Business

The American problems with economy
by Jana Passova

The American economy is discouraged by debilitating recession and destructive inflation. The situation is getting worse since last summer when the credit situation started getting worse. There are predictions that the economic activity of the American market will continue to weaken in next quaters. Ben Bernanke, Chairman of Fed, suggested reductions of interest rate, which should revive the economy. They should come in March. This should get ahead of the curve on a squeeze of financial market. There is not very optimistic situation in oil or food prices. The Congress needs to find out more far-reaching solutions to solve this situation. It might include direct and costly govermnet measures. The main problem seemed to be too long waiting to began solving economic problems. Now can occure a situation that falling house prices could affect consumer spending and finantial markets. Bernanke said he would try to avoid a confidence crisis. Early intervention will simplify to contain after-effects. Anyway there are people who think that existing problems should be solved stepwise. Right now, the biggest danger is the recession of the economy, not the inflation. And it should be solved as fast as possible. Last days showed some perils of an economic stagnation that could be combined with inflation. This situation is comparable with problems of 1970. Bernanke is ready to support using more government power and sources to finish the housing crisis. This should help to buy mortgage-backed securieties from Wall Street Banks at a discount and provide 4 billion dollars to state and local governmants to redevelop homes that were foreclosed. There is a new idea how to help people to aviod foreclosure. It is an bankruptcy relief plan. The negative side is that it might cause higher interest rates.

by Jana Passova for PocketNews (http://pocketnews.tv)

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posted by Blog TechSource @ 2:07 PM