will take to normalize.
What people need to do is not to panic or sell, just hold on as best you can. When you get your IRS (stimulus) check, spend it quickly and wisely.
We also need to migrate away from oil and into wind, solar, ethanol,nuclear, clean coal, etc etc.
Since oil is a matter of national security (we have federal oil reserves, etc) and since we are at war, we should request that the big oil companies move R&D money and some of their profits into funding these alternative energies. It’s a great hedge for them and great for our nation. Hey it worked in WW2. Typewriter companies made rifles, car companies made tanks. Exxon can fund a bunch of nuke plants and a wind farms, and yes, reap some more profit.
Lets not forget the slumping housing market is the logical reaction to a correction that was not exactly a surprise to many. Even the eternally optimistic National Association of Realtors (NAR) has had to adjust downward their outlook on housing as a steady stream of ever increasing doom and gloom on the housing front continues. I am in the same position as millions of potential home purchasers and that is one of sitting and waiting for the housing market to settle. I am NOT paying $400,000 for a house that will only be worth $350,000 a year from now and probably even less the next year. People celebrated when their homes were increasing at 30, 40 50% a year but now refuse to believe that their home may decrease by a whopping 10% or more. Unfortunately, these sellers who refuse to sell at a 10% reduction now may well be selling to me at a 30 or 40% reduction 1 – 2 years down the road. I don’t think too many people would argue that more people are losing money because of the depressed stock market than they are on housing. Everyone with any kind of retirement account has lost a considerable percentage in the past year alone. Where is our bailout for this. I don’t see any financial institution or government agency coming to my rescue when it comes to losing money in these investments. Why is it then that they are so willing to come to the aid of investors of houses. I don’t see one iota of difference between my investment (stocks) and their investment (houses). People buy houses for one reason, and one reason only – it’s an investment. If they only wanted a place to live they could rent a house. Owning a house hopefully provides a return on their investment, unfortunately their house investment has gone south just like my stock investment. Don’t hide behind the “I wasn’t given all the facts” myth. Can I use that excuse to have the government help me out on my stock loses this past year – we all know the answer to that. The over $500 billion that will be lost due to sub prime mortgage foreclosures is really nothing compared to what will be lost in housing values across the nation. Why isn’t everyone with a house that isn’t going into foreclosure getting help from our government. They all lost alot of money too. This housing/market/job/recession crises cannot be fixed by bandaid solutions offered up by banks and government. Sadly though, it will correct itself at the expense of the American people and we will move on.
I was in my 20’s in the 70’s and lived through the aftermath of Vietnam, the oil crash, and stagflation. After that, inflation scares me the most. But more importantly, I have finally come to understand what is happening with the Fed. I invite you readers to type “who owns the Federal Reserve” into Google. You will find that the big banks do not the US government, and they in turn are owned by the old moneyed families (Rothchild, Lehman, Morgan, Loeb, etc.). Folks, these guys are using the Fed to bail themselves out after they got their hands caught in the mortgage cookie jar. The Fed reduces rates, “loaning” the banks money at negative interest, they skim the profit, and pass the hit in inflation onto you and I. I’d say it’s time to end the Fed and put the money control back into the US government, aka we citizens. Oh, and if we would stop bleeding money (and brave troops) into Iraq, that would be wise too!!
It is not wage increases causing the inflation, it is the Fed printing too much money and debasing the currency. This is why gold and the other commodities are soaring and will continue to do so.
It seems the Fed has been too accomodative for too long. The real risk appears to be weak dollar/inflation.
The weak dollar and massive looming inflation are a direct result of “conservative” politicians that chose to go to war in Iraq to stimulate the economy rather than generate new revenue here at home and rebuild our infrastructure. This choice will raise taxes on our grandchildren and future generations while the current administration will brag that they lowered taxes and laugh behind our backs as to how they secured “billions” for their cronies in unbid contracts. The answers to the current problem will be neither simple or painless , but unless hard choices are made and irresponsibility called upon to suffer the fruit of it’s labor the discussion will continue “ad infinatum”. The greatest terror threat we currently face resides in our own borders , and yet we have taken no action to neutralize the threat!
All I know is, my husband and I (and baby) were doing fine and now we are barely making ends meet. Gas, groceries and credit fees are eating into our budget to no end. We have a home of our own at a good rate, but our credit cards are what was our downfall and in some respects continue to be.
Now, I would like to say a word to all those saying this is all a dandy situation to make us conserve oil. While I agree in some respects to the point that the US should reduce its dependence on oil, the timing of this hard lesson is certainly hard on the average American (even those who agree) and I hope that people remember that. I like to consider myself environmentally conscious. Unfortunately, I have only just begun to change my life in that respect, but sadly, I am finding out that being environmentally conscious takes money. We cannot afford to buy a fuel efficient car at this point (although my little Mitsubishi isn’t exactly a guzzler), we cannot afford to move closer to work, we cannot afford organic groceries (though I try to buy more of that for the baby now), and we cannot afford to use just one car. Our economy is hurting the average individual just trying to get by every day. I don’t know exactly what needs to be done (although I wish some people would look more at the credit CARD companies, as well), but to everyone proclaiming the evils of oil, please have some compassion for those who cannot conserve anymore than they already do and are STILL beginning to falter.
This neoliberal talk about inflation fears is just wrong. If you want to fix the economy, go dig up a Keynsian and ask them how to manage things… if you don’t believe me, compare the earnings graphs for 50th percentile Americans between 1950-70 and 1980-2000.
Dr. Ha-Joon’s “Bad Samaritans” discusses the speciousness of neoliberal theory at length.
I see the slumping housing market as something that we got ourselves into. It hurts me to see the prices of everyday items going up because that hurts my pocket. I have a house and no HELOC, so it worries me more that my everyday expenses are going up because my loan is fixed
The Fed’s primary responsibility is price stability. Since they’ve clearly lost sight of that they are no more above reproach than the banks whose primary fiduciary responsbility prior to lending money was to verify income, check credit scores, ensure ethical, fair and accurante market appracaisal and to maintain a mortgage-to-income ratio that could be repaid.
Since both entities have thrown out their primary responsibility, you’ll notice what has happened.
The fed’s preference would be to have moderate growth and price stability but their primary responsibility is to maintain price stabiliy. With another 75 to 100bps cut, inflation and inflation expectations will come unmoored and everything they’ve lied to before Congress will be shown to be such.
And to the person who said that prices don’t matter if you don’t have a job, I’ll counter that for an upalatable 6% unemployment rate, that means it’s okay to erode the standard of living of 94% of the working population (and 100% of the retired population) to keep 1% more of the people employeed. The impacts of inflation to the standard of living and to affordable housing is far greater than a slowdown in the business cycle.
Well can we say raw & unfettered capitalism at its fines will bring the USA down finally in the not to distant future and maybe we need this lesson to get back to our roots. Somehow we have become a nation were spending and borrowing is all that matters in the I have to have it now mentality. What a bunch of crap we’ve been feed. Whatever happened to the work hard and save up your funds for the future and take care of you neighborhood early 20th century mentality? We the people are to blame as we’ve let all levels of government kowtowing to big business which only cares about the bottom-line and maximizing profits at the general publics’ expense, be it outsourcing of jobs, falling wages, etc . Business and especially our own government no longer cares about it people except during an electronic year. The Fed is a perfect example of this as Bernanke does what is good for Wall Street and not Main Street. Future loans of your own tax money just before the upcoming election will boost the economy in the latter half of this year but next year in 2009 after the election when the Fed and the federal government have nothing left to use for stimulating the economy will be the beginning of the end. We have lived like there is no tomorrow borrowing money from any and everyone and the chickens are coming home to roost as the old saying goes. For me I’m starting to wonder were to go before the bottom falls out here.
I’m more concerned about the stupidity of the writer of this article. What? Did he just come from the 1970s?
STUPID.
We are in an unprecedented situation. Massive debt driving the dollar down. Foreign commodity caused inflation (NOT DUE TO HIGH WAGES). So raising interest rates here will not lessen inflation. And lowering interest rates will weaken the dollar. We need Govt. and Markets who recognize the global cause of this situation. And stop changing interest rates of money. Instead invent some new strategies, even though anti-business, temporarily. Such as those suggested by other commenters here. (Freeze mortgage rates, put in price controls, create a public works job program, etc.)
Think differently. Or else we will have 1929 all over again.
More than 50 years you were developing your country on the basis of the big debt. For all these years you were paying it off by printing green worthless papers called Dollar, instead of by real income. Now when somebody shouted “The king is naked” you will payback for cheating the whole world. Your fall has just started and it will never stop…
Set up a formula and freeze the rates of the subprime mortgages for those who have substantially met their obligations.
The banks loaned irresponsibly, let the lenders EAT it.
As to the economy, I think the job market has been in a funk since the turn of the century. Free Trade… I’m a very conservative college graduate with 20 years experience and I HATE those words. We are sowing the seeds of our own destruction by giving a tin-plated dictatorship like China global power, and access to our public debt.
For the short term, inflation is less of a worry to me, competition will likely bring the prices back down over the long term and the inflation is somewhat spotty, not stagflating, and driving high interest rates as in the Carter years.
I think we need to determine to wriggle free of foreign oil… and if you really want to stimulate the american mindset have the fed start living like we have to live… wondering about our jobs… afraid to buy a car when the old one is pushing a quarter million miles….
Stop spending us into bankruptcy, and get us out of the trade robbery that is killing our taxpayers… and get congress out of China’s back pocket
When we start losing low end jobs industry takes notice and watch for new buying trends. Next comes job loses in larger corporations employing professionals and then high paying production line workers who buy low to medium priced homes.
If we cannot resolve the housing dilema then we are in trouble. This housing trouble has hurt the EU and their banking industry, they bought many of the “American” low valued sublime packaged motgage certificates..
All in all lowering the interest rates will not help the housing industry. If people do not buy, and we must remember, many people who can, do not want to, they do not want to find out a year later that the same home they paid $375,000 for is now $25,000 less expensive.
Listen folks, look around, we are huting and and it can only get worse before it gets better, it will get better, “but” a lot of good people will get hurt while the oil company exeutives get rich and we/you get poorer.
Will the falling dollar value hurt us? More than anything I have mentioned, the falling buck will entice the Chinese to exchange their dollars for EU money and forget about the country who gave them most everything they have in terms of living standards and when that happens large/% of clothes shoes food etc produced in China being shipped to the U.S. goes up in price. The American dollar will become “second place”, (IF NOT last place) to all other confirmed stronger dollars/monies.
While your President, President Bush claims to give the people back its taxes his goveernment goes in debt more dollars per second, second to no other President of the United States. What his cabinet has forgotten to tell The People how to repay this debt.
Don’t worry, as a Canadian I know that 80% of our exports go South and when you go down so do we.
One thing, “for sure”, this is not just an American problem it affects all industrialised countries. Therefore it has to be fought by all.
Hoping it does not get as bad as I perceive it will become.
I believe that the housing balloon drove the DJ Industrials up a extra 4000, so when it gets back to around 8000 we may see a levelling out of this economic dilema.
Keith
I believe a recession has started and is going to get alot worse. Jobs create consumer spending and weatlh. If our corporations continue outsource jobs outside of the country to build their bottom lines, soon there will be no way out. Jobs, consumer spending, and better trade policies, while cutting our deficits will strengthen the dollar. Government is not controlling spending. We must have drastic economic and political changes to save this country.
I am very concerned about inflation. interest rates are low right now and I do not believe lowering the interest rates more will correct any of the housing problems that exsist
Wait a moment..who is out there spending $5 for coffee & $300 for sunglasses? Every middle class american I know is struggling to make ends meet, and being forces to choose between gas and groceries.
I greatly feel the pinch in my pocketbook. I’ve been in my house 10 yrs and never missed a house payment, yet I’m stuck there because my equity has fallen because of greedy banks. I either stick it out or I walk away empty handed. Somebody tell me what I did to deserve this? Why is our government bailing out these mortgage lenders yet allowing my equity to disappear? Why are oil companies allowed to make profits in the billions, yet I have to scrape together change to put gas in my car(a honda..no hugh SUV).
