This week is Thanksgiving-a time for reflection and gratitude. I'm going to give you the top ten things to be grateful for.
Number 10 - Your job. With unemployment rates as high as they are, it's more important than ever.
Number 9 -Clean air to breathe and clean water to drink. Not everyone is as fortunate as we are.
Number 8 -- Honesty and Integrity. With all the dishonesty in the world today, let's appreciate the honesty and integrity that we deal with on a daily basis.
Number 7 - Coworkers. I appreciate the people I work with; you should do the same.
Number 6 - Medical personnel - Doctors, nurses and support staff. They are there when we need them; let's appreciate them also.
Number 5 - Our military, both past and present. Their lives are on the line, let's be thankful for their commitment to serve our Country.
Number 4 - Your health - Nothing is more important. Without it life can be miserable; be grateful for good health.
Number 3 - Our country - Freedom is a blessing none of us appreciates enough. We can go to bed without worrying about foreign attacks; not everyone is that fortunate.
Number 2 - The rebounding economy. Although it is moving slowly, it is still moving in the right direction.
Number 1 - Friends and family - What can I say? It all starts and ends here. Appreciate the people you care about.
I'm also thankful for your interest in my blog. Have a Happy Thanksgiving.
The last few weeks we have been discussing what's coming in 2010. We've covered GDP, interest rates and finally the banking crisis. Today, we are going to discuss jobs!
Jobs. They are important to all of us. The national unemployment rate is currently at 10%. It has slowly risen this year and is projected to continue rising into the first half of 2010. Could we see 12%? Maybe. Hopefully not.
Locally in the state line area, we have seen our unemployment rate skyrocket way past 15% in both Rock and Winnebago Counties. I recently read an article that said that the national unemployment rate formula was changed in the early 1990's. The article went on to say that if we still used the old formula, we would already be at a national unemployment rate in excess of 15%. The change in the formula dealt primarily with no longer counting people who have given up looking for a job. This is a large part of the currently unemployed. These people have lost their jobs, are on unemployment and have at least temporarily given up looking for a new job. As they have given up, they are still unemployed. Jobs have now become our #1 economic problem.
Let's hope as the economy slowly comes out of the Great Recession jobs will grow and the unemployment rate drops. Jobs are essential to economic growth, and these jobs need to be private sector jobs, not government jobs!
We've been talking about what's coming in 2010. We covered GDP, or the strength of the economy. Then we looked at interest rates. This week we are going to look at the ever increasing problem in our banking system. As of today, we have had over 100 bank failures nationwide this year.
A bank failure essentially occurs when bank's troubled assets exceed their capital. Troubled assets are generally defined as:
- 1. Loans at least 90 days past due
- 2. Loans where the bank is not accruing interest, and
- 3. Loans that have already been foreclosed on.
As you can see, none of these are good. If you add all these areas together and they are more than the bank's capital, you have a formula for failure. What caused these problems?
Essentially, they have been the result of three main areas:
- 1. A severe decline in real estate values
- 2. Over zealous lending on the part of the banks, and
- 3. The results of this terrible recession that we have just broken through.
When you combine these factors, we see the results of a perfect storm that is causing a strain on the banking system. Should you worry? NO! The FDIC insures your deposits up to $250,000.00 and usually when a bank does fail, the FDIC finds a buyer that takes over operations of the bank. Bank failures could exceed 200 for the 2010, so get ready.
We're looking at what 50 top economists are looking at for 2010. Last week we looked at GDP. This week we are going to look at interest rates.
The Federal Reserve Bank has the ability to set or have input into short-term interest rates. They meet several times per year and set a target for fed funds, which is the rate that banks are paid for their excess cash. The Federal Reserve targets that rate and also controls the discount rate which is the rate that the fed lends money to banks.
Long term rates are governed by the market, or essentially, what buyers and sellers of bonds are willing to pay. This market is similar to the stock market in that it trades on a bid and ask system. When the economy is heating up, or expanding, higher interest rates are prevalent, which causes the economy to slow down. The reverse is true when we are in a slow economy, or a recession. Interest rates go down. So, if our group of 50 economists think that the economy will improve next year, then interest rates will have to go up!! Not dramatically, but they should be about 1% higher a year from now.
That means a number of things for the economy:
- 1. First, it means that mortgage rates will be higher than they are now, which will most certainly hurt an already crippled industry.
- 2. Second, it means that struggling businesses will have to pay higher rates for their business loans, and
- 3. Third, consumers will have to pay higher rates for personal loans, like car loans.
Good news? Probably not.