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Wednesday, April 22, 2009
Steve Forbes Says Economy Showing Signs of Life
The problems in the economy go back to 2004, but really took off in 2007, said Steve Forbes, who runs Forbes Inc. and has twice tried for the Republican nomination for president.
In 2004, the Federal Reserve flooded the market with money, which drove commodities and the housing market up. Then in 2007 a few small changes led to the downward spiral in the economy. Fanny May and Freddie Mac accumulated $1 trillion in junk mortgages in 2 years, the SECs short selling uptick rule was taken out market-to-market accounting resulted in companies writing off bad debts even if the asset was paying off, Forbes said.
The government has continued to put money in, but hasn't helped in the banking industry except to increase banks' cash on hand. The government also has been inconsistent in its bailouts - saving Goldman Sachs but not the more important Lehman Brothers.
The economy is showing some signs of life, but more needs to be done, Forbes said. The market-to-market rule changes so far have helped, but more can be done. The SEC may put the uptick rule for short selling back in the next couple of weeks, and the Federal Reserve will eventually loan more money than is currently being destroyed - right now the Fed is adding $30 billion a week, but $40-50 billion is being destroyed.
Forbes said there are a few battles looming in the next year that will affect the direction of the economy. The first is card check, which is the biggest labor change since the 1930s. It will eliminate secret ballots, enforce mandatory arbitration and provide union access to any business at any time.
Forbes also pointed to energy regulations, health care and taxes, including the death tax, as important issues.
posted by Great American Publishing
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9:57 AM
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