Who the hell is on my side and the side of middle class Americans slipping into lower-middle class? I’m one of those boomers..am I going to lose everything I own?
We have already felt the pinch of inflation which is largely due to the weakening dollar & the sky-rocketing oil price. If we do not try to salvage the US economy by strengthening the dollar but just keep lowering the interest rate, our economy will be doomed. Besides, the US government have paid out too many for the war in Iraq & Aghan. without regard to our domestic thirsty need of hard cash.
Ideas who’s time has come:
If the Boys in Washington and the FED had any common sense a good part of the Sub Prime and Foreclosure problem could be resolve by coming up with a MANDATORY for converting the failing Mortgages to 50 Year Fixed Loans with maybe a 6.5% to 7.00% Interest Rate With the extended time frames in may cases the Borrowers would be able to afford to keep the houses. Especially if the current arrears and 1st years Taxes & Insurance were included in the principal to be financed.
Later on when these borrowers are in better financial shape and can afford shorter term mortgages they can always refinance them.
This will not save everyone but it will certainly help keep a lot of people in their homes. It will also not leave those of us who approached our finances in a prudent manner NOT HOLDING THE BAG for those who did not. Further, It would force the Greedy & irresponsible Financial Institutions to live with the errors of their ways.
Finally, it would help the rest of the Property Owners to face less of a decline in the values of their Properties due to Foreclosures and Property Abandonments in our neighborhoods
I love the slumping housing market. Someday, maybe we can afford to buy. But only if our savings aren’t wiped out buying bread.
Article 1, Section 8 of the US Constitution specifically says that Congress is the only body that can “coin money and regulate the value thereof.” The US Constitution has never been amended to allow anyone other than Congress to coin and regulate currency. In light of this information, how it is possible for the Federal Reserve Act of 1913, and the Federal Reserve Bank that it created, to be constitutional? Why is this private banking cartel allowed to reap trillions of dollars in profits without paying taxes?
Time for a real windfall profit tax and stop the nonsense with blaming OPEC for the cost of a barrell of oil when it is our own Wall Street Futures that are driving this insanity! Oh by the way just how much do we really have in reserve?????
Short term trends in consumer prices is least (or should be the least) of our concerns. I’m more concerned about oil getting rebased in Euros. The weak dollar is a major reason that we didn’t see a production boost from OPEC. And you can bet the China would love to get out of the 1.33 TRILLION USD it’s holding (they’re already threatening sales as a means to counter political pressure from the US). These are precarious times.
This is very disturbing and our current Administation seems to not care at all… Why should they it does not affect them on a daily basis like does most Americans making low to middle range incomes, as we wonder how we are going to continue to put a meal on the table for our children! This is an OUTRAGE! Between myself and my Mother’s homes we spent over 1100.00 in groceries and thats between 6 people!
I’m worried about everything! This is a very difficult time for America in economic terms. Several factors are coming together to unleash “the mother of all recessions”. It’s true, recessions are part of the economical cycle and sooner or later corrections have to happen. But this time around the clouds are darker than ever. I know this may sound too pesimistic but there are so many problems in so many areas that it’s hard to see this situation with a gentler eye.
As long as Americans feel they are entitled to the white picket fence and the new car and home we will be driven into the ground. a report I read said the average American spends 101$ for every 100. This will kill an economy and will drive inflation and other evident problems. Half of those people who BORROW can’t pay the interest not alone the principle on the money they BORROW. The concept of borrowing says you will pay it back. Also you have the idiots who allow this to be practiced. Then we turn and try to bail out the persons who don’t know how to handle their money and debt. This only adds fuel to the fire. Sure Interest rates, Gas, Energy, Food etc.. Kill, but it is nothing in comparison to a country who doesn’t know how to handle its wealth. How easy it is to seperate a ignorant person from their penny, especially when they don’t need to take responsibilty for the money.
What concerns me is: It’s obvious that the government we have is TOO BIG TO FUNCTION !
There doesn’t seem to be any competent “people” that actually know what they’re doing ! Compound that with the “committee mindset” (inability to make a decision in a timely manner – whether right or wrong !). Add, to that a culture that permits no one be held accountable ! Add to that a Congress that is bought and paid for by special interests !
We’re screwed !
Would that the Fed’s hands WERE tied by the weakening dollar and worsening inflation. The little girls at the Fed are afraid of big bad Wall Street. It’s time to put adults in charge. You might find some at the ECB. Hell, bring back Paul Volcker!
Hi Paul:
I hope readers are reading this. I know how awfully, awfully painful inflation is in the short term, but I think it is the best thing that could happen to this country with the likes of George Bush!!
Americans should realize that a weak dollar heightens our trade position against China and makes our technologically superior goods advantageous abroad.
It hurts at home, but I believe if this continues, America will be on great footing again — not dependent on foreign money. Our only problem — get George Bush out of office — and get away from oil.
Interested in comments. Respond to: dhotsmith@sbcglobal.net
OUR FISCALLY IRRESPONSIBLE FEDERAL RESERVE LED BY ALLEN GREENSPAN HAS PRECIPITATED OUR PRESENT RECESSION.CONTINUED DESTRUCTION OF OUR NATIONAL CURRENCY BY THE FED PLUS THE DEFICITS OUR FEDERAL GOVERNMENT ARE RUNNING CAN ONLY LEAD TO A SIGNIFICANT REDUCTION IN THE US STANDARD OF LIVING. THE FEDERAL RESERVE FEELS IT SHOULD RESPOND TO THE SPECIOUS NEEDS OF WALL STREET AND NOT THE RAVAGES OF INFLATION.MAYBE BERNANKE AND HIS COHORTS SHOULD GO TO THE GROCERY STORE OR FILL UP THEIR OWN VEHICLES WITH FUEL AND THEN STATE INFLATION IS AROUND 2%.HELLO,MAYBE THEY SHOULD AWAKEN FROM THEIR DEEP SLUMBER. AS FOR THE HOUSING CRISIS:ONLY A DOLTISH INDIVIDUAL WOULD NOT RECOGNIZE THE DECEIT ON THE PART OF MORTGAGE BANKERS,APPRAISERS,BANKS,THE LEGAL PROFESSION AND MAYBE THE I DID NOT REALIZE THAT IF I MADE HOUSE PAYMENTS OF $25,000 PER YEAR AND MY INCOME WAS $26000 PER YEAR I WOULD DEFAULT NO MY LOAN.STUPID IS AS STUPID DOES.IF YOU HATCHED OUT OF AN EGG,TOO BAD. DR HR BAYNE
Both-Our business is related to the housing market; when the market is slow then then our business is slow. Food costs directly affect us as well as fuel costs to go the places we need to make money or just to get around.
Recessions are part of the business cycle and so is inflation. The problem is that a strong dollar (or weak yen) have driven consumers to low cost imported goods that have masked real inflation.
The second reality is that housing prices went up much faster than the cost of other goods and services. The only way to stop the collapse of th real estate market is by inflation boosting housing values back up again so that housing costs are back in line with the cost of living. Far from being a bad thing, inflation may be the necessary and inevitable correction to the real estate and dot.com bubbles.
Everyone should be worried about the economy, but they should also be realistic. Here are a few things to consider: 1) If you want the price of oil and gas to come down, conserve! In a free enterprise system, a supplier will continually raise the price of a good or service unless the demand drops. 2) There is a silver lining to the devaluation of the dollar against the euro and the yen. It makes American labor cheaper. The jobs that the US allowed to be shipped out of the country for cheap labor may now be replaced by jobs resultant from investment by foriegn companies. The cost of labor in Europe and Japan is rising making labor cost in the US look inviting. 3) The likelihood that Benanke will lower the interst rate again is high; the question is by how much. A significant cut will lower the value of the dollar against forein markets. 4) Don’t blame the government or the companies making money for your financial misfortunes as they didn’t force anyone to assume large credit debts. By the same token, don’t let the government bail out the troubled lending institutions. No one twisted their arms to assume the risk when they were planning on rewards.
The bottom line is that we, the American people, control and are responsible for what’s happening with the oil prices, the housing crisis and the economy. It’s time that we all started making good financial decisions and turn our personal economies around first. The national economy will follow on its own.
I am concerned about both. The government has failed to be responsible for its own action domestically and internationally thus earning very little respect among its own people and other countries worldwide. The results are in front of us — deteriorating government, weak dollar, inflation, and the slumping housing and job markets. Stop wasting people tax money for wars and brainwash ppl– it’s the same thing as shooting yourself in the foot.
The Fed can do nothing to prevent recession. Its panicky rate cuts ARE doing a bang-up job of trashing the dollar and stoking inflation, which hurts all of us. Well, I guess inflation would be a boon to the deadbeats, wouldn’t it? Should bailing out deadbeats at the expense of the honest, prudent majority be our government’s policy?
This apparently started in March of last year when bankruptcies started to tick up despite bankruptcy reform making it harder to file bankruptcy. There was a call for liquidity back in June of last year from the fed by the companies. I’m not sure how accurate the govt numbers on jobs, gdp, “inflation”. what happens if inflation is reported at the real rate of 11%. Social Security checks go up due to COLA..ouch….the sub prime bald eagle was sent flying out to public to hide the CDO’s, CRS, rate swaps on banks books without adequate reserves and the fact that MBIA and other giants insuring these are in financial trouble. Praises to financial accounting standards board for letter 46 which requires the cdo’s to be marked to market. There are a few main players which have spearheaded this and should be brought to justice. We’re watching
Everyone is finding something to blame for the bad economy, the lack of meaningful employment, the falling dollar, the growing depression, the ever increasing security risk in the US, but no one wants to lay the blame at the foot of the tree from which all this is falling, “the faulty government legislation” that has sold out our nation to the highest bidder. US security is only as strong as the manufacturing base of a nation. When legislation favors foreign workers over US workers, a CEO has no other choice then to sell out his neighbor for the benefit of a higher quarterly return on his company’s books. When the US no longer has the skilled labor force it needs then we are just like a company who has blown its targets, we are open to take over. Today, that is what you are seeing. What little US interest are left are being bought by foreign interest. When we reach the point of no return we will have to trade our national independence, sovereignty, and status as a nation for slavery to the highest bidder. You can ask any equities trader out there and they will tell you, the money is all going oversees to foreign markets. There is no money to be made at home here in the US market. For the last 10 years I have watched as the US job market has continued to shrink and become more limited in scope. Not everyone in the nation wants to be a nurse or software programmer. Neither could we afford to be. With the cost of living has high as it is today, the only families who can afford such jobs are single, young, without children, or living on two incomes. If your 50, have children, and your wife is a stay at home mom, you need an income of over $100,000. to stay out of poverty. If your over 50, without work for more than 6 months you are now part of the new poverty group: “Well educated, under or unemployed and losing it all.” Your retirement, you worked so hard for is gone and your about to move your family of 7 into the 10 year old van to live in because you can no longer afford your home.
I cannot be the only one out there who sees this scenario playing out.
I am more concerned with the weak dollar but I am also concerned with the values of stocks. I think house values needed to come down and in a big way. They are highly inflated due to this lending mess. It is unfortunate that so many people were allowed to borrow against this mythical equity created by these liberal lending practices. Poor young people just starting out are better served with more realistic prices on homes.
The FED should NOT reduce rates anymore. The problem isn’t rates…its FEAR. Qualified people are afraid to purchase homes because they fear prices continuing to drop. What we need is stable rates, absorbtion of inventory and responsible lending from our Banks….oh yeah, regulate Mortgage Brokers. Without regulation of these companies…it will all happen AGAIN!!
get bush and chaney to stop raising gas prices and everything else will be ok… when bush was running for election the first time a barrel costof oil $31… now its at all-time high’s at over $100!!
As inflation rises, prices of homes will lower. Food will ALWAYS trump the price of shelter. I could care less about the housing, I can always just move into a bank owned one and squat a while.
I am going to agree with almost everyone on this post. The main problem is inflation and that needs to be the focus. Cutting rates so fast does not shore up the economy. It takes time for this to take affect. The drop of a couple of percent in a few short months doesn’t instantaneously fix the problem. Keep rates where they are at so we don’t go into a tumble we can’t get out of.
