Some random thoughts on a possible recession
I've been following the news reports of the dramatic losses in foreign stock markets on Monday, caused primarily by fears of a forthcoming US recession, caused largely by the subprime mortgage crisis. Some have even referred to this as "Black Monday", a reference to the days of dramatic losses in 1929 that preceded the onset of the Great Depression (or the dramatic, but brief crash in 1987). In the UK alone, nearly $149 billion in stock value was eliminated on the FTSE . It's interesting to note the ripple effects of the mortgage crisis across the world's economy. In the short term, stock sell offs present a buying oppurtunity to buyers looking for investments with solid fundamentals at a discount. But an extended slide can be a self reinforcing feedback loop, causing a decline that will erase trillions of dollars of private and publicly held wealth.
While it is a little unsettling, there might be a time when problems with foreign economic markets have a similar effect on the US economy. Economists project that in as little as 20 years, both China and possibly India will surpass the US in annual GDP. It's also unsettling that the economy is beginning to trump all other issues in political discourse. The president proposes a $145 billion stimulus package (heavily dependent on tax cuts) to help stave off a recession, although part of the recession has also been brought on by the decline of the value of the US dollar due to excessive federal spending. I think that the potential for a recession also gives a pretty solid reason why the President's plan to privatize social security in the stock markets would have had dangerous consequences to our country's long term financial stability. And whatever the recovery strategy, its clear that lending markets should be prevented from practicing abusive lending practices in the future.
While it is a little unsettling, there might be a time when problems with foreign economic markets have a similar effect on the US economy. Economists project that in as little as 20 years, both China and possibly India will surpass the US in annual GDP. It's also unsettling that the economy is beginning to trump all other issues in political discourse. The president proposes a $145 billion stimulus package (heavily dependent on tax cuts) to help stave off a recession, although part of the recession has also been brought on by the decline of the value of the US dollar due to excessive federal spending. I think that the potential for a recession also gives a pretty solid reason why the President's plan to privatize social security in the stock markets would have had dangerous consequences to our country's long term financial stability. And whatever the recovery strategy, its clear that lending markets should be prevented from practicing abusive lending practices in the future.