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The Dreaded “R” Word

Recession. It’s on the lips of financial forecasters and the Fed. So much for that fantastic Bush economy, eh? Seems that the “ownership society” the president used to talk so much about is really more of an “indebted society” and no amount of spin can change the reality on the ground.

Today, the Federal Reserve issued a statement warning that “financial market conditions have deteriorated  , an tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward…the downside risks to growth have increased appreciably. ”

Translation: The shit is headed towards the fan and may soon hit it and land on everyone’s face.

It’s not just that the stock market resembles a rollercoaste r without brakes. It’s not just that home prices are dropping faster than a politicians approval rating. It’s not just that banks are tightening credit like a virgin sphincter in a prison shower. It’s all of these things combined that present a gloomy prospect for the nation’s economy. And if you think it won’t happen, think again. It’s already here. It’s just not at full force quite yet.

Merrill Lynch is forecasting the first consumer recession in 17 years. And as asset wealth declines (stock, real estate) and as credit to business and home owners dries up, the cuts in personal and business spending will affect job growth, retail sales, factory orders…you name it. And while it’s no sure bet that we’ll dive into a full blown recession, analysts are saying that the odds are at least 50-50 that we will. And they’re hedging their bets towards a worst case scenario for now.

The Fed seems to be unable to halt the downward trend too. They’ve injected billions into the central banks to help with liquidity and now they’ve cut the discount rate too. And while both moves brought an upswing back to the market, they’ve done little to solve the credit crunch that may well be the boa constrictor on the economy.

I guess all we (the average guys and gals, that is) can do is sit tight and see where the ride ends.

<tag> economy, recession, Fed, stock+market </tag>


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6 Responses to “The Dreaded “R” Word”

  1. Eh…. No depression here… Low stock prices are a buying opportunity.   Ebbs and flows like the sea…

  2. Steve’s not much of a student of history.

    The situation we have now is “deja vu all over again.” Think back to the late 80’s - the S&L crisis, the Prudential bailout, the real estate collapse… any of this sound familiar?

    JMJ

  3. Steve also seems to have a spelling problem, since Depression starts with “D” and not with “R.”

    Sure lower stock prices are a buying opportunity, IF you have the ready capital to do so. But since most of the capital comes in the form of loans (unless you make some dough in a sell off), and since loans are tightened up right now, at best, most investors can juggle their stock portfolios and hope for good picks.

  4. Oh, and all this after irresponsibl e deregulation from a sleazy con government… again, sound familiar?

    JMJ

  5. I am sorry… seems like liberals, like my pal Jersey here, like to relate the current economic situation to something in the past. I am merely pointing out the doom and gloom nature of this post.

    If you don’t enjoy the fruits of Capitalism move to Cuba… At least their health care is better (allegedly).

  6. The Federal Reserve issued the ‘doom and gloom’ steve in their statement. Last time I checked, there isn’t a whole helluva lot of liberals running the FRB.

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