I also agree with a number of people on here. QUITE spending your money on things you can’t afford. Why do I see kids driving brand new SUV’s getting 14 MPG and hard workers getting $4-5 coffee every morning? Start spending money wisely instead of using it all. Let’s not forget, the people who are having trouble with houses are the individuals who should not have bought a half million dollar house on 40K a year. Irresponsibility of people for the last few years made this problem much worse.
The economy goes in cycles, its normal, by people spending all of their money and not paying a bill, it made this downfall far worse than it needed to be. It’s pretty basic, if you buy something on a credit card, make sure you can afford it and actually pay the bill. Do people not realize that you incur no interest rates if you pay off your monthly statements, try it once.
That’s my two cents worth. As a recent college grad with a good job, I will be working very hard for my dollar and only spending what I can. For me, I will be able to purchase a nice house in the future because of what has happened in the past couple years. The housing market will crash and I will be able to afford something quite nice as I will save up money and then spend it, instead of spending before you have it.
At 70 and 67 respectively, we tried to scale down 2 years ago. Bought a less expensive house, less property taxes, and a little more savings. It brought us higher income taxes because of less deductions. With the cuts in the interest rate, we have lost hundreds of dollars per month on our savings. With the increased cost of gas and oil, we have increased cost for utilities and gasoline. With costs doubling on milk, flour for bread and cereals, and everything else one eats; should we have made the move. I don’t think so. Are we better off today? I don’t think so. Is it time to move forward with new people in Congress? I think so. Go Drake University.
this is also a prime example of why Social Security should not be privatized! The rich just want you to get your money out of SS so they can get their hands on it in the Stock market! Inflation caused by the weak dollar is not as important as inflation caused by exuberant investment! The weak dollar will cause inflation on foreign products and China used this to fuel their economy with under valued currency! This may in fact over the long run cause some jobs to come back to the US!
Definitely inflation but the price of oil and commodities is another bubble that will burst in the next couple of years.
You can blame our current condition on the administration, the Fed, special interests, or wall street but for the most part we need to blame our society’s obsession with the celebrity lifestyle in the last 15 years. How’s this related? Let’s take a look at the retail goods termed ‘affordable luxuries’ that have made their debut during these years that have given people ‘access’ to the so-called celebrity lifestyle: McMansion homes, $5 coffee, kids with $300 Gucci glasses, Coach handbags and Escalades. Premium alcohol (Patron), the explosion of clubs, Vegas, $50 Armani t-shirts. The list goes on… All this marketed to us to feel like a celebrity. Have you been on MySpace lately? All the kids take pictures of themselves with pouting lips (girls) or like gangstas (boys) all mimicking the photos of celebrities.
Unfortunately, too many people took a bite of the apple.
If you didn’t, you have a better chance of surviving what will certainly be a difficult few years regardless of who’s voted into office. Conservative lifestyles will prevail and once again be praised – not the indulgent lifestyles of Britney Spears and Paris Hilton.
Being a real celebrity or a poseur has a price…
The FED’s only mandate is not to allow inflation out of the bag. Only Volcker seems to have understood that. Greenspan spurred on first the tech market and then housing bubbles. When money is offered for free what did he expect would happen? When the cost of a roof over head increases 20%+ per year what is it besides inflation? Inflation is the great destroyer of everyone but the rich. Recessions are the cleansing part of the economic cycle. They should be welcomed and not continually shoved into a closet or swept under a rug. Sooner or later a major cleaning is required or the house gets boarded shut and is knocked down.
Definately yes! We should not forget that the current housing slump and weakening job market was caused by the FEDs in the first place, when they lowered the rate all the way to 1% and kept it there for so long. The FEDs irrisponsible monetary policy has taken us where we are now. The weak dollar has becoming a nightmare for the Americans. Since many of the commodities in the world markets are traded in dollars, we are the once who stand to loose big. This is a perfect storm coming together and I see no cure from avoiding a JUNIOR DEPRESSION. Only time will take us through it. Wake up Bernanke! Make the dollar stronger! Stop printing worthless dollars! Don’t punish the middle class! Stop bending over for the administration for their failures! Otherwise, history will remember you, along with Greenspan, as the worst economists we have ever had.
On my wall, I have a 1932 picture of a man, in front of the Capitol, selling an apple to a congressman. This time around, maybe we’ll be selling frappachinos.
I was made homeless in 2004. I am stuck 1 hour away from my children and grandchildren. I have lost my business. I have no plans to work outside my home given the condition of the school systems and my Bible based beliefs women should work from home (titus 2:4,5 and Proverbs 31:10-31). In the 4 years my life has come down to a 300,000 mile 1991 Ford Explorer and everything I can fit into it left as mine…no I am not worried about housing and job markets. What worries me is when the nations will rise up and fulfill Bible prophesy concerning the destruction of Babylon the Great found at Revelations chapter 17, 18. I only hope to have enough gas to get out of town. I am not Democratic (remove God from education and law) I am theocratic (parents teach children God’s laws and God makes all laws that we adhere to). I am Christian, which does not appear to be allowed in the United States. I think the housing and job situation is a clue. In the Bible the nations attack and destroy Babylon the Great. That is what worries me.
The fed should raise rate to stimulate savings. If the Government would also reduce or eliminate the income tax on interest from savings and eliminate the tax benefit of borrowing by interest deduction we would have more capital to invest in productive enterprises. Now Govt. gives incentives to borrowers and punnishes savers.
Who cares if the house prices fall? I NEED them to fall so I can afford to buy them! On the other hand, food/energy prices rising is far worse. How can I buy the house if my food/energy budget continues to eat away at what I can afford on a house? Ben Bernanke needs to retake his basic economic coursework… he studied the GD so intensely, he forgot his basics!
THIS INFLATION MUST STOP!!!!
PS: I do agree that oil is a HUGE issue
http://www.oilcrashmovie.com/ Cheny was quoted in the movie saying something to the effect that China would increase global oil demand by 2-3% and production would drop by 2-3%.
The Earth’s oil tank is 1/2 empty. Ethonal uses more water, corn, farmland and gas to manufacture which as our population goes from 6.5 billion up doesn’t help reduce any stress on oil or food demand/prices.
BUT and this is a huge BUT 2-3 years ago the dollar was about 1.18 to the Euro, now at 1.53 to the Euro all thanks to a printing press.
Counterfit? I think the Secret Service should be fingerprinting the money hot off the press.
We also need to look at immigration, google math professor Albert A. Bartlett on youtube. http://video.google.com/videoplay?docid=4094926727128068265 and 7:45 into the video here says it all.
The US can not sustain 465 million by mid century. Funny, ALL the canditates I have heard are begging for the vote.
I don’t think the people nor the newspapers understand the true depths of the situation here. This talk of recession lacks full meaning for the reality of this monetary/financial/oil induced meltdown. I think the word we’re looking for is DEPRESSION. now think about that for a while!
Think about it this way, what good is your job if the money you earn is worthless you are essentially a slave. If the fed doesn’t start raising interest rates to European levels we will eventually end up with hyperinflation. In Germany during WWII hyperinflation was running at 100% every 2 days, think about the repercussions. If the fed doesn’t act to protect the middle class everyone but the ultra wealthy, whom have already moved their assets to safe havens,are DOOMED.
Obviously, we should all be worried about both. After all, a lot of people’s equity is pretty much gone and prices are rising quickly. Home values will continute to fall for at least the next 14 months. The job market is grinding to a halt. Businesses are already feeling the pain; it’s costing more to do business and margins are shrinking. It’s going to get worse as oil prices rise in the face of a weakening dollar.
So what if you lose your job? Credit markets are so tight adn you don’t have any home equity to draw on in an emergency. You have no place to turn and when it’s going to cost anywhere from 5% to 15% more just to meet basic needs by the end of this year, you’re going to be in serious trouble.
We’re going to hear about a big increase in homlessness over the next 18 months.
It seems that Ben Bernanke finally finished that mail order course in macroeconimics 101. It’s too little too late. The Fed should have been clamping down on run-a-way credit by tightening the money supply three years ago.
Inflation is definately the bigger porblem. It is a huge hidden tax burden on everyone. All these FED rate cuts will not allow people to buy more things that they could not afford. Those days are gone because the banks will not lend them the money or give them the credit cards. Get over it. Be responsible and you will get the credit you deserve. That is the problem, no one in this country is held responsible for anything anymore. The slick bankers were feasting on the village idiots. What is unbelievable is that there was an inexhaustible supply of cattle to be skinned. The market will correct, people will lose their homes and some financial institutions will fail if they made poor personal or business decisions. Let the market correct the problem. If you were relying on your home as an ATM machine then you need to take a realistic look at your finances. Let the loan shark financial lenders fail. My home price has fallen tremendously because of this mess. I am proud to say that I am not selling tomorrow (thank God) and my home is not my biggest asset. Everybody gripes about gasoline prices but very few people realize what is the true cause of higher gasoline prices. We have not built a new gasoline refinery in this country since the 1950’s. The bootleneck is that we do not have enough refining capacity for the demand. Due to environmental regulations you will not see another one built, just the upgrading of existing plants. What is the solution to this? Alternative energy. The automakers are finally getting on board. Lets develop renewable energy and then we will quit financing the people who could very well own us one day. They are already working on owning our banking system.
The Fed continued to cut rates when there was clear evidence showing it stoked inflation. They have gone too far with the rate cuts. By cutting the rates, it seemed to help people who made bad choices and took out debt they could not afford, now more people are going to be in a worse position due to the job losses. The actions of the Fed over the past several months did not help, it hurt. And it will hurt for a long time now.
To the person who said that China is the cause of the problem — China may be the cause of the problem, but not for the reason that person implies. Outsourcing actually helped to keep inflation low. Unfortunately, all good things will come to an end BECAUSE China itself is experiencing a horrible inflation itself, probably thank to its stupid fixed currency exchange rate. The official inflation in China is in mid single digit, but most ordinary people sees prices of goods risen 20% or up since last year. Factories are closed on the eastern coast because labor costs is rising. Even worse, China is setting a minimum wage — another sure way to worsen inflation. Their government has increased interest rate multiple times and has not seen an slowdown of inflation. It’s inevitable that they will change to a strong Yuen policy (Lou Dobbs will love it.) Too bad the timing is totally wrong. A strong Yuen will just make the dollar weaker, further tying the Fed’s ability to cut rate. The best we can hope for is for China to continue its stupid fixed exchange rate — artificially keep Yuen low so that our US Dollar remains strong to Yuen. If you listen to Lou Dobbs, Yuen may have to risen 100%. Imagine how much it will do to the oil prices! Suddenly, the Chinese can use the same amount of money to buy double amount of oil import. If that happens, I am pretty sure that hybrid will no longer be a hard sell in here any more.
Through high gas, food and other commodities prices we are all paying for the housing crisis. The Feds are bailing out people who bought homes they could not afford…banks were complicit in this, and both should suffer the consequences of their decisions. Through weakening the dollar with all the additional liquidity the average family is paying indirectly for the greed of others. Why should I have to pay for their greed??
As a former homebuilder who quit in 2002 (for health reasons) I knew subcontractors (framers) who were in 2004-7 making over $150,000 to $200,000. That is more than doctors and other professionals. Before this time these same subcontractors made $70,000 to $80,000. There is really no way to save the housing market. When these subcontractors cannot find work, they will lower their prices for labor. When this fully happens new homes can be built for much less than those currently on the market. As developers realize they are not going to profit on land development for many years and will have to carry the cost (taxes, interest) they will look to get out of their land holdings. All that makes for lower prices regardless of outside forces. This is what happened in 1980 in our area and in other places in the country. At that time high interest rates shut down the housing market. Labor intensive subcontractors prices came down by 30% to 40%. Lots and land were sold for cost. However, by 1980 the prices in our area had just taken large jumps, mostly in 1978-9 so homes were not nearly as overprices as they are today. Nonetheless home prices came down. The market today is in a different crisis and has a lot more to lose as a result of overpricing. The bottom line is that as a nation we are going to have to take a housing hit. The only way to avoid this is to have immigration taking up the slack, which is what happened in London. My understanding of London is that this helped to drive up prices and now it is beyond the financial ability of most to Englishmen to live there. If we allow massive immigration the average American family will not be able to afford a single family home.
