Recession or not?
Everyone has a different definition of recession but they all come down to one meaning: A significant decline in economic activity over a period of a few months. Most of the time, the decline comes after a peak in the economy. Could it be that the real estate market was the Silicone Valley of 2008? It seems that no one wants to actually say the word “recession” for fear that we might wake up and realize that we are already in one. But if you look around you, listen to what people are talking about and saying, there are so many people in high-level positions who have lost their jobs and are desperately searching for something else. In our area alone, we know of many who have found themselves in this situation and the numbers continue to grow. People everywhere are losing their homes in foreclosures as they default on mortgages.
As I write this, Bear Stearns, a well-known investment banking company, has had to turn to JP Morgan Chase & Co and the Federal Reserve Bank of NY for emergency funds to keep them afloat. Bear Stearns plays a large role in debt markets, especially those securities backed by mortgages. The Federal Reserve Bank supported the arrangement with JP Morgan and said that it would continue to provide the markets with liquidity as necessary. They haven’t done this since the Great Depression.
For the same reason the government doesn’t use the word recession, I don’t like using it either as it seems to cause panic in otherwise rational people. This is not the time to run out and sell all your stocks and other investments - it is the time to sit back and wait-be patient. Things will get better but as with anything worthwhile, it takes time. Sure it’s time to pull in your purse strings, watch what your spending, monitor your gas usage, save the expenditures for later, but it’s not a time for panic.
Sphere: Related Content