After several months of bad economic news, there are finally positive signs in the economy. After the fed meeting last Wednesday, the stock markets have been responding positively to the news and some of the economic indicators are leveling or improving. Banks have started to relax lending terms and the services industry is growing. Manufacturing indicators are also improving after four months of declines at the end of 2008. Regardless, this should not be seen as a sign we have reached rock bottom, but instead should be seen as an indicators that we’re almost at the bottom and the economy will be on the upswing soon.
However, despite the positive market reactions, yesterday’s news on the financial sector is quite disturbing where ten of the nineteen largest US banks tested need to raise a total of $75 billion to keep afloat. These ten banks now have to put together plans to raise new capital and exectute them within the next six months.
Want to see how your bank is doing? Take a look at the table on CNN Money.
As the number of confirmed swine flu cases increases, there is a lot of panic going on. Some people have been buying drugs overseas and importing them for their own personal stockpiles. Others have resorted to not going out at all. The recent drop in oil prices seems to have helped the economy and certain economic indicators have suggested that the economy is starting to recover. Since the swine flu started appearing and governments have closed schools and sent many notices to the people, one of the fears I see is a decrease in consumer spending and once again a slowdown in the economy. One of the hardest areas hit by the flu was Mexico. Since the flu hit, schools, businesses and other social venues have closed down for anywhere between a few days to several months. Small businesses that depend on a steady stream of customers and income may be looking to close. Certain imported goods will also see an increase in price due to a drop in supply and the scarcity of the good.
The swine flu will definitely impact schools and will have a snowball effect on the economy. The question now remains, how much will it impact and how quickly can regain lost ground.
Everywhere you look now, there is always some mention of the US financial sector and the instability which it’s facing. First there was Enron, then the subprime loan crisis, then fuel price concerns, followed by Fanny Mae and Freddie Mac, and now the government is proposing bailing out failing financial institutions. There’s is even further talk of some of the executives of these companies getting their fat bonuses despite the demise their companies are facing. Those companies took a calculated risk and the markets went forth with a downward spiral. They should have realized when it was time to cut their losses and find other places to invest. Unfortunately it is the taxpayers which ultimately foot the bill for the bailout and this is something that I and I’m sure other people are not pleased about. All of us as regular citizens, can not simply go back to the investment company and say “My stock dropped $10 and I lost $10K. Can you please subsidize it?”. The government in my opinion made a bad move by trying to subsidize the financial sector. Instead, they should have let the companies fend for themselves. It may have caused instability in the already sensitive financial markets, but it would also increase corporate responsibility and oversight over financial traders and fund managers.
With fuel costs increasing, many of the airlines are looking for ways to make an extra buck or to lighten the load of the plane. Over the last year, we have seen that airlines have started charging fees for luggage. The main question I have for the airline industry is “Is it helping at all?” With the TSA regulations on liquids, gels and other carry on items, many people do not have any choice but to check their bags in. All of the carry on baggage which would have gone into the cargo bay of the plane is now stuck in the cabin with the rest of the passengers. The Houston Chronicle composed a very good article about a futuristic airline, and I have to say they do an excellent job in outlining the potential problems. I have heard about stories where people are willing to fly across the US and back again on the same day to save their frequent flier status. At the rate the airline industry is going, I would be tempted to do the same thing if I was in the same case.
Houston Chronicle article: Fees galore when flying in the future