Stock Market Recovery?
Does the economy really feel like it has rebounded? Do you think the stock market is the place to go throw your 401k money into again? I think that this market is a house that is being rebuilt on a very shaky foundation with borrowed and rotting wood.
Before you decide it is time to get off the sidelines and start investing again you need to really step back and examine why the crash of 2008 / 2009 occurred and what has changed since then.
The number one thing being pointed at as the root cause of the market collapse eighteen months ago was the very aggressive lending practices by banks and even insurance companies into the home mortgage business. It is true that the government has stepped in and attempted to reign in the "wild west" days of bank lending. This is only fair since it was the government who in fact loosened the banking and finance regulations in the first place that got themselves and millions of Americans into financial hot water.
Yet, the result of this cannot be in any way looked upon as a tool or mechanism that has ended a recession. All this has created is a very tight money supply environment where it has stopped banks from lending money to people who are trying to purchase a home. If a bank will not lend money to people looking to purchase homes then the trickle down effect will the continual pressure on the housing industry. With the current glut of homes available in any geographic market - where is the need for homebuilders to build more homes?
The other issue created with the bank bail out is the lowering of interest rates to consumers on their savings. The current interest being paid on savings accounts, certificate of deposits and other like instruments is under 2 percent. Yet the last time I was in a bank they were charging over 8 percent for a car loan. Why? Because the government is know lending the banks as much capital as they require in order to attempt to loosed the banks lending policy. There is no need to pay the consumer a reasonable interest rate when they can borrow it for less from the United Stated government.
History does repeat itself, at least as far as the government and their rich friends are concerned. It was the government who relaxed lending policies and regulations that was the root cause of the market collapse. It was the rich who benefited from this decision. It was then the government who came to the rescue by throwing obscene amounts of money at the issue and again benefited the banks. The only ones made to suffer and made to pay for these mistakes is the common citizen. We pay by not being able to borrow money for the items in life we truly want as well as no incentive for saving any money based on the measly interest rates being paid to us by these banks.
As usual the best place to make your feelings known on these issues is at the ballot box in the fall. It is time to stop rewarding those individuals in Washington that continue to ignore our needs in favor of their largest donors.
About the Author: Steven Wegors has reviewed Phil Town Payback Time at the site of http://www.philtownpaybacktime.info
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