Confidence in the global economy fell in September, as concern mounted about the health of the U.S. economy and global financial system following the bankruptcy of Lehman Brothers and the near bankruptcy of AIG, which prompted a U.S. Federal Reserve intervention, a new survey indicated.
The Bloomberg Professional Global Confidence Index fell to 11.3 in September from 14.1 in August among U.S. respondents. The Western European index fell to 12.6 from 12.9. Readings below 50 indicate negative sentiment.
Economist Richard Felson, who did not participate in the Bloomberg survey of 3,000 Bloomberg Terminal users, told BloggingStocks Wednesday too many financial concerns and bankruptcies are occurring over a short period for business professionals to be positive.
"Countrywide, Bear Stearns, Indymac, Freddie, Fannie, Lehman, Merrill, and now AIG. Wow, that's an awful lot for any economic system to absorb in five years, let alone one year," Felson said. "Executives and other business professionals are justifiably concerned about credit access for business operations and about declining demand due to rising unemployment. The major U.S. economic metrics are not moving in a positive direction right now and the nation needs to correct that."
What would turn sentiment around, in Felson's view? In addition to identifying a growth catalyst for the economy, Felson said the United States must find a way to stem the tide of declining home prices.
"Stabilizing the housing sector is a key. If we keep more people in their homes, fewer foreclosed homes will be added to the market, eventually decreasing the supply of homes for sale, which will stabilize home prices," Felson said. "With that in place, lower foreclosures will stop the drop in value of all these mortgage backed securities, which are at the heart of collateral calls that are driving many of these financial institutions into bankruptcy."
Felson recommend that the U.S. Government expand the Federal Housing Administration to refinance mortgages of distressed homeowners, and re-establishing the Resolution Trust Corporation to manage the flood of bad assets. The former will help median home prices recover, the latter "will enable the U.S. financial system to process, over time, the hundreds of billions of dollars of low-value securities," Felson said.
Economic Analysis: Stabilizing the housing sector appears to be the key to recovery, along with creating a growth catalyst for the economy. On the latter, economist Felson added that the new U.S. Congress and President should pass a second fiscal stimulus package for infrastructure projects of at least $100-125 billion to help get the U.S. economy on a growth track again.
This week, Congressional Democrats proposed a second fiscal stimulus package for $50 billion, but the measure was opposed by Congressional Republicans. Congress recesses next week, so no new fiscal action is expected prior to the November 4 election.
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Reader Comments (Page 1 of 1)
9-17-2008 @ 10:21PM
ken said...
"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled
by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and
all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the
most completely controlled and dominated governments in the civilized world. No longer a government by
free opinion, no longer a government by conviction and the vote of the majority, but a government by the
opinion and duress of a small group of dominant men."
-Woodrow Wilson, 1916
"I sincerely believe that banking establishments are more dangerous than standing armies ... If the
American people ever allow the private banks to control the issue of their currency, first by inflation,
then by deflation, the banks and the corporations that grow up around them will deprive the people of all
property until their children wake up homeless on the continent their fathers conquered.”-Thomas Jefferson
"The issuing power should be taken from the banks and restored to the people, to whom it properly
belongs."
-Thomas Jefferson
"Today the path to total dictatorship in the United States can be laid by strictly legal means, unseen
and unheard by the Congress, the President, or the people... outwardly we have a Constitutional
government. We have operating within our government and political system, another body representing
another form of government, a bureaucratic elite which believes our Constitution is outmoded and is sure
that it is the winning side. All the strange developments in the
foreign policy agreements may be traced to this group who are going to make us over to suit their
pleasure. This political action group has its own local political support organizations, its own pressure
groups, its own vested interests, its foothold within our government, and its own propaganda apparatus." -
Senator William Jenner, 1954
9-18-2008 @ 8:16PM
Tim said...
Is there any chance that Lehman Brothers
stock is going to be worth anything? What If Lehman Brothers is purchased will it then be worth something?
9-18-2008 @ 8:16PM
Timothy Slossar said...
Will Lehman Brothers stock be worth anything if they are bought ?
Will I be able to get some of my money back?
should I sell or wait?