Dateline 9-25; President says “Our Economy Faces Challenge

Posted by George L. Kenney

October 3, 2008

by George L. Kenney

Well, the word is finally out, and it came from the TOP! President Bush stepped forward and said “our economy is in danger”, and also, “faces a great challenge.” This all begs the question, where did this start and where is it going to end?

The war with Iraq might well have been the starting point. Consider this, the war costs $10,000,000,000.00 per month, a phenomenal sum. Our Federal debt now stretches out over the next three or four generations.

So, as I wrote in another article, all additional dollars the Fed prints and places in circulation actually decreases the value of each dollar now in circulation. This has given us a double hit. We are paying for a war and loosing buying power because of the increase in dollars circulating, about ten billion of them, on a monthly 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.

There was, and is, a tremendous confluence of circumstances, the likes of which we as a nation have not faced. The value of real estate dropped, and when it came time for some people to refinance out of their existing adjustable rate mortgage, they had neither the cash on hand nor equity in their home to cover the costs. That of course, is assuming that they could even qualify for a new mortgage.

Losing the ability to convert the equity in their home into cash through a refinancing of their existing mortgage, has removed huge sums of cash from the economy as well. Without the hope of more dollars coming, people tend to hold on to the dollars they have, slowing the rate of circulation. This ripple effect has touched every sector of the economy.

In early September, the Federal Government stepped in to bailout Fannie Mae and Freddie Mac, which are the two largest mortgage purchasers. Since then banks and Wall Street firms, some long established, have gone out of business or filed for bankruptcy. And more recently, the Fed decided to step in and bailout AIG, a huge and extremely important insurance company, to the tune of $85,000,000,000.00. We now face a $700,000,000,000.00 bailout.

I’m curious about two things. One is have you seen this coming for as long as I have? The other is, have you made plans to secure your and your family’s financial future?

About the Author:

George L. Kenney has a BA in Economics and career of twenty five years in financial services. He is now a successful online marketing professional, with a passion for assisting others realize their dreams. He will help you learn how to leverage your time, money, and technology to put you on the fast track to success. To find out more about his team and the Marketing Mentors Program Click Here

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