As a nation we need to get our financial house in order. We cannot spend beyond what we produce forever. With tax and other incentives we need to promote savings, R&D, alternate energy and other nation building activities.
The biggest worry is the weak dollar and the inflation that it is inducing. The weak dollar is the basic cause for higher oil prices, as measured in dollars. Supply of oil is fine, but the price in dollars keeps going up, as the dollar keeps going down.
If someone does not believe that the weak dollar is a problem, then they should ask themself how many eggs they could buy with a dollar in Jan 2001 vs today, or how many slices of bread or whatever. The dollar weakness over the last 7 years has hammered the value of anyone holding dollar based 401k retirement investments. Forget published inflation rates, what did your last trip to the grocery cost?
If interest rates continue to weaken the dollar, people need to think of how many extra years they will need to work to get back to where they were in early 2001, in terms of “in the store” buying power.
Oil is only the visible tip of the weak dollar iceberg, and the inflation that is resulting.
When will everyone realize we are in SERIOUS SERIOUS trouble in this country??? We are headed into uncharted waters that we have never seen or experienced in our lifetimes. We have lived the high life now we have to come to grips with the down side of this behavior. Most have themselves MAXED out yet knowing and seeing all the signs of a weakening economy, behavior was not adjusted for what was ahead. So here you are today excuses all over the place and refusing to accept your personal responsibility for helping us all get to where we are, a disaster in the making!!! We have all contributed each in our own ways…..
America has a leadership crisis:
We have a Treasury Secretary who is managing CHINA’s economy and currency rather than our currency.We had a FED chair named Greeny who made us get into this volatile mess of subprime mess and everything and he is still making money going around making absured speeches like “chances of a recession are 50 50 ” . What America is facing now is a leader ship crisis in every facets u can imagine and still we look for short term fixes like interset rate cut etc.How low can we cut to please the WALLSTREET? The previous cuts were supposed to lessen the crunch but we are not seeing any effect. Remember, the stock market is not the economy and jobs and purchasing power is the economy.Ben needs to sit with his team and straighten this out.
The Weak Dollar and Inflation.
There are still workers out there who need to deal with everyday high energy & food cost, in addition to balancing their budgets, Helping only those who made bad investments (housing), which caused a downslide in the job market, is a big mistake!
If the people who currently have jobs are caused to expend more money than they can afford, then they too will bow out of the economy. These people are currently paying the taxes that will carry us through the recession and will hopefully help support those who lost their homes.
Not catering to the factors which will support current employees, who have made wise decisions and investments, would create a greater crisis than what we currently have now!
I believe that the simplist Win-Win approach for the mortage company and loan defaulter in dealing with the hosuing crisis is to allow those who made the mortage to continue to keep them but reduce their payments. Their payments could be reduced to amounts that they can afford. The difference between what was owed and new payment amount would be placed in arrears by the mortgagor and accrue interest.
This scenario would prevent mortgage company from be a lanlord and save them from maintenance & up-keep costs, vandalism, etc.
Thus a win-win situation for both parties, while those who have a job slowly help the economy recover…
The mortage companies have every thing to gain by the above proposal.
The sky is truly falling on the US economy. I can’t think of one positive thing about our state of the union. Bush and his anointed pick to run the Fed, Bernanke, is running around like a chicken without a head. And of course the Bush regime has chosen not to say anything about the rapid fall of the dollar which is perhaps the most important issue facing the long-term health of the economy. I say let the chips fall where they may, don’t decrease the interest rates (which is a bank bailout in disguise) and let the housing market fall. Maybe then housing will once again be affordable.
I am definitely most worried about inflation at this point and I have been since December. We have been seeing sharp increases in consumer goods especially in regards to food. If the Fed continues to cut rates those individuals who are already feeling squeezed by the cost of goods and services are going to be forced to use what’s left of their available credit to purchase groceries and household goods. In summary, the economy will be much worse off if the Fed continues cutting interest rates compared to where we will be if they leave them alone for several months. The economy can not withstand increases in consumer goods and services and decreases in consumer income.
I feel the Fed will do more damage by continuing to cut interest rates. Whether acknowledged as a recession or not people are hurting and cutting back. I think we need to accept the pain for past mistakes so leave interest rates where they are. Inflation is being fueled by cutting rates and will only make the recovery harder moving forward.
Lowering interest rates will not fix our current issues. The Feds lowered the key interest rate by 1.25 percent in two week and the average 30 Year fixed rate went from 5.50% to 6.0% in one week. This will not help the housing market. There are plenty of buyers waiting to purchase a home home when the rates come back down to 5.50% – 5.25% for a 30 year fixed mortgage. For example for someone who purchased a home 3-4 years ago at a rate of 5.25% wants to upgrade to a nicer home, they don’t want to lose their current rate of 5.25% to a rate of 6.25%.
As for gas prices..Until we change our habits, gas prices will rise until were forced to change. How many people do you see commuting in a full-size truck or SUV with one person in the vehicle? An average gas tank hold 25 gallons at $3.17 is $79.25 for one fill-up. If a person commutes a 80 mile all around trip a day, their gas cost more than the vehicle payment in 4 weeks of commuting. The only reason people continue to pay this price at the pump is with credit cards. If you had to walk into a gas station and hand the clerk $80 in cash for a tank of gas, we would change our lifestyle quickly.
TRILIONS to build Iraq could be here at home to build roads, new renewable energy plants. This will create milions of Jobs for Americans and problem solved.
But leaders argue spending in Iraq is better, contract to Airbus is better than Boeing and outourcing is profitable. Now we will not be different than Subsaharan africa soon if this continues.
Finally, I have timed the market right! I am living and working in Europe where the salaries are much higher, the healthcare affordable, the cost of living lower, and the quality of life better. I am able to set aside tons of money each month to pay of my outrageously expensive student loan debt in the USA. Keep cutting interest rates and let the housing market collapse! Within 5 years, I’ll have enough capital that I can come back to the USA and will actually be able to afford a downpayment (unlike every young person who tried to buy a home over the past 5 years!)
I am one of those who will tell you:
“I TOLD YOU SO.”
A few months ago I posted with my views regarding recession. I stated in my post that due to the increase in oil prices, lower dollar value, and market moves we would see a shift in consumer spending and an increase in layoffs.
Now I am going to say, we are definitely either in the first part of a recession or soon to be in one (I know almost everyone is saying this now). But, what I am saying is that this may lead to a depression. There is NO wiggle room in the economy. If the Feds reduce rates again the dollar drops increaseing the odds of recession. If the Feds don’t reduce rates the market will take a fall causing a draw-down in manufacturing a reduction in work force and increasing the odds of a recession. So either way we end up in a recession.
The housing sector is taking a severe blow due to the mortgage mess, which increases costs of money to borrowers, which means they will buy less of a home or not want to pay as much for an existing home (devaluing the existing home stock), which will cause sellers to sell for less meaning they will recoup their losses by laying off workers who cannot pay for their homes, or gas, or food.
In economics in college we discussed the best way for a government to manage the economy. A one time tax rebate was NOT one of those ways. A permanent tax break was the best method as it is recurring, spendable, available income for spending (or saving). Reducing the prime rate only devalues currency which leads to inflation, increases cost of money, and directly affects income as more is needed to pay for the necessities.
Consumer spending drives 2/3rd’s of our nation’s economy,yet when Mr.Bernanke and crew decide to cut rates,why are these savings never passed to the consumers? The claim that these cuts reduce rates on credit cards, auto and equity loans is simply not true. Furthermore,what is meant by “inflation?”. Could this be rising gas prices? Rising food prices? Not to mention heat and electricity. The only sector that will not experience a period of inflation is obviously the housing sector. That is only because it was already inflated enough to burst.
I am tired of this. When I graduated High school In 1977 the unemployment rate was over 10%, Inflation was over 10% and you could not get a Morgage loan for less then 10%. I sure don’t want to go back the good old Carter days thank you
One thing I dont see mentioned is the money supply, or the amount of currency being printed and in circulation (its very much on the high side right now). It is also producing inflationary pressure. Lower rates generally increase the supply of currency.
It’s inflation now first and foremost. The rates are low enough. Current gas prices will eat up all of the rebate/stimulus checks for most taxpapers. We have yet to pay a dollar for our misadventure in Iraq. It’s all been done on borrowed money.
The real question is, “Who’s in charge?”
Bernanke is letting Wall Street bully him and reduce rates when Wall Street whines. He is too weak. Imagine advising banks to write down principal on loans? If they do it , do it across the board for all homeowners to be fair. Go after the greedy banks! Get rid of all our congress people who can only talk and do nothing!
My concern is inflation –
I am sorry if you allowed a realtor/lender to sell you on a mortgage/house that was beyond your means. Whether ‘They’ misrepresented your information on your loan, or you did it yourself – you signed the papers, now live with what you did. As far as the bankers go, you allowed these ‘Subprime’ loans, now they must pay the piper as well. Because I had enough sense to know what I could and could not afford, it is not my issue.
As for the oil – Congress at one time, had spoken about raising the required margin required when purchasing Oil futures. Now it is some where in the neighborhood of 20% of what is required for other investments, why would some one not want to buy what they can, when they have little invested for a more than reasonable certainty of a good return. What will probably happen, is that the oil bublle will burst one day, and all of these investors that have a large volume of futures in their portfolio, will lose a LOT of money (hope they do), and then expect the government to bail them out, which they will probably do, since most in office, are the ones driving the prices up.
And if any out there thinks that either party is not involved, then you are naive as all. This is not a Democratic or Republican issue – it is a political issue, meaning, ALL OF THEM are in it for them, and that includes Obama, Clinton and McCain, do not be fooled.
I watch all of these people that live beyond their means, and then complain when things go sour – I live below my means, and I am tired of bailing those that want instant gratification out.
Did you really think that they were going to let regular folks into the rich boy’s club? They suckered your money from you via your investments in the stock market and real estate, promising you would get richer. Where’s your money now? The rich are RICHER. Hmmm… YOU were sold to China, just like slaves.
Come on all you Pollyanas – let’s learn to speak Chinese!
Personally, I’m more concerned with inflation than the job market, since I have a pretty stable one. While the housing markets are in bad shape, the problems are self-inflicted by the greed of the financiers and we have reaped as we have sown.
In the larger view, however, it would appear that our inability to deal with our growing dependence on oil has begun to seriously affect our economy, and probably long-term. Basic petroleum products influence every sector of our country, not just our cars. Worse yet, the fascination with corn-based ethanol has infected the food sector with rising prices as well. All these influences have a major impact on how much we can buy. Unlike the 60’s and 70’s, where the labor sector could adjust for inflation by negotiating better, higher wages and benefits, there is no underlying economic support for such action now.
I am more concerned about inflation at this point. I think we are probably stuck with a weak housing market do to excess inventory, and the job market will stink for a while no matter what the Fed does. The fed should just deal with inflation instead of weakening the dollar further.
In the long run, inflation is the greater and more persistent concern. Recessions pass, but inflation lingers and escalates. The single greatest threat to our economy in the immediate future is the escalating cost of energy. Until this most recent round of rate cuts, the price of oil was headed downward. However, with the severe devaluation of the dollar, oil is at an all time high. But for those rate cuts, the price of oil could have continued to decline. Mr. Bernanke and his co-conspirators on the Fed should be required to take an oath similar in part to the one taken by physicians: “First do no harm”.
Panic and crisis all man made…the banks are still MAKING a profit…the last two quarters are in the BLACK. There is no crisis other than the one being made by the media and the CEO’s who’s bonus’s are being pinched. If the banks profits had been pooled then they could have solved their own problems, problems they created with oh so clever financial instruments, instead of rushing the world into panic and crying to the Fed to bail them out, and having a negative effect on the whole economy.
