Looks like cats have to finally shake off their denial and admit that we’re in a recession. If the dollar’s freefall over the last year and the rising unemployment rate (it stands at 6.1%, which means there are 94 million employable adults out of work right now) weren’t enough to convince the well-paid pundits, yesterday should have put things into perspective: The 504-point drop in the Dow Jones Industrial Average was the biggest single-day fall-off we’ll seen since the market reopened after 9/11.
It came on the heels of Wall Street investment firm Lehman Brothers’ bankruptcy filing, after defaulting on $600 billion owed to creditors. When brokerage firm Merrill Lynch saw that Lehmanâ€”a company that successfully weathered the Great Depressionâ€”couldn’t get it together, it sold itself to Bank of America for $50 billion like the expensive whore that it is. Massive layoffs have already begun in NYC and London.
“I still have my job,” you might say, and I’ll say, “Good for you, but do you still have your retirement money?” Today’s precipitous drop resulted in the loss of about $700 billion in 401(k) and IRA funds, nationwide…. I’ll wait while you check your account balance (I peeked at mine earlier; it’s not prettyâ€”I’m already down 14% year over year). It will also likely make it harder to get a loan, as firms tighten their belts in an overreaction to their own failed mortgage policies during the housing boom.
But I don’t tell you this to make you panic. I tell you this because an informed citizen is a smart one. First, we should consider how our government reacts to these situations. The Treasury used tax dollars from the Federal Reserve to bail out Bear Stearns back in March to the tune of a $30 billion, and did it again a week and a half ago to save housing giants Fannie Mae and Freddie Macâ€”effectively drawing on public funds to support private enterprise. Treasury Secretary Henry Paulson says that saving Lehman was never an option, but I can’t say I believe him; I just don’t think this administration thought they stood to benefit enough from the salvation of this particular company, and they haven’t taken saving A.I.G. off the table….
And it doesn’t hurt to consider how we got here. When banking institutions are allowed to grow rich by taking advantage of the American dream of homeownership with sub-prime mortgages that put folks in houses they can’t afford, isn’t it a little like karma that they’re living through a nightmare now? I feel bad for the little people who got caught up in the madness of their employers, but I feel bad for my little retirement nest egg, too.
And it has implications that reach beyond your pocketbook: Many people think that the candidate who can come up with a workable plan to revive our economy is the one who will win this election. I’m not sure I necessarily believe that, but polls show that the economy is the number one factor on most voters minds. So who is best situated to handle the drama when he gets into office? Both candidates talked about the subject plenty yesterday, and McCain even released a commercial talking about “our economy in crisis.” But in a speech yesterday in Jacksonville, Florida (where the unemployment rate is 6.3%) he said, “I think, still, the fundamentals of our economy are strong.” Wow. Forgive me if I’m oversimplifying things, but how can a man who is that out touch be expected to fight for our economic well-being?
But don’t let me tell you what the candidates think; take a look at their economic plans and make your own decision. You can find Obama’s here, and McCain’s here, then come back and tell me what you think.
If you like Kenrya’s opinion, check out the rest of her posts here.
Obama’s speech on the economy (sorry guys, but I couldn’t embed McCain’s video, but you’ll see it at the above link):
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