US Economic Outlook & personal impact
I was originally just going to post this as comment to a post at Get Rich Slowly, but thought I would expand it out to a full blog post here.
He makes no claim to be an economics expert, nor do I make such a claim. He just gets quite a few requests for his opinions on national economic issues.
The three recent issues he talks about are:
- Stock Market Woes
- Economic Stimulus Package
- Fed Rate Cut
I don’t worry too much about the stock market as really the only money I have in it is my retirement which I shouldn’t need for 25 years. I do worry about how it could indirectly me effect me through my job and other areas.
My wife and I have already talked about what we might do with a refund check from the government. The clear winner was save it. Does this make us unpatriotic? I don’t think so. The government and media sends such mixed messages
on personal savings. On an individual basis we’re encouraged to save, but on a national scale, it’s ‘SPEND SPEND SPEND’. This is old news, but back in 2005 it was reported that the personal savings rate dropped to zero percent. I couldn’t find a citation for it but I think more recently than that I’ve heard the savings rate has gone negative on occasion. I should note here that we may keep a little of the money out for personal fun money or something, but most will get saved.
I make no claim to understand the fed rate cut. I can’t say if it’s good or bad. I do worry about future economic issues that the rate cut and stimulus package will have. I realize there are large issues at play here but suppose we get $1000 check from the government. Where does that money come from? In my mind it looks a lot like consumer debt that we, or our kids, will have to be paying back with interest.
I did sort of like the idea of the rate cut in that I might be able to refinance the mortgage at a lower rate although that’s questionable. We are already in a fixed 30 year mortgage with a good rate. If we can get a half to three quarters of a percentage point cut we’ll look into it further. I do also believe there is a limit to how low the banks can/will even go on their rates, they need to cover their overhead.
I hadn’t thought about the aspect of the rate cut effecting my high yield saving account. My FNBO Direct Account is currently yielding 5.05%, which I suppose will be going done soon. That’s a bummer.
I do try to filter out most of the news on these issues. Or at least not let them get to me. Like J.D. said in the original post that got me going:
If you’re living within your means, avoiding common financial traps, and exercising sensible habits, you’ll be fine.
I agree with this statement. I can’t say that I’m always true to it, but I do try.
Allen
—– Added
I was continuing to read down my blog list and came across a good post on The Simple dollar giving some of the ins and outs of the fed rate cut. Be sure to read the comments as well, as they’re very insightful too.