Even if the FED reduces the interest rate to 0%, it still won’t help the economy. The fundamentals just don’t add up. This country doesn’t produce anything except debt for the last decade and a half. Good paying jobs are being outsourced/off-shored and low paying jobs are being in-sourced. American have already used up their last remaining collateral during the last housing bubble ride and generally are running out of means or the adequate incomes to repay the current debts let alone carrying on a new one. If 3/4 of the economy is generated by consumer spending, you’d certainly recognized what this is leading to.
You have to be kidding the feds are only helping the greedy banks out of the hole. Now think hard have you heard of any banks calling a person about to lose there home to see if they could help? Big busness and the feds it seams are holding hands with special iterest groups. How do you think millions are raised for our elected officals
Our Government is spending money like a drunken sailor. The way they cover this is to just print more (oh, technically they sell bonds, but you’re still pushing more dollars into circulation). When you have more dollars chasing the same amount of goods, the price per item goes up. This is INFLATION. We had very little of it when we actually balanced the budget. Of course, both parties are planning on spending even more in coming years, which is making foreign investors (the only ones will real savings anymore to invest) nervous that the dollar will continue to slide – which it probably will. If we want to spend Trillions (yes, with a T) on rebuilding a country, Iraq would not be the one I chose – how about the USA instead ? Oil is climbing because the countries selling it no longer believe dollars will hold their value (as opposed to the Euro, for example). The flight from the dollar has already started, and we’re just starting to feel the hangover from 30+ years of living beyond our means.
Inflation is way over the top. The numbers are what they want to you believe. As far as housing , the people that are losing their houses would have never been able to afford them at a 5% fixed rate. Now they want to be bailed out for being fiscally irresponsible. Get educated people!
Let the interest rates rise and housing go into a freefall. Better that than see oil rise and the dollar freefall.
I’m 52 years old. I’ve always lived within my means, and when the going got tough, like now, have had two, and sometimes, three jobs, make it. Sometimes, I two or three jobs to get ahead or save for a “rainy day”. I’ve always believed in being responsible for myself.
It’s a good thing, because my husband, a semi-truck driver who owns his own rig, was out of work for 5 months due to the UAW strikes against The Big Three this past fall.
Now we’re out of all the money I’d managed to save up the past few years. Luckily we had good credit, and we able to refinance our car for an extra year to lower the payments. We discontinued our cable television, our landline phone (who needs one nowadays with cell plans), and now he’s been back to work since mid-February.
I’ve always shopped at the Goodwill for our clothes, and clipped coupons for other items.
But with the rising prices of everything, including fuel, “living within ones means” no longer means that much. You can have as many jobs as you can handle, pinch every penny until Lincoln is screaming, and it doesn’t do a darned bit of good.
I don’t know what more I can do.
I would argue that the weak dollar could actually fuel job growth, as US exports are now much more attractive. However, I believe inflation is a much bigger concern than the current housing and job markets. These are short-term problems that were due for a correction, whereas inflation can be something that, if out of control, can plague an economy for much longer.
I agree that the Fed is stupid and cannot see the forest for the trees. The chairman should go home and stay there. If He would go out into the real world and see the damage caused by proping up inflated housing and stock prices maybe then he could make some intelligent decisions. Inflation affects everyone but the D.C. elites.
Rising energy prices go back to the Vice President’s closed door meeting with all the top energy Executives a few years back. Why else would the White House fight tooth and nail to keep everyones name out of the public’s hand. And the American peoople still don’t know who were in there making their shady deals.That I guess is Executive Privlage.
The real problem which Homeland security is keeping from everybody is that when Bush told the bankers and mortgage lenders to make loans to illegal aliens no one thought Bin laden would use that as an economic weapon. Homeland security has totally be unprepared for the fight with Bin Laden.
When Bin Laden learned through his agents here that they could secure mortgage loans without documentation. They soon took advantage of it and sold houses back and forth to each other until the final sale of the property was for three time’s it’s worth and to an illegal alien who not only did not have any documentation but was not even a real person.
It is estimated now that Bin Laden stole at least 3 trillion dollars that way and is now waging a second front on the economic war against us in the oil future markets. They are pushing the price of oil to $200 a barrel and with the 3 trillion dollars they stole can easily do it.
All this time Homeland security was watching the wrong gate. Instead of coming through the airport gates they came through the bank and mortgage undocumented loans gate.
I am really worried that we are going into a deep recession as a result of the current trends.
We need more diplomats and less soldiers. We need to require that our high school graduates can do basic house hold math. We need to treat abundant and cheap energy as a privilege not a right. It might also be time to revive nuclear energy even if the coal lobby screams murder.
Four small things that could make a huge difference. Also, making domestic diesel and ethanol at the expense of higher food prices is retarded. Real fix is to consume less energy per person. We have the know how but we lack the will.
Home owners are now walking away from their homes EVEN IF they can afford the mortgage. They have lost the equity in their homes and feel helpless. Greed drives the banking industry as well as the stock market. The shame is that it’s now the middle class who are suffering. T
Our government seems unable to unwilling to help. No wonder the majority of people are voting for Obama!
Definitely Job Market. The housing market crisis I saw coming years ago. You have all these half-million dollar houses being built, when you know for a fact the people buying them don’t make all that much more than you. If you can’t afford it, they can’t afford it, and when the rates went up, down they came.
But definitely job market. If I can’t get a job, there’s no money for me to spend. It doesn’t matter if by the end of the year I have my college degree or 25 years experience if I can’t find a job to use it in.
Personally, as a college student, I don’t care that much about the housing market (I can live in an apartment without that much stress), or inflation (I cook my meals and do so without spending more than about $100/month on food and toiletries anyways), but after the years and years I’ve spent busting my brain to get a good job, if there’s nothing there for me to do, it doesn’t matter.
I honestly hope the next President puts some focus and forethought into how they’re going to handle this situation, along with several others. The current one sure hasn’t been able to (not like we have anyone to blame but ourselves; after all, we did vote for him).
The basis of the entire economy is the price of energy. When energy costs get out of control, the price of everything goes up. It has to. With the weak dollar, the cost of energy out of control, $12 billion per month for war effort and the housing / job crash — the threat of a visouse circle is a real possibility. The Fed cannot afford to lower interest rates much more for fear of inflation, yet the cost of fuel is driving inflation now anyway along with the weak dollar. The weak dollar and the cost of fuel is driving inflation. They are feeding off of each other and may soon be beyond much help from anyone. Out fine government at work. Two years to see improvement? I am hoping that we survive it.
There is only one real problem. Corporate greed which convinced our leaders to sell our countrys soul to China. Do you se the next big crisis? Look at China with inflation at 20% soom you wont be able to afford a trip to WalMart
mmmm,the banksters evaporated all the money people had in their accounts. This has produced a gigantic hole in the economy. There are only two ways out and both of them are ugly .You can print more and more dollars and give them to the banksters so that the dollar looses all of its value and we end up working for nothing , or you can let the people know the banksters took their money from their accounts, a big deflation will follow and we will not find jobs . I vote for the last solution plus jailing the banksters…better not to work than to work to receive worthless dollars …
My greatest concern is the incompetence and indifference to middle class pain in
the Bush administration. W had no idea what the price of gasoline was until a reporter told him. It’s time to call Rubin and Summers back to Washington to help solve this growing crisis that seems to be spreading to the rest of the world.
Cutting rates at this point should cease. These cuts are causing more harm by killing the consumer’s buying power. The Fed seems more concerned with keeping Wall Street happy than with fixing this mess overall. Let the Street sort itself out, after all they all love free markets until they start losing money, then they want government welfare to bail them out.
Cut rates no further. It’s not doing anything other than causing inflation. It’s not helping the credit markets, and it’s not helping the consumer.
Why is it that the United States has survived 13 recessions, and we cannot survive this one? Inflation should be the biggest concern, especially at a time when wages are not rising. And when did 34 hours a week become full time? I have worked in industry where my average work week was 45-50 hours. Thanks to President Bush, I did receive overtime for my extra work, but if I am working above 40 hours a week, as are many of my collages, then how low is the deviation? Besides the fact that hourly wage is going up, peoples hours are being cut. Coming from Wisconsin, I know that recent trades on corn, wheat, and milk are benefiting most of the community I live in but, that will only last so long, as grocery stores in my area are already giving away food. Right now, the market needs to come to reality. Which means some investors may have to take losses on their investments e.g. CDO’s (or was there some sort of guaranty that was expressed, in which case, they should look to the SEC for legal actions against the funds), banks may have to go under or at least take real losses, and a few more people might have to loose their house – which is horrible, but it must happen. This is not a blame game as many would call it; it is just the way the business world works. When you make a bad call, you generally have to pay for it. Any government bailout would require everyone else to pay for the mistakes of the past which I believe would only deepen the problem for the long run. The current low rates and auction have been great for keeping bank balance sheets looking good, but it is essentially avoiding the inevitable. The question is at what cost. Remember, the greater the risk, the greater the potential return.
I’m worried about both. Stagflation is what I see happening. Until housing prices come down another 15% or more I do not see that sector bouncing back. It is not rates that are keeping buyers on the sideline it is affordability. We need to see some real wage gains accross the middle class in order to support the economy without credit. Too large a portion of our population, our businesses and governments are leveraged beyond what they can manage. Until these debts come down, there is more job security with better wages I just do not see this economy turning around.
Inflation is certainly the biggest concern znd the none too bright feds had better do something about the weak dollar and for heavens sake leave the damn interest rates alone and let them rise to market levels without the foolish bureaucrats intervention. The senile old fart Greenspan with the artificially low interest rates CAUSED THIS CRISIS.
It appears that Bush and his friends have gotten just what they planned on from his first election. $100 barrel oil. Credit is only part of the picture. Remember the domino effect everyone was worried about in Viet Nam. We have it now caused by the Bush administrations deliberate attack on the middle class and giving away the country to special interests. What ever happended to the Windfall Profit Tax???
Why is no one concerned about the Feds pumping billions of worthless money into the marked? I believe the $30-100 billion auctions are going to cause much higher inflation than any rate cut will.
As long as the Fereal Reserve Bank exists, there will be booms, bubble and busts in all of these areas.
You can blame the war. All the rest is a cover-up. Obama, you better get us OUT of the Middle East. Unless we flex our muscle and TAKE the oil, we want out.
The only people Saddam was terrorizing are in the White House right now. Pinching their profits, like they’re stealing our money now. Google these people and see where they’ve come from. You will get angry and feel like a sucker.
I’m mostly concerned that financial organizations buy junk paper and show them on their books as high quality. When the junk paper starts to come apart it drags many part of our economic matrix down the drain also. I can’t believe our financial system is so incompete, unethical or both.
What we need to do is get rid of the senators and congressman who have not stood up against the big oil companies (oops that could most of them)
Why should they care what the average American has to do to keep their heads above water. They don’t pay for thier gas , we do.
Write or call your representative( the person who is supposed to listen to us and help us) and let them know that if in 45 days there is not some kind of agreement that the oil companies refund their billions of dollars of profit to the Americans or that gas prices are not below $2.00 they, can kiss thier jobs good bye, because we won’t vote for them when re election time rolls around.
Do it and do it now.
The dollar was overvalued for a very long time, hurting exports and subsidizing imports. The ‘weak’ dollar is needed to reduce the trade deficit.
Outside of oil (which is controlled by a cartel), inflation is not a problem.
Housing prices need to come back down to the 1998 – 2000 levels, where the average person can afford the average house, at about 4x average incomes.
Due to job losses at construction and finance companies, the job markets look soft. If we take out construction and finance companies, they are solid.
I think we will be sunk when our foreign creditors (spelled China) call our debt and it takes triple the dollars to pay it off. Our borrow and spend government has not only enabled the lenders at home to mess up, but they are teaching future generations how to spend more than they have, and more than they could possibly pay off! We will soon know what it is like to live the Third-World lifestyle if this trend is not reversed. Too many people live off of investments and push for higher profits, and too few know how to actually do WORK for a living!
