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Hernando Today

The Forced Recession

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DONALD J. MYERS Special to Hernando Today

Published: January 25, 2008

Updated: 01/24/2008 05:55 pm

The power of the press remains strong. For the last couple of weeks, the pundits have been harping about our moving towards a recession.

The market, since most of it is based on emotions, responded with a downturn. The national holiday on Monday left our government and markets closed. Foreign markets got jittery and fell precipitously fearing an American recession - they to read American papers. The pundits had a field day predicting a massive sell off when our markets opened on Tuesday.

The Fed stepped in and dropped interest rates three-quarters of a percent. The market recovered a portion of its initial loss for the day and closed down more than 100 points.

What does all of this mean? We are the same country that we were last week or last year. There are always pockets of poor economic conditions even in the best of times. Low interest rates are great for the young because they can borrow at a cheaper cost as they begin their life journey in the working world. Low interest rates are not so good for the elderly who rely on interest to subsidize their income since retirement.

None of that is new.

Different parts of the country have relied on different industries at various times in our history. The northeast had its textile industries, Pittsburg had its steel mills, West Virginia had its coal mines and other parts of the country had their specific industries. Many of them have had to adjust when their specific industry moved or closed.

Time marches on.

The current situation is being hyped. Typical economic indicators remain very positive - unemployment remains low, inflation remains in check and the Gross Domestic Product remains strong.

The housing boom has gone as all booms do. The price of homes soared, and now there is an adjustment. Congress demanded that lenders loan poor risks money to get into the housing market. Some of them will now lose their houses because they could not afford them in the first place. Housing prices are dropping and one would think that it is simply terrible.

When have we ever complained about the cost of anything dropping?

We still have the same number of people living in the country, and they must live somewhere. When the price of a home is within the reach of people, they will buy. When a person must sell his home in a depressed market, he will also buy another home in a depressed market.

The president and Congress are both moving towards some type of stimulus package and the figure most often expressed is $150 billion in tax rebates. The best stimulus would be to make the Bush tax cuts permanent.

If this were not an election year, proposed action would not be moving at the speed of light.

Donald J. Myers, a retired colonel in the United State Marine Corps, is a regular columnist for Hernando Today. He lives in Spring Hill.

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