A healthy credit balance in the private sector and consumer spending, both individually and commercially, drives the United States economy. Evidence that both are weakened is driving fears that the economy is already in a negative growth period.
Federal Reserve chairman Ben Bernanke addressed congressional leaders on Wednesday to warn that, for the first time, the housing crises, weakness in the nation’s banking and credit systems, and the drop in consumer spending is fueling contraction in the economy. Financial markets and economists around the world, both of whom have warned recently that the U.S. economy is already in a recession, will take Bernanke’s remarks very seriously. The International Monetary Fund will be revising its economic growth forecast for the United States and other world economies at its upcoming meeting with the World Bank next week. The federal government has provided funds to assist large financial institutions that have been adversely affected by the lending crises. The Bear Sterns aid package is an example of the Feds aggressive lending policies. A number of congressional leaders on both sides of the political platform have questioned this strategy because it ignores the needs of the American people. Record numbers of people have to foreclose on their mortgages. In addition, years of buying on credit, together with poor money saving habits, have left millions of Americans with a burden of debt that inhibits them from spending that fuel the economy.
In conclusion, the definition of a recession is 2 consecutive quarters of negative growth in the economy. Indicators point towards a turnaround near the end of 2008. This issue will atop the upcoming presidential election.
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