We drive fuel inefficient cars/trucks, completely under utilize public transportation and spend the equity in our homes like it’s a credit card we’ll never have to pay back, and I could go on and on, but we all know what the problems are.
The bill is due. Putting off paying for it, will absolutely make things exponentially worse later.
It’s not even close; inflation. For over the past decade, inflation has been an enormous problem. From 2003-2006, the 4H’s of inflation were burning hot: higher education, heating, healthcare, and housing were all rising above wage growth. Oil didn’t go from $10/brl to $107/brl overnight. Does anyone recall the gas lines after Katrina (9/05)? People were freaking out over $65/brl. Yet, our economy was resilient to have withstand it. What does that say?
Nixon was recorded to remarked, “No one has lost an election to inflation”, but the implicit message, politicans do lose elections over deflation. The housing market may affect a large number of people, but a very small percentage of the population overall. Thus, with the rising debt load (fiscal and personal), the rulling elites are more than willing to sacrifice the dollar on the altar of inflation.
Now that one of the 4H’s of inflation (housing) is no longer rising, our leaders are freaking out. I expect the other remaining 3H’s to burn even hotter.
The definition of inflation is a weak currency, because you need more U.S. dollars to buy the same loaf of bread. We have increased the money supply by 51% since 2000 and diluted our currency. Foreigners, who own 50% of our Govt bonds, will soon demand more of the declining currency just to make them whole, which is an interest rate hike. We also owe $9 trillion in debt, will spend $3 trillion on the war and have 79 million baby boomers about to retire.
Hope America had a good time spending money it didn’t have; the party is over.
The Fed needs to stop worring about bailing out Wall Street and Banks with low interest rates and concentrate on the dollar. The Fed should be increasing interest rates, not lowering them. If they think the high cost of oil and inflation is not a much larger risk to our economy they have have their head in the sand.
As just an average person out here, I can’t see anything that will help this mess except maybe another Depression. I’m at the point of just staying home and not doing anything. I’ll raise my own food and go to bed when it gets dark just like people did in the 19th century.
I entrely agree with Samuel in the Phillipines (10:37am, Mar 10). The great majority in the US live far beyond their means and the time has come for them to get on par with the rest of the world.
High school kids with SUV’s, $4 cups of coffee, retail clerks thinking they can afford homes? Wake up, eh? Europe and Asia can no longer finance our frivolous lifestyles.
Gain wealth the sure fire way. Brownbag it, save, buy used when you can, economize. Just don’t expect poor Uncle Sugar to bail you out when you want to live a $100,000
lifestyle on $40,000. Right now he’s busy paying off your parents debts.
Wake up and smell the coffee, not the $4 a cup kind either.
Am I just being simplistic? I think if the oil prices were controlled/ dropped by $1 a gallon or 1.50 the economy would bounce right back. The price of shipping and manufacturing is directly related to oil. The reason people are defaulting on their mortgages is because gas/oil prices have driven up everything else therefore they can either feed themselves and put gas in the car or pay for the overpriced house, which also needs to be heated……..
Shame on those “Wallstreeters”. Why are you nut cases get so hyped-up that with oil that you greedy asses think about yourself and not the investors. Its is the people like you in wallstreet that causes the price opil to go up – NOT the demand. Shame on you fools. A note to all investors pull your money out of oil stocks and lets these dogs perish with their scrupulous actions.
Also, there are so many houses available for sales, so why should the economy dwell on how many new homes are built to sustain. Its all polictical gimmick and the rich people that cpontrol the monetary flow. There should be laws to prosecute these people. But oh no – the contribution to tthe politican pocket is good , so they don’t care about the paxpayers.
Rising prices mean I can afford to buy less food, less entertainment, less of a car, etc. But if I don’t have a job, then I can buy zero food, zero entertainment, zero car, etc. Its all about jobs. What ticks me off is that because of the actions of greedy investors willing to lend their money to anyone, and greedy home buyers needing the biggest and fanciest home they couldn’t afford (or maxed out home equity loan) … because of their actions, my job, career, and future are now at risk. I hope they burn.
The problem with housing can’t be fixed with the fed lowering rates. The real problem is the battered banking sector. Even with pristine credit and verifable income, it is a challenge to secure financing in this market. Although the 10 year treasury is down, spreads have increased 100-300 basis points or more and LTV has shrunk considerably.
Until lenders are willing to ease up on underwriting guidelines,(which will take some tome) we will continue to be on a rough road in the housing market. No matter what the fed does with rates.
I am more concerned about the slumping housing and job markets. If we keep losing jobs, we’ll be talking about depression instead of recession. President Bush and his administration, through arrogance, apathy, or incompetance, will have decreased the standard of living for all Americans making less than $100,000 a year before he leaves office. I just hope the next administration can reverse this slide in a year or two.
Good paying jobs create the giant tax base America needs to support SSI and the entire system.
Without them, homeowners will pay more tax to run the government.
Stop all weirdo trade agreements. I cringe when I hear there is a “new trade agreement” underway. The agreements need to be one page of plain english read out loud on the nightly news and voted on by the people.
Unlike most elected officials as a common sense housewife I actually read the NAFTA agreement…It was approx 1100 pages…The agreement was completely insane. Both democrates and republicans pushed it through. John Bainer Sp? of Ohio admitted to our entire watchdog group that he didn’t actually read NAFTA. He said his people read it and therefore he knew it was best for us….It contained all the disasters Ross Perot claimed. The media quickly declared Ross Perot’s common sense approach crazy. Weak people feared being labled crazy if they agreed with him. Because they did not check out the actual information they were conned out of decent futures. They unfortunately depended on mainstream media to tell the truth. The truth came from the mouth of Ross Perot…a giant sucking sound of good paying jobs left the USA and are still leaving. In their place are lower paying jobs that create a poorer population vs enough middle class to compete against the rich.
Practically the only media covering 3rd party candidates such as Ron Paul is the internet. 3rd parties are important because the two main parties have failed to improve the lives of the average American Citizen. The two main parties have been completely irresponsible…thus; the current financial situation.
I THIN THAT THE FED IS BLOWING IT BIG TIME. THEY ARE ONLY INTERESTED IN KEEPING WALL STREET HAPPY- IF THEY KEEP DESTROYING THE DOLLAR LIFE GET’S WORSE FOR AVERAGE PEOPLE WHO GET A BIG BONUS EVERY YEAR. IF THEY THINK THAT CAUSING OUT OF SIGHT ENERGY PRICES IS BAD FOR THE ECONOMY, THEN THEY MUST OPERATE IN A DIFFERENT UNIVERSE. WHAT I THINK THEY SHOULD DO IS STOP TRYING TO DROP INTEREST RATES TO “LEND” OUR WAY OUT OF A RECESSION. A BETTER IDEA MIGHT BE TO DO SOMETHING TO CONTROL THE COMMODITY MARKET FOR ENERGY SO THAT FUNDAMENTALS ACTUALLY DETERMINE THE PRICE, NOT THE WILD WEST SHOW THAT IS GOING ON TODAY.
Amen, for David Martorano of California.
I completely agree. The FED is caving in to Wall Street to save bank and company profits, instead of letting those companies take big margin hits to their profit lines as a result of their stupidity for going after extremely risky business.
The FED should first and foremost be concerned about Inflation. That is the real culprit that many ordinary consumers are feeling at both the checkout lines and the gas pumps.
Let corporate profits slide, and market profiteers sweat. That is not the job of the Fed to bail them out.
This recession is I believe a long overdue correction to a market that was left completely unchecked for the past 6 years. It will reach an equilibrium point and stabilize. But the FED’s efforts do NOT help that by artificially keeping banks bottom lines afloat.
This is a bit of a loaded question, for the company I work for a weak dollar is a mixed bag. For me personally it’s a bust. I would have liked to see a 90 to 180 day interval between rate cuts. Sure my investments would take it on the nose but that would be somewhat of a wash looking at the future earnings of this years investments. Rising gas prices will reduce demand to a point but if rates are continually cut then the weakening dollar will out pace the consumer based correction and prolong the effects of a recession. Ironically I don’t think it matters when buyers start to come off of the sidelines and purchase houses. Using a ten year outlook. (I know hard for most to do) the longer they stay on the sidelines the more pressure will be placed on rental prices. Rental prices typically reign in housing prices in a normal environment so in the long run things will balance. What I would like to see is fewer fire sales on the part of banks and perhaps the establishment of a few parnterships between banks and realtors to lease foreclosed homes, keep them off the market, and allow for the current correction to right itself sooner rather than later. Why not pull in some income for those investors instead of losses? There’s little point in throwing around blame. Far better to throw around ideas.
OIL, OIL, OIL, OIL, Freaking OIL!!!!
Energy is the most basic necessity. Yes, necessity. Until the price of oil gets under control, you can forget about any recovery. So much for that wonderful stimulus package. We’re all getting “stimulated” and can’t afford any lubrication!
I think housing/job market are a big worry. When I was laid off in 2002, the only way I could find employment was to relocate. I had a hard time selling my house back then, it could be even worse now.
The weakened dollar could hopefully undo some of the damage done to our country by the free traitors (err… I mean traders) who have been complicit in exporting virtually our entire industrial base overseas (just try to find something made in the USA). Inflation? Well that’s just the price we’ll pay for letting them get away with it and becoming addicted to imports.
I have a hard time feeling sorry for the people in the building/finance/real estate industry that are out of work (and believe me, I know what being out of work is like). They deserve what they’ve got coming to them, and more. As a group, they’ve pulled us all down with them, even those of us who have lived conservatively and within our means. They’ve managed to steal our equity, raid our retirement accounts and make it difficult for our children to get college financing.
The Fed and Congress should be ashamed of themselves for allowing the dollar to depreciate the way it has.
The answer is to go back to the gold standard. Where are the politicians with enough backbone to do that, and eliminate deficit spending?
I could care less either way. I am a renter with job security who utilizes a great mass transit system (NYC). I would love to see housing speculators and dumb consumers who love to buy on credit get axed. I would love for big profit corps (banks and financials) to go under. Those who complain about the economic system they’re in and support forcefully or not, should advocate change. Accept a market econonmy and all the good and bad that comes with it, or act towards change.
Again the banks will be the main benifactors of the recent and future rate cuts. While borrowing from the Fed at historic lows they will be again lending at huge spreads of 4,5,6 percent versus what they borrow from the Fed for. Morgages will be again pegged to prime plus, plus, plus and there will be points to pay too. What a joke, what a huge ripoff for the middle class and forget about the lower income earners, they will be screened so harshly now that the banks have been stung that very little or no loans will be given them. Now the weak dollar, the plung in the housing market, Wall street knocking down stock prices. All this because the Fed is only interested in helping the banks get out of the red. We lose jobs everyday to other countries because the corporations here find it more profitable to do business and hire workers somewhere else, thus suppporting their economies and there currencies. Shame on them, they have completly forgoten about the American people and how American entrprise made them what they are today in the corporate world. God bless America but lets take our jobs and business somewhere else, shame on them. We as Americans have to stop this giveaway and keep the jobs here. People have to remember that a strong America means a strong dollar and a strong position in the world markets. Have we given up or has corporate America given up on us.
We can’t have guns, butter, tax breaks, nation building, war, corporate welfare, now “stimulus” handouts which are no more than bread and circus, and newly introduced health care for all all at a time when the babyboomers are going to start to retire.
To those that resent the USA: because we pay a premium for prescription drugs, we are paying for the Research and Development for the World’s health benefit. Also, because we pay for a military to help stabilize a volatile region and most nations know that we would run to their aid if anyone hurt them, they can dial back their military spending and offer better socialistic benefits to their people. The greatest Nation on Earth will not go bankrupt. Some undisciplined cities who spent money like drunks at an open bar might be in trouble, but our constitution is load bearing because we work hard and we will hold.
I am more concerned about inflation. It seems everybody has forgotten that economies are cyclical. We are supposed to have periodic contractions, and always have. The feds efforts have made this problem worse, not better.
Now, we can expect a larger contraction, and perhaps a depression as inflation really hurts what everybody thinks they have. Most of the young money in this economy has never seen a prolonged period where what they owned depreciated. Many are far too over-extended with debt. When they default, things will get worse.
