Will this Recession go on Forever?

Virtually everyone is concerned – to some degree or another – about the current recession the world finds itself in. It seems that each and every day a new and more troubling headline surfaces. More and more jobs continue to be lost; unemployment has reached a 14-year high. Indeed big companies as well as small are seeking relief from the Federal Government.

When this crisis first began, many economists believed that it would last no more than eighteen months. Today, however, the general view is that it will probably last considerably longer than that – well past 2009, in fact. According to CNN Money, "The economists indicated that a recession is likely to continue at least through the end of next year (2009), with 79 percent of them stating that the economy will grow by less than 1% and 38 percent saying that the economy will shrink next year."

Even with the implementation of the government's "Rescue Plan" and the lowering of interest rates, there doesn't appear to be any appreciable shift toward a more positive economic direction – at least not yet. In fact, in some ways it looks to be having just the opposite effect. Currently, well over a hundred banks are now poised to ask for money from the Federal Reserve. What's more, the three major U.S. auto makers – Chrysler, Ford and General Motors – all have very low hopes of being able to last through the coming year. Large retail chains, like Circuit City, have gone into bankruptcy; and many other well-known companies, such as Office Depot and Macys, to name just two, experienced horrendous 3rd quarters in 2008.

The Federal Reserve recently announced that it would not buy toxic assets from banks as originally planned, but instead would infuse more money into banks so that could begin lending to each other again. Unfortunately, the banks are just sitting on the money, afraid to part with it for fear of their own continued liquidity problems down the road. Due to the fact that the economic stimulus plan has to date not been as effective as had been hoped, the Treasury has left approximately half of the earmarked $700 billion yet unspent, handing it over to the incoming Administration in January 2009.

Because general consumer confidence is currently at an all-time low, we're likely to witness even more companies either merging with or being taken over by larger organizations, or slipping into bankruptcy. According to statistics, only 15 percent of companies surveyed reported an increase in their profit margins, 23 percent said that they were cutting jobs and employees, and there was an overall 35 percent decrease in demand for goods and services. In fact, the only real bright spot in this economic downturn is that the price of gas has dropped significantly. (Of course, even this would not be considered particularly 'bright' if you happen to be in the oil industry.)

The truth of the matter is that, in all likelihood, no one can accurately determine how long this recession will last. Therefore, the best thing to do is stay informed, pay down your debts and be smart with your money. Eventually, this, too, shall pass.

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