Is The Rate Cut A Rose Or A Thorn?

February 4, 2008 8:06 am Published by

Negative economic news seems to arrive every day lately, doesn’t it?  Housing is weak, construction jobs are falling, and gasoline prices don’t offer any comfort.  The Bloomberg News ran a gloomy-sounding headline:  “Markets Force Fed To Make A Big, Risky Rate Cut.”

As a bankruptcy attorney in Indiana, I am continually reading up on financial news and commentary that may in some way affect my bankruptcy clients.  The more I understand about the overall financial situation in our state and in the country in general, I figure, the better prepared I’ll be to advise clients on which strategy is best in working through their individual financial problems.

Bloomberg’s Dr. John Berry sees the Fed’s latest interest rate cut as “monetary panic football.”  By this he means the action of lowering rates, rather than helping calm markets, could further unsettle the markets by spooking investors into thinking the situation is even worse than they had feared.

Ironically, Dr. Berry seems to have a view of the economy much rosier than that of others.  He points out that the broadest recent survey of the U.S. economy found no indication of recession.  Yes, housing and construction are weak, but the banks that conducted the survey found “robust demand” for hiring new workers in health care, hospitality, legal, and insurance companies. New unemployment claims plummeted during the week ending January 12, from 357,000 to 301,000.

In other words, Dr. Berry is telling us he sees the economy as being in a period of slower growth, but far from a recession.  As a consumer bankruptcy specialist, my advice to people is to use this time (when it’s easier to keep up with the Joneses because everybody’s being more careful about money nowadays!) to do their best to catch up financially and curtail unnecessary spending.

On the other hand, remember that in our country and particularly within our state of Indiana, bankruptcy laws provide a final safety net if your own personal downturn becomes more than you can handle.

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This post was written by Mark Zuckerberg

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