Thursday, January 17

No Worries, the Fed will save us!

Billions of dollars in losses from the subprime disaster. Waining consumer confidence. Personal savings at a historical low. Warnings of recession.

The news from the financial world has not been good. How can this be fixed? Surely I don't have the answer, but I do have a few observations that I find interesting and make me say 'hummm'..

The word today is that the Fed will undertake measures to spur the economy, to encourage consumer spending. The holiday season retail sales reports indicated that people actualy spent less in December than they did in November; a sure sign of recession?

With personal savings at an all time low, and more and more Americans living from paycheck to paycheck, I wonder what the government will do to create cash to spend? Or, instead of putting money in our pocket, will they merely continue to advocate for credit purchases which in many opinions have lead to the current state of our economy.

Simply put, continued debt accumulation further reduces savings, pushing the savings rate into negative numbers. Encourage more debt spending only esaserbates an already dismal economic prediction.

Hopefully, all the doom and gloom predictors are wrong. Hopefully, our new President and his\her people have an answer.

I'm not a financial scientist, but I believe the answer continues to lay in financial education. The core of this education must be to help us learn that we cannot borrow and spend. We must learn the savings discipline, and the value of earning a reward, to not get it now, but to earn it later.

Anyway, our government will be attempting a fast track fix to the economy. More to come!