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The Economy: Why All the Panic?

For the last couple of weeks, all we have heard is how bad the current economic situation is. “The markets are going to crash and interest rates are going to skyrocket.” Panic has definitely engulfed the entire country.

Consumer confidence, as measured by the University of Michigan’s Consumer Sentiment Survey, has fallen to a number not seen in thirty years. This panic has actually had a negative impact on the economy.

It was said best by Mark Zandi, chief economist at Moody’s Economy:

“Confidence normally reflects economic conditions; it doesn’t shape them…

Yet at times, particularly during economic turning points, cause and effect can shift. Sentiment can be so harmed that businesses, consumers and investors freeze up, turning a gloomy outlook into a self-fulfilling prophecy. This is one of those times.”

What does the data actually show?

We decided to look at certain economic indicators and compare them to the numbers from a year ago. Here is what we found:

We are not making the argument that the current numbers are worth celebrating. We are only suggesting that the sky is not falling.

Bottom Line

Conditions aren’t as dire as some are professing. Make good sound financial decisions based on your own economic conditions. There is no need to panic.


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13 replies
  1. Mike
    Mike says:

    Is that really good news? DJ is up almost 12%, S&P up 11%, NASDAQ nearly 16%… But the cost of gas is up 33%, cost of milk is up 34%, cost of coffee is up 30%, cost of corn is up 83%, cost of cotton is up 77%, while oranges and fishmeal are nearly the only commodities that have dropped in cost.

    So it could be said “the market” is up 12% but “the dollar” is down well over double that. I’m no economist, but I’d call that pretty bad news (though perhaps not panic-worthy).

    Reply
  2. Julie
    Julie says:

    I agree with Mike. I do not think these numbers reflect the truth! The unemployment numbers do not relect the ones that took jobs making less or the ones who have used all the Benefits allowd to them.
    What about the ones who used all thier savings and retirement money just to make ends meet, because they took jobs making less money, but have to pay more gas to get to work. What about the Dad’s that took jobs out of town and no longer get to see the kids every day! Still waiting for it to get better on this end!

    Reply
  3. John Hamrick
    John Hamrick says:

    I agree with Mike also. I will add though that in the next 12 months you will see the political spin machine spinning numbers like this all the way until November. Of course, this spin will be so that one politician or the other can get elected. The bottom line is that there SHOULD be a panic. Until there is such, I’m afraid that collectively we will “good mood” ourselves into financial oblivion. Wake up, while we can’t run around in a depression, we all should be well aware that our lives are going to change as what is happening now is un-sustainable.

    Reply
  4. Glenn
    Glenn says:

    You think it’s bad now? It is going to get much, much worse in the near future. Our federal deficits and entitlements cannot be sustained. Not to mention much more dangerous wars on the horizon like Iran and Syria. Stock up on food and bullets while you can. Today is heaven compared to what it is going to be like soon.

    Reply
  5. Steve Harney
    Steve Harney says:

    Or…America will do the same thing it has done after every challenging time in our history (ex. the Revolutionary War, the Civil War, WW I, the Great Depression, WW II, the dot.com crash and 9/11). We will be stronger, not inspite of the challenges, but because of them.

    Reply
  6. Marvin
    Marvin says:

    I start worrying when I see articles telling me not to panic!

    People are sitting on the fence because there are sharks and blood in the water.

    Putting it gently, real estate and stocks are not performing as expected.
    Before making the next move people are asking themselves:

    Do I want to be in the market wishing I was out of the market?
    Or do I want to be out of the market wishing I was in the market?

    It does not mean they lost their spirit. It means they can not afford another setback.

    There is a convergence of quantifiable negative indicators that support the negative media hype.

    Reply
  7. Linda Palmer
    Linda Palmer says:

    This reminds me of the old joke where a woman comes home and finds her husband in bed with another women. She accuses and he denies “Are you going to believe what you see, or what I tell you?” There is no doubt that millionaires are becoming billionaires overnight and those billions are being made on the stock market. Huge corporations are merging for amazing profits, and of course, less options for consumers. It is also true that Banks are showing record profits because they are encouraged not to lend by the Federal Reserve…but drive down any central district and tell me what you see? More and more small business are closing their doors, our employment rate would be even more dismal if we did not have public service jobs employing nearly half of our countries people, and applications for food stamps, medical care, and assistance have increased dramatically. Wages are stagnant, and inflation is just beginning. It doesn’t mean too much to the great middle class that rates are low if no one is lending, that stocks are up because millionaires can snatch up foreclosures for pennies on the dollar, and Banks are getting rich by not lending. Especially as the middle class heads over the great niagra falls of debt…but hey, ‘nice barrell’. :>)

    Reply

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