Tuesday, October 14, 2008

A note on the economy. . .

Our former Fed-Chair NOW says we've entered into a recession! Hmm, I've been in recession for a long ass time!

I spend a lot of time watching CNBC, I trade Forex and have done so for quite some time now. I have to say that I am really worried about this economic situation. First, let me say that I was opposed to the bailout- $700 Billion to bail out banks when our economy is super-crappy? Come on, really?

After approving the bailout, Wall Street had a REALLY bad week closing on Friday around 8400 (after dipping down into the 7600 range for a minute). That's scary! So, what did our Federal Reserve do? They cut interest rates (yet again!) 0.5% to 1.5%. Okay. They also created an institution to buy up debt of banks to increase liquidity in lending. Hmmm. Okay. They've also announced today measures to spend $250 Billion dollars in capital injection into the banks, and have increased the FDIC account limit to $250,000 (just shy of meeting inflation requirements since FDIC incorporation post-Great Depression).

Okay. So, after the stock market sorta-crashed last week, on Monday, the stock market rose 936 points (an all-time one-day POINT increase record). Awesome. But what does that mean for us? Mental Note- 6 out of 10 of the LARGEST percentage gains happened DURING the Great Depression.

(1) Commodities will increase- oil for example, that was down to $76/barrel and gas at $3/gallon will go back up (an has started to do so- even with low demand). Natural Gas, Copper, wheat, etc...will continue to increase! awesome for our pocket books in the short term!

(2) The value of the US dollar will decrease against major currencies like the Euro (especially when oil goes up) make YOUR dollar unable to go as far as it once did. The dollar may look strong now, but let me say the only reason our Dollar is doing well against the Euro now (1.36 Euro= 1 dollar) is because Europe's economy sucks too.

(3) Our individual tax-debt will continue to go up...the cost per hosuehold is now $483,000 for the national debt plus this bailout.

(4) The bailout allows Wall Street to Sell into Rallies...that is when the Dow increases, Traders sell to make a profit on their way out...That will start happening this week (and definitely happened last week...)

So, inflation increases, your dollar doesn't go far, your personal debt goes up and let's not forget that EVEN WITH THE BAILOUT unemployment is INCREASING and the HOUSING CRISIS is not being resolved...That's right, capital injections to increase liquidity do not erase bad housing debt...

It doesn't make a whole lot of sense to me...Bail out the banks by stealing from the poor...

Something is wrong here...

I hope if someone out there has a better understanding of this economic situation they will share it with me...I really don't see how this economic plan RESOLVES any issues...I see it as (ANOTHER) bandaid...just covering up the problem...

And now our government is considering another STIMULUS package for us? As if giving us $600, and another $1000 will make us forget that you just made us give $2500 to banks?!?!

The unfortunate thing here is that I don't have any solutions...I see letting the economy fall apart as the 'smartest' long-term option...It keeps the power on OUR side (the People's side), and though it will hurt, it provides us with the opportunity to re-build...

Solving a credit crisis by allowing bad banks to give out more bad credit is NOT a solution...it's FUBAR!

Good luck to everyone!


P.S. the Dow just turned Negative again!

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