As a net import based economy, a weak dollar means rising prices — hence inflation. We escaped inflation through the Clinton and majority of Bush years due to prices falling with low price imports – China really took-off in 2000. The Yuan, though linked to the dollar has appreciate 15% in 2 years or so. China’s exports are down considerably for February – some %60. Increased demand by higher value currencies push commodity prices up at least by the devaluation percentage of the dollar. Take a sack of flour – $0.99 to $1.15 forever, yesterday $3.00. Gas- $0.60 increase to $3.20 in a year. I have an editor in Switzerland who has taken a 20% paycut in the last 9 months just due to currency.
Mortgage rates seem a little disconected to to the 10 yr – will we see 5.25% on the 30 fixed any time soon?
Consumers are hurting and this is just the beginning – neither party is talking about a realistic solution and the Fed’s tinkering seems to ignore the global nature of the US economy.
Its not an either/or question. The weak dollar is adding a heavy burden to the financial condition of many families. Fuel and food costs have taken away a lot of the American consumer’s spending power, and its only going to get worse due to demand from China, India, etc. The resultant lack of available capital will cause house prices to spiral lower since people can’t afford the payments that they previously could. Less spending will also cause a continued loss of jobs in the US. This is not going to be the minor downturn that the economists have been predicting, but instead a major, somewhat long-term recession.
This ia a demographic issue. At .6 of a life span + 1 generation after a major war, the apex of that generation’s spending wave will be reached. The baby boomers will begin to reach that point this year, by 2012/3 they’ll begin to tap Medicare/Medicade.
The debt cycle will become unattainable after that point. The dollar is fiat currency and therefore, worthless. Gold will be at $2000/oz. easily by the end of 2008 – that signals the true inflation rate. In other words, you ain’t seen nothin’ yet in terms of inflation.
By 2009 the US will hit the peak of housing prices – we won’t see gains again until some of the echo boomers reach their peak buying years (2024, or so). 2010 we hit the Dow’s top end. From there we go into a strong deflationary trend that will make the early 1930’s look like a cake walk.
The only thing that matters now is keeping the dollar from collapsing. If OPEC turns away from US currency we’ll be at the end of our collective ropes.
Not good, not good at all!
Inflation. The slumping housing and job markets are an unfortunate part of the natural boom/bust cycle and the Government will do more harm then good trying to prevent it.
Increased money supply makes Government debt lower while giving the appearance of trying to fix things so i don’t expect the printing presses to stop anytime soon.
I’m torn. On the one hand I don’t want to see a repeat of the inflation we experienced in the 70s, and believe that an occasional recession actually is good for an economy’s long term growth. (Seriously, does anyone believe that excesses won’t build up without the occasional downturn to clear away the deadwood?)
Still, at this point, the downturn is seriously starting to bite into my personal income, and I am a little bit concerned about my income prospects going forward. The problem is that I am not too sure that interest rates cuts will have their desired effect. (I am not Keynesian in terms of my economic philosophy, but it could be that these interest rates cuts will really be like pushing on a string.)
One thing I wish the government wouldn’t do is bail out homeowners who are in it way over their heads. While I know that there was at least some fraud in the mortgage market, that is no reason to make other taxpayers, especially low-income renters, further subsidize homeowners. After all, homeowners already get a subsidy in the form of the mortgage interest deduction, and how in the world do you expect the housing market to adjust if the government comes along and shores up the inflated prices that were caused by the lose credit between 2000 and 2006?
The rising cost of gas and food is affecting me and my friends far more than the housing market. We have always lived within our means, but with the rising cost of food and especially fuel, our lifestyle has been shrinking rapidly. Our so-called leaders in Washington need to react to fact the a handful of investment bankers are running this country into the gutter for their personal gain. The oil and gas inventories have been rising weekly since the first of the year, so according to supply and demand logic (a word that doesn’t seem to matter in Washington) fuel and transportation costs should be going down. HEY CONGRESS, WAKE UP !!!!!!!!!!!!!!!!!
I am most concerend about the continued greed in the financial sectors.
Credit card intereste rates are NOT going down with the decerease in credit costs to banks,bloating thier profits.
I am most concerend about the continued lack of goverance over bank mergers and consolidations which hampers free market trade.
I am most concerned that business today is lettig Wall Street tell them how to run their business. Business should forego giving quaterly guidence numbers. Wall Street is totally kne jerk in reaction to any sneeze or hiccup.
I ammost concerned by the continued lack of leadership by the Federal Government, in all branches. Lead or get the hell out of the way.
America has experienced increasing deficits and decline since the introduction of Milton Friedman’s brand of voodoo economics. It’s time for government to rein in the Fed and return to controlling the value of the dollar along with other policy changes designed to restore economic prosperity to the masses and not just the rich.
Inflation should be No. 1 priority.
At street level the inflation looks much worse than officially stated.
Regarding the housing market: in New England the current prices are still 30-40% higher than in 2002 so I see no problems there (for sellers).
Gee, I thought 2.39 percent was less than 3%. Is the author/reporter implying to us that the “Fed” is going to stop auctions?
The “Fed” IS printing money and lowering interest rates by holding auctions. http://www.federalreserve.gov/monetarypolicy/taf.htm
As the supply of money swells its value diminishes – supply and demand 101, don’t believe it go change some US Dollars for Euros.
Scroll to the 6 minute and fifty second point. http://video.google.com/videoplay?docid=-7760821786905609611
Jefferson is rumored to have said, “If the American people (that is us folks) ever allow private banks (I’d consider that the Fed folks) to control the issue of their money, first by inflation and then by deflation the banks and corporations that will grow up around them will deprive the people of the property until their children will wake up homeless on the continent their fathers conquered.” Foreclosures are WAY up and last I heard http://www.ft.com/cms/s/0/c6eb81e0-c083-11dc-b0b7-0000779fd2ac.html China and Kuwait aren’t American.
Somehow I personally do not believe that Section 1 Article 8 referred to printing paper money. http://www.law.cornell.edu/constitution/constitution.articlei.html
If other countries realize that the emperor is naked and the decouple the dollar from commodities I think inflation will show us the meaning of taking it up the shorts.
Saying we have strong dollar policy means jack when the printing press is running in high gear!
Inflation, at least this time around, is certainly not tied to rising salaries. Wages have been flat. Any inflation out there today is a result of higher material costs because of the astronomical price of petroleum.
I am more worried about the falling dollar and inflation. The housing bust we are presently feeling was fueled by the free money Greenspan gave out which helped shoot the industry over the normal trend line. We are now paying the price and it will take time to work through, on its own. But lowering rates will only lead to higher prices and the cycle will continue. We need to take our medicine to get really better.
Obviously, inflation since it affects all of us WHO EAT, DRINK, OR DRIVE, even retirees who depend mainly on their dividends and interest. Us younger folks, however, are the ones spending money, putting money into the economy, and yet we are getting screwed the worst by our president and fed. I get ZERO benefit from my mortgage interest deduction, since it does not pass the standard deduction, so I get taxed even more so my money can get flushed down the toilet that Bush calls the “war on terror”. A rich person gets A LOT since they buy million dollar houses. I work hard, get taxed the most. I wouldn’t blame anybody who could get out of here for deciding to do so. Our policies only favor the rich, only bailing out rich folks so their stock prices keep going up, while the power of the dollar from my salaried job to just keep my house afloat just makes me poorer and poorer every year, and I see that my govt. does not care about me. boo hoo right??? fine, let’s stop you rich people’s hand outs too and see how quickly you start crying to the govt……
Only Obama has talked about revising taxes so there is a mortgage credit FOR EVERYBODY instead of the meaningless mortgage deduction…..unless I am over my head anyway in which case I just expect the paternalistic govt. to bail me out…and GOP lawmakers are a bunch of hypocrites….
Unemployment rate only going down because people see how govt. screws them and say, what is the point?? You cannot achieve the “American Dream” anymore…it is really a dream…..and who cares anymore??? nobody……we are a selfish bunch of money grubbers…..
As is usually the case, the media is at least 25 to 50 % of the problem here. What would you have the fed do? Raise rates!!! When the housing market bottoms and its already showing little hints of this than the cuts made by the Fed will begin to show up in the market which will then in turn begin a rising of the economic ship. When the ship begins to rise the ” Dollar” will begin to strengthen and the price of oil will stabilize. When stabilization occurs , inflation will subside because this inflation # is being caused by euphoria over oil prices. Inflation will then be held in check. There is plenty of oil to go around. This is a currency issue and not an inflation issue. Interest rates by the fed will do their work, 175 billion dollars in stimulus will do its work, the fed 100 billion in auctions to banks monthly will do their work. At the end of the day the opportunists will jump in and find all kinds of reasons to see why the US is still a worthwhile place to grow their wealth sitting on the side lines.
I would have to say that I am concerned by both. Obviously, one of the biggest problems that is resulting from inflation is rising oil prices. This is of great concern to me. Also, I formerly held a job in the housing industry, but was laid off because of declining sales. We need a solution to both of these problems, and soon.
Lowering the interest rates will only make things worse. Consumers spend based on confidence. When the interest rates are lowered too much, inflation and oil prices go up. This means that the consumers will see it at the pump every day (free negative advertising). This lowers their confidence and they stop spending. Exactly opposite of what the Fed wants. Higher gas prices affect every consumer (their confidence and their spending) while foreclosers affect the real-estate speculators and greedy lenders.
I’m not concerned about prices going up, because they haven’t. Oil doesn’t cost more, the problem is the dollar buys less so you need more of them. The rapid decline in the dollar is the root cause of all this. It’s good to be the government-if you don’t have enough money to pay your bills you just print more.
i am not concerned at all. it’s payback time for ALL THE GREEDY PEOPLE. we are headed to a worldwide depression worse than the 1930’s. what is amazing to me is all the supposedly experts have their heads UP THEIR ASSES AND CAN’T SEE THIS COMING.
wake up people.
I am more worried about inflation than the housing market. I for one did not purchase with a risky loan in hopes of riding the wave and making a quick buck. The weak dollar will also drive unemployment of those who deal in imported goods. It seems that the Fed are reacting more to Wall Street than assisting main stree. Low interest rates were the cause for the problems we are facing today and they are trying to “fix” with the same remedy.
My wife and I both retired two and five years ago. We didn’t plan for $4 gas and $4 milk. We will spend on nothing but staples now. We have cancelled all of our travel vacations. I certainly don’t want my tax dollars bailing out the illegal aliens that the mortgage companies suckered in, or those mortgage companies whose top people will surely jump ship taking all of their profits and leaving the mess for the US taxpayer. Aside from all that, I think that rising oil costs have been the major culprit.
Much more worried about inflation, and the job market goes hand in hand with this. If American middle class wages were actually increasing, we’d be better able to tolerate this. But ever since the 01 recession, average worker wages have stagnated while CEO pay and hedge fund manager pay goes up and up. The housing market is a necessary correction. For those of us who didn’t buy a home during the boom (because we correctly recognized we couldn’t afford it) we need this correction so we can actually buy a home in our lifetime. It’s frustrating to hear about the fed dropping rates when mortgage rates are higher now than they were a year ago. They keep auctioning to banks at 4 or 4.25, I want to know why banks have to take such a huge cut. If the fed really wants people to buy homes, they should direct loan to America instead of letting banks get practically “free” money by borrowing for 4 and lending for 6.5 or 7!
It is all about Oil prices, in my opinion. Ii boil when the economic reports announce that “Ecluding the volatile energy and food categories, there is no inflation”. How can you exclude anything!?! Especially necessities! These are REAL costs to us working Americans, and the govt is SO out of touch with real life! (Both Dems & Reps). I am spending what used to be “Mall Money” to get to work & back! $100 a week in gas, used to be $25 a few short years ago! That is $300 a month, which means a TON to a working-class family. There went my past 5 years’ pay increases! Time to get the speculators OUT of oil! At least eliminate the 10:1 leveraging factor. There is NO oil shortage, but the cursed Katrina just showed the greedy oil co’s they could charge what they want, and it is breaking our backs, and our economy. Groceries are way up, mostly due to fuel prices.
