Bankruptcy & Foreclosures

I know that I personally (along with many economists) have been trying to remain positive in what is quickly becoming quite an economic slump. Uncle Sam is finally confirming such suspicions now that tax time is quickly approaching.

The President has recently proposed a plan of short-term tax cuts, in case you haven’t heard, with the goal being to keep a little extra money in circulation for both individuals and businesses.

According to a poll conducted by Fortune Magazine, roughly half of the individuals surveyed claim that they are already cutting back on spending when compared to last year for fears of recession in the upcoming year. This is important once we begin to look at how a recession gains momentum. Once the fear of recession forces individuals to take action (by not spending) the process of an actual recession is suddenly underway.

About the only positive to report amidst the economic turmoil is that the price of crude oil is falling along with the dipping stock market. Thanks in part to less than stellar employment numbers, a shaky housing market and manufacturing cutbacks, traders worry that the demand for oil will fall which means increased supply and decreased pricing.

With talk a sluggish economy fueled by instability in the mortgage industry and rising oil costs, the infamous R word has been popping up a lot of late. Of course jumping to conclusions about a potential recession does little more than send everyone into panic. The key to success is to examine recent documented cases of economic recession and to backtrack as to their potential causes.

2001, 1990, & 1981 were all periods of recession in the United States economy. The causes? Well in 2001 it was the combination of Terrorist activity and a fallout in the value of technology stock prices. In 1990 it was the combination of a fear of inflation, a credit crunch, and a lower consumer confidence accredited to the Gulf War. In 1981 the labor market was to blame. Unemployment rates hit 9.6 million and high interest rates plagued the automotive and housing industries.

There are a few similarities in today’s situation: We are still fighting a costly war and the housing market is providing just enough instability to shake domestic consumer confidence. Here is the good news. Since 1981 (when the recession lasted a solid 16 months), recessions have been getting shorter and less intense. The Federal Government is credited here as a result of their more active involvement to nip these situations in the proverbial bud.

Speaking of the government’s involvement, Chairman Bernanke has announced today (January 10th) that the Fed is ready to cut interest rates again as needed.

You’ve heard of Discover, Visa, and American Express, but what about Direct Express? According to the US Treasury Department, a new pre-paid debit card is on its way. The card, which will be issued through Comerica Bank will be FDIC insured but here’s where it gets interesting. The government plans to charge up this new card with funds from social security benefits eliminating the long-standing tradition of issuing paper checks.

The card will function just like any other debit card which means it can be slip through the ATM machine for cash or direct purchases can be made while the balance is up to the minute accurate.

The idea behind this concept is to eliminate the time it takes to mail out paper checks and risk of losing or having a check become stolen. Best of all, the money not being spent in paper and postage means savings to the taxpayers. The cards begin shipping out within the next two months and the transition should be complete by the end of summer.