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Home » Economy Category: Economy 
Five signs that foretell a new recession
Posted on August 9, 2010, 1:46 amAuthor : economy 
 (0 Rating)

The U.S. Government has made trillions of dollars transfusions in the economy revived the banking sector, subsidized housing and has helped millions of other sectors such as automobiles. However, unemployment remains high, consumers are in a depression, the shares declined, and one nine analysts forecast a recession.
This scenario is possible for the following reasons:

1. Boom in financial markets was an artificial one

After the collapse of capital markets in 2008 and early 2009, activities began to increase remarkably, and after 13 months of when the advance was 83%. This growth should translate into a healthy economy.
But it seems that was another reason for this rally. In March 2009, the Federal Reserve (Fed) started the program to purchase mortgage assets to stabilize the housing market, injecting about $ 1.2 trillion in capital markets. Investors who had sold the assets the Fed suddenly had money for other investments. Some of these funds from the Federal Reserve turned to financial markets. Fed to buy these assets ceased in April this year, the same month in which your capital markets rally ended. Therefore, coincidence or not, the advance of capital markets was perfectly synchronized with the Central Bank of the U.S. program. If the Fed program was one that fostered the growth of scholarship, this means that the economy has not recovered.

2. Real estate market still has not returned

Decreased after three years in a row, it seemed that the house price reached last autumn's bottom. But this "recovery" has not taken into account that both the U.S. government and its agencies insolvent Fannie Mae and Freddie Mac were responsible for the majority of newly issued mortgages. Nobody knows how it showed the housing market without government support. However, an image that can be done taking into account that complete support program led to a further decline in housing prices and demand.
Therefore, recovery could delay the housing market and prices continue to drop four or five consecutive years, even a decade. Therefore, it is hard to imagine a strong economic recovery without a healthy real estate market.

3. Consumers are bankrupts

Revenue growth is very small, for those lucky enough to still have a job and debt are people close to record highs.
While revenues have stagnated in the last decade, consumers
have borrowed through credit cards, which supported the positive development of the economy. But the crisis has made people to be bankrupt, without any savings and full of debt.

4. Aid funds have been exhausted

The money injected by the authorities hardly have been feeling, but it is possible that their absence is felt in the population. Among other things, these funds have prevented many layoffs, which would have led to unemployment and higher.

5. Europe is down

Worries of Greece were now slower, but the debt crisis of Europe remains an important issue that could undermine financial markets. Almost half of European countries have debt problems, many countries may re-enter recession.

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Tagged Keywords: europe, recession, economy, bankrupt
 
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