Economy and that scary "R" word

Schneed10

Any candidate planning to roll back the Bush tax cuts will push the economy further into recession. Taking money out of the hands of people, even if they are the rich, will hinder their ability to spend (hurting retail), hinder their ability to invest (hurting the financial companies), and hinder their ability to hire people to the extent they run small businesses.

Increasing taxes will always create higher unemployment. It's practically a law of physics in economics. Higher taxes takes money out of the economy, so businesses tighten their belts. They lay people off or put hiring freezes in place.

Yes, the Fed will continue to ease the Fed Funds rate. If you'll remember in 2002, the Fed took the rate all the way down to 1% and maybe even below, if my memory serves. They'll continue to go lower as time goes on. This will help the stock market.

As for a bottom in the stock market, really hard to say. If I knew, I'd be a rich rich man. Some think the fears have already been priced into the market, and we're kind of close to a bottom already. Others think the credit crunch is going to take tons of money out of the market as lenders refuse to lend to folks with marginal credit, banks foreclose on mortgages, etcetera. We'll see.

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mheisig

Kevin Hassett of the American Enterprise Institute had an interesting checklist of sorts in the Washington Post, well worth a read:

If you're worried about the market, keep in mind that prices will almost certainly be higher five years from now. If you look at your "stock money" as "five year money," 95% of the time, stocks' five year average annual returns fall between -0.8% and 26.0%.

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Schneed10

I agree with this.

Trying to figure out when it's wise to dump stocks and run to bonds or gold or cash, it's fruitless. Most of the time, you'll jump out of stocks AFTER the lion's share of the drop is done. And most of the time, you'll get back into stocks AFTER they've bounced back quite a bit.

You don't want to get out of stocks now, because you never know when they're going to bounce back up. You could miss out on that bounce.

Assuming you don't need the money for a number of years, just ride it out. It pays off in the end.

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Schneed10

That said, be diversified. Don't just own one or two stocks in a recession (or anytime for that matter). Own a mutual fund that invests in a bunch of stocks.

If one gets tanked by recession pressures, you won't lose your shirt.

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hooskins

The Fed already cut rates yesterday prior to opening, 3/4%. Although this is bad news bears for us, we are doing a bit better than some other markets which took 5-12% hits yesterday.

I hope their anticipation about our market is not a reality.

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dmek25

this president has done everything he could to weaken the American dollar. cutting the rate is another way. that's just trying to insert a quick stop gap on the economy. we need more jobs on American soil. NAFTA should be dropped into the nearest trash can. worse piece of legislation ever passed. more jobs = more spending. in turn strengthens the economy

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Monkeydad

Without his tax cuts, we'd be in FAR worse shape for the last 5 years.

Schneed10

There is no doubt about this. Unemployment would have hit 7% instead of 5.5%. More jobs would have been outsourced overseas.

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saden1

**** the Bush tax cut, I wipe my ass with that measly $300 I got back. I'm getting screwed and I know it, how anyone else doesn't is beyond me. And when did we go from "the tax cut is wonderfully awesomely godsend" to "we would be in a far worse position without it???" Psst, the government is running in RED, what that means to you is that you're getting chickenfeed while the wealthy bleeds this country dry.

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mheisig

NAFTA is the biggest turd of legislation ever. There, I've agreed with dmek for the first time

Tax rebates ($300, $800, $1,600 whatever) seem like a good idea at first glance, but most economists agree that they are a pretty bad idea. Not to mention the fact that most people end up putting that rebate in savings instead of spending it, so the impact is negligible at best.

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Schneed10

You're getting the tax cuts and tax rebates confused. The rebate was the one-time $300 check. Which I agree, amounts to a hill of beans in the long run.

However the tax cuts have been in place all along. We're all paying less taxes every pay period, especially the wealthy, because of the tax cuts. That is the move that made such a good impact on our economy.

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saden1

How has it been good for the economy? We are spending more money than we generate. I'm no economist but my take is that you don't give a tax cut without a balanced budged and a surplus.

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hooskins

Exactly there is no incentive to put that money back into the economy. A tax cut is better because you will have direct disposable income.

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