After making promises to millions of Americans, what else would President Obama say? Surely he would not conform to the hard numbers and explain that we have yet to see solid progress made. Fed Chairman Bernanke is working hard, Secretary of the Treasury Geithner is basically keeping the status quo of Paulson’s plan, and President Obama is stating there are new “glimmers of hope” for the economy.
For those who do not know, the President’s initial plan to fix the current crisis was to establish some kind of stability. From that point, we can start rebuilding and come out of our reached trough. This goal included the repeated tasks we have heard since the time of Paulson, including the re-establishment of banks by removing toxic assets, unfreezing the credit market, and addressing the mortgage crisis with refinancing plans. As of the late, there has been a drastic increase in number Americans who are refinancing their homes. Perhaps this has something to do with a growing number of Americans who are in more debt with home payments than what the house is actually worth? The President explains that this surge of refinancing will aid the economy since there will be a new wave of money entering the market. While I do not agree that this trend is necessarily a good sign for our future, there is one hopeful sign with more Americans refinancing. To refinance a mortgage, a home owner must meet certain requirements. Many Americans do not demonstrate the said qualifications. Since more people are refinancing, at least there is a sign showing a fair number of Americans who can refinance (if that makes any sense).
There are a few concerns I have with the supposed “hope” and “upturn” we should eagerly expect. The President and his advisors are explaining all these favourable conditions and potential in the market while numbers on paper say otherwise. Let’s take a look at some of the numbers released by the Department of Labor for March 2009 “Economic Situation Summary”:
- Unemployment rose from 8.1 to 8.5 percent
- Specifically, a 694,000 job loss increase totaling 13.2 million
- Drastic increases in unemployment rates for states including California (now 10.5 percent), Michigan (12.0 percent), South Carolina (11.0 percent) and a few others now in double-digit percentage rates
Meanwhile GDP shrank almost 5 percent in the first annual quarter of 2009. So at this point, I am wondering, where is all this potential hope that the President is seeing? Will mortgage rates at an all-time low since the early 70s be enough to get us out of the crisis, or at least start a reaction to do so? The only thing I see happening right now in the market that we can justify optimism with is small-business spending. The U.S Small Business Administration stated in its monthly report that loans being taken out in the past month have increased drastically. Besides that, I don’t see us emerging from (what I hope to be) the current trough.