December 15, 2008

Signs of the times

Saturday, I was out shopping for presents for my family, and while driving to a department store, I saw a somewhat beaten-down man standing at a stoplight. At first, I thought he was a panhandler - not an uncommon sight - but when he turned around, I realized he was wearing a sign and had a clipboard.

I don't remember what the sign said exactly...This gentleman was out of work and was collecting petition signatures for another New Deal to send to Obama.

The light changed to green before I could chat with him and find out more. It's been a long time since I studied that era - I think 7th grade in a Social Studies (aka History) class, so the finer details of the program escapes me. For those of you who need a refresher, the New Deal was a massive program that FDR and a bunch of other brilliant(?) people thought up. It gave jobs to the jobless and whipped sleezy business and finance practices with the objective of helping the economy. It also brought about the Social Security Administration and SEC.

While I don't think we need another New Deal of the same scope...Our jobless rate is nowwhere as high as it was then (9-ish% vs 17%)...I would not be surprised if a government job program of some type was created in the near future.

We cannot depend on trading with other countries to help us bounce back. Although the Great Depression wasn't contained to U.S. alone, this recession is affecting far more countries this time around.

To put it in perspective, the forecasts for GDP growth for U.S., Euro Union, Japan, U.K., Canada and Mexico are all expected to have negative GDP growth. China needs at least 7% to sustain its economy, due to its large population and other factors, and they are forecasted to have 6.9% at best. Russia had 6.6% GDP growth for '08; they are forecasted to have around 2% growth next year. Signs of the times, indeed. I'd cite the source, but that'd give away my place of employment, which I'd rather not do online.

How does this affect you and me? Well. It all depends on how the government reacts in the next few months. The jobless rate will almost certainly grow to 10% next year - and that's excluding the fallout of an American auto bankruptcy - which, incidentally, isn't as bad as the media makes it out to be. If one of them filed for Chapter 11, they not close doors, they will continue to function. Remember, America Airlines and Northwest Airline, amongst others, filed for bankruptcy, and they're still around today. But I digress...the jobless rate, however, is not expected to go above 12%. As long as your company is in a decent shape, you cut back on luxuries and hold tight for the'll be fine. If you're caught in a layoff, remember to apply for unemployment - the unemployment period will be extended, I believe, another 3 months.

To wrap this post up - I didn't intend for this to be a long one - I have a feeling that this will be a long, but fairly moderate, relatively speaking, recession. Spanning more than two years, perhaps.

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