News Flash! President says “Our Economy Faces Challenge”
By George L. Kenney | October 3, 2008
Finally, at long last, President Bush has stepped forward and stated what most of us have known for quite some time. He said "our economy is in danger", and "faces a great challenge." How did this start, where are going from here?
To begin, we might want to go back to the beginning of the war with Iraq. The cost of the war is now about $10,000,000,000.00 per month, a staggering figure. The Federal debt now reaches forward at least three generations and possibly as many as four or five.
As I mentioned in an earlier article, the Fed is technically bankrupt. As the Fed prints the additional money for such things as the war,and by placing more and more dollars in circulation, it deflates the value of each one which is currently in circulation. So we are paying the price for war and lowering our purchasing power on a continual basis.
Then there were all of the risks being taken by Wall Street, a lot of which were in the mortgage business. And as the investors continued to raise the stakes and take higher risk, they brought down the requirements for buying houses and refinancing existing mortgages. This took place about a year or more ago.
The irony is that those who created some of the largest losses, C.E.O.'s, were terminated or left on their own and were well compensated for doing so. Most received multimillion dollar packages. But the problems which were created continues to grow.
We now have a set of economic circumstances like no other in this nation's history. Real estate went down in value dramatically. When those people who were in two or three year adjustable rate mortgages needed to refinance, most couldn't afford to. They hadn't saved the money and the equity that they once had in their homes was gone. And on top of that, the standards had been raised and a lot of them no longer qualified.
Without being able to take equity from their homes on a regular basis and convert it into cash - like a real estate ATM of sorts, spending for other items has been reduced. This has the effect of slowing the velocity of the dollars which are already in circulation. This has a ripple effect throughout the entire economy.
And I'm certain you know about the Federal Government bailing our Fannie Mae and Freddie Mac, the two largest buyers of mortgages. We've also had some well established Wall Street brokerages and some major banks go down. AIG was recently bailed out because of their size and importance, it was felt they could not be allowed to fail. And now we are facing a $700,000,000,000.00 bailout package.
Two things to consider. Have you seen this coming for a long time? And, What are you doing to prepare for and secure your and your family's financial future?
Topics: Investing |
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