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Should we (The United States citizens) worry about recession?
I heard about the DOW going down the most it has ever in one single day after the bailout bill was rejected. So, what does all of this mean for us, as normal US citizens and tax payers?
Are we going into recession?
My best friend said it was going to be just as bad as The Great Depression! Is that true?
Maybe someone knows or understands more than I do about all this and can explain what is going on with the United States.
What is our biggest worry right now? Should we prepare for the worst? And how would we go about that sort of preparation?
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It's unlikely that we are going to plunge into a depression. Not impossible, but pretty unlikely. Technically, economists wouldn't even call what is currently happening a recession, although it’s likely we are headed for one or will experience something very similar. The economy has been generally strong for a very long time and right not it's not strong. It's not horrible. It's just not good.
There is a saying that goes "It's a recession when your neighbor looses his job. It's a depression when you loose yours." A lot of what is in the news right now is about perception and panic, not about reality.
Major banks and lending companies are NOT failing in the way they did during the great depression, and there is little reason to believe they will. Over a thousand banks where closed only back in the late 80s... We haven't hit anywhere near that mark yet and even that isn't as bad as the great depression, and that didn't cause us all to starve and loose our homes either.
There is NO recession, not in the technical sense. It simple has not happened yet.
There is NO substantial job loss. Employment has been declining, which is sad and unpleasant, but not at a terrifying rate.
What should your biggest worry be right now? Debt and Savings.
I wouldn’t even call these ‘worries’, really, this is just common sense, something most people have not been using when it comes to money.
Don’t take on any debt you cannot handle. If you can’t afford it, don’t buy it. This is a good rule for life. If you already are carry credit card debt pay it down ASAP. Pay down your car ASAP too, as those loans tend to have the highest interest rates. If you are carrying ‘good debt’ such as debt from a mortgage or education, be economical and pay off as much as you can each time, don’t just make the minimums. A recession can hurt anybody, but it will always hurt the person who is carrying more debt then they can handle.
As for savings: Once you’ve got any debt under control it’s time to save. This isn’t the kind of economic climate where you should be splurging on new toys and shiny things. You should always have an emergency fund that would allow you to live without working for three months. This is a good rule of thumb even when there is a strong economy, because you never know when illness or family troubles might strike.
There is no recession yet, but people should be and will need to be tightening their belts. There is less money in everyone’s pocket, not because we are getting poor, but because there is less easy credit and people have become nervous about spending more then they actually have We, as individuals, as countries, and as corporations have been overspending for years and now we must compensate for that irresponsibility. However, I am optimistic (um, but I’m also Canadian by the by), that although the next few years will be more difficult, there really isn’t any reason to panic. Simply behave responsibly. If you do that, at the moment there is no reason to be terrified, just to be frugal.
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