Last Friday, Ben Bernake, the Chairman of the Federal Reserve, said that the "US economic storm 'has not yet subsided.'" To tell the truth, I hadn't noticed much of a "storm" going on, until I started looking out of the window of my own life.
True, I've read a lot about auto sales slowing, and some plants closing. Yesterday, my other half e-mailed me a couple of stories about the big three auto makers--GM, Ford, & Chrysler--asking for some pretty big bailouts: $25 billion initially, and an extra $25 billion in installments over the next several years to develop more gas-efficient, "green" vehicles. This comes after a $24.1 billion loss over the past year, as people haven't been able to afford gas for the ginormous SUVs they bought, and are selling them, or opting for voluntary repossession. The companies have, for the first time, started taking losses on leases, leading them to get rid of that program. Many families have opted to downsize to one car, while others are buying used Toyotas and Hondas with far better reliability and gas mileage.
I also know that the mortgage mess is still, well, a mess, with Fannie Mae and Freddie Mac still deeply in debt; however, Freddie Mac claims to be turning it around. Freddie's board said that they sold about $2 billion in their debt (I have no idea how that works--can individuals sell their debt, too?). The board also said that it and "Fannie Mae can fund operations without a government takeover."
Government takeover?!? Not just (as if that's not bad enough) bailout? Gah! Who are we, Russia?
I've also heard that there've been a lot of bank closures and buyouts. We had Bear Sterns earlier in the year. I heard that JP Morgan and USB are having trouble. Friday, a Kansas-based bank, Columbian Bank and Trust, closed its doors on FDIC orders. According to the FDIC's website, they've closed nine banks this year alone. The FDIC is getting ready for even more, coming up. Well, today, the market tanked on banking fears.
Criminals are dumping the dollar as their currency of choice. Current currency relative strengths discussed here.
We're not in a recession now, according to the textbook definition, as well as some researchers. However, we may be heading that way, if things don't start turning up.
Whether we actually have one or not is not up to the Federal Reserve. It's not up to any government bureau. It's up to the consumers and the market. Since the consumers are influenced by the media, which have been wrongly calling the current turbulence a recession (possibly for ratings impact, possibly for political impact), it's likely to become one soon. In my opinion, Chairman Bernake (and the media) simply needs to get out of the way and let the market work.
Update: The FDIC has released a story that they have 117 banks on their troubled list, up to 13% of which could go splat soon, according to statistics.
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