This is the question that most Americans are asking themselves? Is our economy improving? Are we headed in the right direction as a nation or are we floundering and headed toward a double-dip recession? Even the economists can’t agree on what is actually happening here in the U.S.and the world economy.
When the stock market bounced down over 600 points, the day I took my money out of the market; bad timing, I know, the fear was based on the U.S. downgrade to AA+ by Standard & Poor and the frenzy our politicians unable to agree on a deficit cutting budget. But, what now is driving the stock market to uncertainty?
Discouraging economic data from around the globe has heightened fears that another recession is on the way. Evidence continues to emerge that U.S. home sales and manufacturing are weakening. Signs also surfaced that European banks are increasingly burdened by the region’s debt crisis and sputtering economy.
This increased anxiety ignited a huge sell-off in stocks that led many investors to seek the safety of U.S. Treasury’s after the historic tumultuous stock trading a few weeks ago. I am sure many were caught off-guard by the continued European bank- crisis.
Economists say the economic weakness and the stock markets’ wild swings have begun to feed on themselves. Persistent drops in stock prices erode consumer and business confidence. Individuals and companies typically then spend and invest less. And when they do, stock prices tend to fall further.
The risk of a recession is now about one in three, according to Morgan Stanley and Bank of America Merrill Lynch.
Here are some worrisome indicators that we may be headed for another recession which many are still feeling they are in now:
- U.S. home sales fell in July for the third time in four months, the National Association of Realtors said. Sales dropped 3.5 percent to a seasonally adjusted annual rate of 4.67 million homes. That’s far below the 6 million homes that economists say must be sold to sustain a healthy housing market.
- In Asia, Japan’s exports fell for a fifth straight month. The world’s No. 3 economy has fallen into a recession since its earthquake and tsunami in March. Its weakness is contributing to the global slowdown.
- Consumer prices rose 0.5 percent in July, mostly due to more expensive gas and food. The “core” price index, which excludes volatile food and energy prices, rose 0.2 percent.
- European banks are being forced to pay more for the short-term loans they need to finance day-to-day operations. Some with heavy exposure to the debts of Greece and other weak countries are relying on loans from the European Central Bank because other private banks are reluctant to do business with them.
- A consumer survey taken this month showed confidence in the economy fell to the lowest level in 31 years.
- Some expect Congress will let a Social Security tax cut a business tax credit and extended unemployment benefits expire at year’s end. It calculates that the expiration of those measures would reduce U.S. growth by 0.5 to 1 percentage point in 2012.
- The number applying for benefits rose 9,000 last week to a seasonally adjusted 408,000. The four-week average, a more reliable gauge of the job market, dropped for a seventh straight week to 402,500, the lowest level since April. The report suggests that the economy is creating jobs but not nearly enough to lower the high unemployment rate.
I am an optimist, at heart, who believes in a capitalist government, but am disappointed by the economic policy set by Bernake and a Whitehouse that cares more about being re-elected than the future of the U.S. economy. Being in debt is not new news for America, since we have been living on credit in this country since the 1930’s.
Managing our debt and being fiscally accountable for spending is the responsibility of our leaders who seem to forget just who they work for, but love to spend our hard earned money!
What do you think?