Credit Freeze-Credit Thaw and the Yo-Yo Stock Market

I was re-reading my blog entries from last winter and spring and boy did I call it. We are in a recession – gee what a surprise!!

But it’s not a garden variety recession – it’s one caused by the biggest credit bubble in history and the consumer is not likely to buy the US out of the recession any time soon. The consumer was also lured into cheap credit both taking equity out of their houses to spend beyond their means and amassing huge balances on their credit cards. So not only do the banks,hedge funds and corporation have to de-lever BUT so do the consumers. This is bad and good. Bad because there is no quick fix and we are likely to be stuck in a recession for a good year or so. The good news is we may become SAVERS!! And saving is a good thing!! It keeps money in the banking system, it takes the burden off of our children’s futures and it helps avoid the types of problems we now face.

So, the US government has helped thaw the credit markets and lending is beginning to happen again but the Stock Market is behaving like a yo-yo, not even a roller-coaster. I think it’s because there is uncertainty about the magnitude of the recession, uncertainty about the outcome of the election and uncertainty over the future of the US capitalist system. We have never experienced the Fed as the lender of first resort – is it a bailout or a movement toward socialism?? I wish I knew. I am however an optimist and I believe we will work things out and happy days will be here again.

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