Inflation is by far the biggest concern right now as it has crept up on over the past 5 years. I know my salary has not increased at nearly the same rate everything you buy is much more expensive that it was 5 years ago. The banks and irresponsible borrowers should take this pain, not all of us. Inflation hurts everyone more than these historically low rates that we already have.
I would have to say that I am more concerned about the loss of JOBS in todays’ economy. If we countinue at this pace not only will we be losing our homes and our cars, but our lives as well. Because this will have a direct effect on the crime rate. Today’s recession is diffent from the previous ones because most Americans have become adjusted to a life style of riches and contentment (not to mention their kids). I’m afraid that if we take that from them we may create criminal family’s.
From a mortgage banker perspective of nearly 30 years, I would like to see the Fed stop around a 2.5% Fed Funds Rate and allow the procees to unfold. Anyone who watches the actions of the Fed knows that their actions take anywhere from 12 to 18 months to affect the economy. As long as they aggresively lower the overnight lending rates, inflation will be of concern and the longer end of the market will trade in kind, driving up the rates that we need to correct the current housing problem. As they lower rates and pump cash into the system, oil continues to rise and longer issued debt will rise based on their inflation protected returns. If the Fed could hold off, the fear/risk to inflation may subside as the dollar slide stops or even recovers and the longer issued paper will rise in price, decline in rate which will work to the benefit of the housing correction. The concern for jobs is over stated. With the reported unemployment report at around 5%, this still represents nearly full employment. Back during the last housing correction and recovery, the concern was for unemployment dropping from 8% to and through 6% (1993 roughly) and that was considered full employment. This will be a painful correction but if the Fed can maintain control of their actions, the pain will be less and the correction will take care of itself in a manageable way. If they continue on the aggressive path we have seen and hear about, stagflation will become a part of our lives for years to come.
A strong $ comes from a strong economy.
The cheap money the Fed puts out needs to be used to support production instead of consumption: Building power plants (based on oil/nuclear/ solar); growing and using more of our own harvest from farms and forests to reduce imports, and keeping the anti-technologists at bay.
I’m an expatriate living in the Phillipines and the falling dollar is killing me. The US government complains about other countries devaluing their currency while embarking on a years long initiative to drive the dollar into the ground.
For the Americans still in the US, the reason prices are increasing is the falling dollar. The US imports so many things that prices are bound to keep rising.
As for the price of gas and heating oil, it’s time for people to quit whining and face the realities of life. I’m sorry you bought an Expedition, McMansion and have a long commute to work, but those are all pesonal choices YOU made. Quit whining and face the consequences of the gluttonous American lifestyle you’ve been living.
Wake up people, the US lifestyle is not sustainable anymore. It’s time to re-evaluate how you live and how you spend money. The economic situation will continue to deteriorate until Americans learn to live within their means. The rest of the world is getting tired of supporting our wasteful ways.
If the people who can’t make their adjusted mortgage payments can’t break even when they sell their homes, house prices will plunge. Without lower mortgage rates, too few will buy. New buyers are waiting to see if things are going to plunge. Lowering the interest rate BEFORE the spring selling season would have help stabilize the market. Lower rates and increase lending standards, let currencies fluxuate, let people bet against the USA and let them see what will happen.
We need to focus on the M3 supply of money and ask if we missed some corrections due to ownership rich growth at 8 to 10 percent (tracking equities markets) and everybody else tracking the CPI. The tension between the two would have had a correction (wage inflation or equities correction). This didn’t happen because too much money was put into the economy and assets sat like vessels in the water and rose with the M3 money…
Also, watch the gap between public sector workers outpacing private sector with higher fringe benefits, pensions which based on cash flows make them millionaires. Watch the tax burden increase obscenely in areas like California, New Jersey, New York. Not enough sled dogs to pull the sled…
What an absolute shame! As our economy slides the U.S. President keeps saying things are fine. They are clueless, stubborn and single-minded. Get out of Iraq!
This is a no brainer, but there is a big difference in what they are going to do and what they should do:
The FED is going to lower interest rates. They have corporate campaign financing to worry about for the 2008 election that they cant afford to lose. Heaven forbid if the economy sinks for a little while or the housing market has an adjustment that was clearly needed (look at cost of owning versus cost of rent). Thanks Wall Street for pushing politicians hard enough to practically null and void my vote/opinion on what “my” politicians should be doing.
What the FED should do is concentrate on inflation. We have done enough for the housing market and the tax rebate bill for $120B should be enough to take care of the economy. What hurts me most is paying $100 to fill up my car, each week, not the fact that Citi had to take another write-down (boo-hoo). What we are forgetting here is that the economy/housing market will bounce back, they always have and will. BUT, we also known that inflation always goes up, always has and always will, so why are we so concerned about the economy that will be fine (eventually) while we are getting battered by 7% inflation??? Hell, my raise this year is basically nullified by this.
The focus that the government has is only on the macro-level, they should focus more on the micro and start to remember who puts them in office. But, its not like what I say is ever going to matter. End of the Game? Wall Street- 1, Average American- 0.
The question is misleading, as if we have a choice between recession and inflation. The evidence is fairly clear that we’re well into the early stages of both a recession _and_ inflation. And contrary to Mr. LaMonica’s assertion, the recession will in no way help control inflation as the dropping dollar is the primary cause, given that wages for most people in this country are either stagnant or declining and that we now import most of the oil we consume, not to mention most of the clothes and consumer goods and a lot of our food. As the immortal Bette Davis said: “Fasten your seatbelts. It’s going to be a bumpy night!”
Inflation is much more important because it affects every single person in the country, as opposed to the housing market and people looking for jobs. Unfortunately the FED is in Wall Street’s hip pocket so interest rates will continue to fall and do more and more damage to the economy.
Energy prices!!! I can hardly afford to commute to work. Pretty soon, I’ll be better off quitting my job.
I completely agree with Warren in Clarksville, VA — I don’t make a lot of money by any means, but I lived responsibly and kept my credit rating up, then bought a house with a decent fixed-rate mortgage. My budget was stretched a little thin but at least I always knew what my payments were going to be and I could plan accordingly. Now with all these rate cuts, what little I have in savings is hardly earning any interest (my ING account used to be over 5%, now it’s down to 3.4% – thanks, Ben), and with inflation in oil and food and hardly any annual increase in salary, my already thin budget is nearing a breaking point. Let those who made foolish decisions in lending and in borrowing pay the price and the market will eventually correct itself — stop bailing them out at my expense!
Corporate America and the Feds put us in this mess, it’s their responsibility to get us out. So much for globalization and off-shoring and how great it is for our Country and the economy. Make in America. Grow in America. Buy American.
Rising costs of every day essentials like food, gasoline and medicine is slowly eroding away the middle class. Each week I pay more for food, gas, utilities and other essentials, yet wages are not increasing to keep up the demand. I am fortunate to have savings to fall back upon, but even that is being slowly depleted. What will I do when that is gone? I have purchased a small, economical used car to replace my leased car, which may be turned in to GMAC before the lease is up. Why pay for a car that I can’t afford to fuel and maintain? Unfortunately, this cycle keeps repeating itself. We have 8 year of Republican “leadership” which takes it’s toll on the economy. The Democrats then have 8 years to try to fix it. When that can’t be accomplished, the country then elects another Republican and then it goes further down the cycle.
I think jobs are tied to our currency and what is important is to keep unemployement low. If our currency were very strong today, it would on create a larger trade defecit and not more jobs. The weaker dollar has helped increase exports and the sale of American made products. BMW, Toyota and others are expected to add more jobs in the US due to the weaker dollar. In the long run, we need a strong currency so investors buy our bonds and invest in dollars, but the economy needs to be fixed by not being soo credit irresponsible. I blame consumers for not living at their means and the government for not doing enough to keep jobs here. Now the weak dollar will answer the latter, but will people become more responsible?
Sorry to rain on the parade of those that think a slowing economy will hold inflation in check; it won’t. Price inflation is the result of monetary inflation. It always has been and always will be. So as long as the Federal Reserve maintains their “loose” monetary policies, inflation will continue its onward and upward march. And slashing short-term interest rates will not spur the economy. The economy is suffering from the bubbles (stock market and housing) created by cheap money. How is more cheap money (low interest rates) going to solve that problem?
I am more concerned with the housing market. My dollar is weak in other places, but a dollar is still a dollar in the US. If we do not get the houing market back on track, we are in big trouble. Home sales spur retail spending, mortgages, credit cards, jobs, vacationing, gas use, etc.
Inflation is a more important problem. It hurts all the poor and those on fixed incomes. It distorts the economy rather than correcting it like a recession does.
Recession will happen before the election, the consequences of inflation after. Why is there a question what the Fed will do?
The most important factor in a nation’s economic stability is the exchange rate. Everything else swings off that.
My main concern is the concert “LACK” of guidance by our so-called leaders in congress and the empty promises that the 3 front runners for president are making. We need someone to step up to the plate and guide this country through these rough times.
Inflation is the imaginary bugaboo. It doesn’t really mater if something costs 10% more or 10% less if people don’t hav ejobs ot pay for it. The bond trader parasites will be hit, but really, does anyone care? Jobs an dteh economy are the only real issue.
The Fed should leave the interest rates alone. If the dollar continues to weaken the rising costs will continue to erode away at disposable income. Low interest rates led to easy money and many people over borrowed, that problem needs to take care of itself and the sooner we let it play out the sooner it will be over.
All the large brains got us into this mess. now they want the little people to buy their way out of their mess. Putting us (the little guy)indebt so as they could continue collecting their million dollar pay checks. And were right back to were we started.
I am personally more concerned about the rising cost of oil and food. I believe that the economists who feel that inflation will be kept in check by a weak job market are correct for core inflation stripped of volatile food and energy costs. However, higher energy costs will eventually be passed to the consumer. So inflation will persist if these costs are not also kept in check. What many Americans seem to forget is that a weak job market will not necessarily drive down the price of commodities, especially oil, because our economy no longer drives the demand for oil. If our demand for oil dips, the price per barrel will not fall.
Recessions are a natural course of progression in markets. Cyclical periods of ups and downs need to occur without interference.
Now, that being said, the Fed has interfered because of the fear of systemic risk to the banking system. It has done what it could to prevent an all out sector wide failure. The problem now, however, is that the Fed cannot continue to protect the banks at the sake of inflation – no matter what the ridiculous CPI stats the Fed uses (core). In the past, food and energy were omitted from core inflation readings because they were considered “volatile”. They’d be up one month, down huge the next. So they were excluded. But in today’s world, they are constantly up – and up big. They need to be considered.
The Fed must let some banks fail. It has to happen. Those banks that made poor risk management decisions need to be consumed by those that did not. And the Fed needs to do it’s job to protect consumers from inflation through the continued devaluation of the USD.
But will they? That’s another story.
How can you separate them. What started as a credit issue for a few with the weak dollar now everyone isimpacted. More jobs will be losted due to weak dollar than from the credit issue.Just go to the grocery store to see its direct costs to us all.
Inflation has been running rampant for two years now in my industry. I get price increase letters daily and it is almost all the result of high commodity prices. When oil goes up nearly every thing we touch is affected. Enough already! This is what we should do- raise interest rates. The dollar will strengthen which in turn will cause speculators out of the oil market which will cause the price of oil to go down which will cause the price of gas to go down. That will put more money in people’s pocket than this so called stimulus package. Recession over and inflation tamed.
Lowering intrest rates is a mistake. Low rates is what got us in this trouble.Bailing out those people and companies that have borrowed too much is just hurting those of us that lived within our means. If anything the FED should be raising rates and let the people that over borrowed pay the price before we end up in a much worse problem.
The fed needs to stop catering to Wall Street. There partly responsible for this mess. Inflation is out of control and a Rate cut is doing very little for the lagging ecconomy and middle class
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What our country needs is for our elected officals to stop accepting money from the oil and drug companies and get the prices back where they were. This will put spending money back in peoples pockets every week not just a one time deal like the tax rebates. PROBLEM SOLVED!