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The economy is officially in a recession, what does the balance of 2008 look like economically

 

The job market contraction confirmed everyone's fears that the U.S. economy is in a recession.

This week Warren Buffet went on record stating that the U.S. economy is in a recession. Today the job market confirmed this with very disappointing news relating to job growth. The collapse of the credit markets, falling home prices and fallout from the sub prime mortgage fiasco of last year have put the economy on a downward spiral. It is very clear that the Federal Reserve has mismanaged this market and came to the table to late with their interest rate cuts. They are now playing from a position of defense and lack the ammunition to restore growth to the markets by simply cutting the Fed funds rate. The economic stimulus package that will hit the market in mid May will only provide a small lift to the overall economy. The economy is going to continue to struggle until the housing market bottoms out. There is no end in sight for home sale depreciation as home values continue to decline with record foreclosures in the market. Until the government aggressively tackles the lending issues and helps bring more home buyers into the market we are going to be stuck with an economy that is not growing and inflation that is going to be rising sharply with pressure from energy prices. The markets are screaming for more liquidity to help banks make more money available to lenders and home owners. The fed is trying to help facilitate this and pledged $100 billion into the market on Friday. This news should help some banks and lenders who can directly draw cash from the Fed, but lenders such as Thornburg mortgage, a REIT, that has seen its stock price drop by over 80% in one week, it may be too little, too late.

3-7-2008 ? LoanNetwork.com

 

 

 

 

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