January 22, 2008
Are we in a recession?
President Bush Friday spoke about an economic stimulus package that would be about 1% of GDP, it just needs to be approved now. It is funny how both sides work together when money and votes are involved. The problem we’re seeing with the recent up and down ride on Wall Street may not necessarily be a recession.
Recession by definition is when we actually lose economic growth and GDP recedes backwards. Unemployment usually goes up and people work harder to hang on to their jobs. No matter how you look at it, we’re going to be in for a long up and down ride. They can cut rates and give us back our money, it may not make a bit of difference in the overall trend. So if we’re not in a recession, what has happened?
Slower growth in our economy is causing things to start to balance themselves out. People were riding everything so high, in their house, companies setting record profits, and raising the bar another notch always means higher expectations. Welcome back down to reality. Without a doubt the housing market has taken a hit because appreciation went up so fast, anyone could get a mortgage, and the bubble could not get any bigger. Now the individual making $50k is feeling what was once a $300k house on an interest only mortgage is really like. Panic always creates emotion and emotions can put us into a bad situation.
Monday the US markets were closed but the International markets were freaking out. Indexes in major markets were showing crashes, losing 2-7% in a single day! Then this morning when NYSE opened the DOW dropped like a rock 465 points but later came back up. This month alone I have literally watched my 401k drain away to the tune of hundreds of dollars. What goes up must come down, and the band played on. Why should I be concerned so much about my retirement savings right now? The stock market has a level of risk we accept when our money is involved with it. I’m keeping things just as they are because the sun will shine again and it will gain strength.
One positive thing I seem to be hearing about the tax rebate we could get is people want to pay down their debt with it. Getting out of debt somehow became more important than rushing out to spend. I think our economy would be stronger if we didn’t have to use credit as much or at all. In all due time though we will see what is going to happen with our economy.
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