The Declining Market

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There is no denying that our country has always faced financial problems based on our mentatility of borrowing versus saving…of consuming versus producing…of “printing money” when needed!  This issue has been compounded with the downturn of our real estate market and depreciating home values.  Our homes are the single largest asset (or should I say liability now) of many Americans.  With a decrease in this asset, spending is minimized and families cannot rely on their homes as an ATM machine anymore.  This issue is hitting home, not only as a country but individually.  A movie called I.O.U.S.A is being released this month that outlines not only our current financial conditions but the history that has led to where we are today from a debt perspective.  Below is the trailer:  

As of today, February 16, more are more signs are leading towards a further declining market:

•  U.S import prices went up by 1.7% which was driven by increased prices for oil
• Export prices increased 1.2% which was the largest jump since 1989.
• The Reuters/University of Michigan index of consumer sentiment dropped to 69.6 which was the lowest it has been since 1992.  These numbers are representative of the recessions in the mid 70’s, 80’s, and early 90’s.
• Stock prices fell due to concerns that there was a slowing in consumer spending.  Dow Jones was down 28 points to 12,348.

On January 22, the Fed cut the benchmark interest rate by 3/4 of a point (now at 3.5%).  This meeting came a week or so early from the next board meeting on January 29th.  This was partially due to the panic that swept the globe on Monday when all foreign stock markets took a plunge. 

What is most concerning is that this is the largest cut ever.  Typically we have not seen cuts more than .5% (especially in a spontaneous meeting like this one).  I guess desparate times calls for desparate measures.