WEEK4

My first article was called "Near-term outlook for U.S. darkening: Fed officials", and was about the economic outlook for the near future and the actions that the Federal Reserve is taking in response to these dismal projections. The Feds main aim is to stimulate the economy by lowering interest rates without causing a rampant inflationary response that would in turn end up screwing the American people more than helping them. The article had presidents of both the Atlanta Federal Reserve Bank (Dennis Lockhart) and the Dallas Fed (Richard Fisher). Fisher states that he expected the first quarter of 2009 to be roughly equal to the 6.2 percent annual rate of contraction seen in the 2008 fourth quarter, a huge hit on the economy. The projected amount of job loss for last month is 648,000, a number that will increase our unemployment rate from 7.6 percent to 7.9 percent. In response to this the Fed has cut interest rates to almost zero and more than doubled the size of its balance sheet to around $2 trillion through programs to support private lending. Lockhart was more optimistic than Fisher, trusting the power of the Fed to act and effectively stimulate our "enormous potential for growth and prosperity". However, the large expansion of the monetary base could lead to inflation at some point, which in response the Fed would have to tighten monetary policy, the problem is, in order to be effective the Fed would have to tighten monetary policy before signs of recovery were underway in order to work properly, something that no one can really foresee. Business does not expect improvement until late this year or early 2010.

I think it is a great thing that we live in a free country where people like Lockhart and Fisher are able to reasonably inform the American people about the going-on's of essential Federal economic institutions such as the Federal Reserve. The information in this article provided a lot of detail as to how bad the state of our economy is right now, which can be useful information for people wiling to use it wisely. However, I feel like some of our economists and great minds have become too math and data oriented about the market. They seem to underestimate how easily an informed opinion from experts in the economy can persuade an average consumer from one set of actions and behaviors to another. It's about time our politicians and educated elite learn that the market is a very psychological place, with a lot riding on the outlooks of its consumers. President Obama and a lot of Congressmen seem to be inundating the press and in turn the American citizen with news of a devastating economic meltdown, which I feel only serves to discourage consumers from spending and putting money into the market and contribute. I feel like these people need to be reasonable and responsible with the information they deal out, and make sure that what they say has America's best interest in it.

My next article was called "Venezuela sees no further Cargill takeovers" and was about the President of Venezuela,  Hugo Chavez, and his relationship to Cargill, a privately owned U.S. food giant. Chavez follows a pretty socialist doctrine, is staunchly anti-American, and is a good ally of Cuba's. Chavez seized Cargill's rice plant because the company seemingly refused to meet Chavez's demand to produce cheaper rice. He has taken similar action against Venezuela's own top food company Empresas Polar, and threatened to nationalize the company if it did not comply to his demands. Chavez has stated that these seizeurs are temporary, that he does not plan on seizing anymore American companies plants, as long as they comply with his demands. Some economists think that this recent grip that Chavez has taken on the food industry may end up contributing to food shortages. Venezuela is a member of OPEC, and is beginning to feel the effect of tumbling oil prices on their economy, which might be a motive for Chavez's action.

This article was very interesting to read, because it explained a lot to me about Hugo Chavez's personality that I have not really come into contact with before. Previously he was more of a name to me, someone I didn't know much about, but now I feel like I've learned some key components of his personality. Chavez seems combative, and extremely demanding. Three weeks ago he won a referendum allowing him to run for reelection again, something that scares me because it seems to defeat the purpose of having an election. He is a powerful man obviously and with no risk of losing the upcoming election he has less reason to care about the people's opinion, which is the major flaw with dictatorship. However, he has been successful in pulling Venezuela out of some serious poverty and has always been one to help out his nations poor. His success makes me question some of my own political beliefs, maybe sometimes countries in dire need of modernization and implementation of an economic base need a strong, demanding, and controlling leader such as Chavez?

My third article is called "U.S. launches 75 billion mortgage plan to aid homeowners" and talked about Obama 75 billion dollar mortgage plan, which is part of a 275 billion dollar housing stimulus program. The article talked about the trouble the current housing market is in, with about 8.3 million properties underwater at the end of 2008 and widening still. The plan aims to help people facing imminent hardship by offering cash incentives to loan servicers to cut monthly payments on single unit homes up to $729,750 in value. Obama hopes that this program will precent forecloser for struggling borrowers and allow standard refinancings for strong borrowers whose homes values have eroded. The only real positive point of the article is when it talks about how Foreclosure sales and how they have surged in these conditions, since foreclosed homes sell at a discounted price compared to what other people are asking for homes.

This article was informative, but pretty boring. It reiterated the weak housing market which I feel I've heard too much about in the past to care about anymore. Anyway, the plan seems pretty fair to me, giving people in trouble because of this crisis a helping hand to stay afloat while making the market a little more accessible to stronger borrowers who might be looking to refinance because of their own home value decreasing. Hopefully this plan will do something in the short term to help this market from free falling more. Its crazy to think that the housing sector is in its deepest downturn since the Great Depression, a place I really hope we are not going to have to revisit anytime soon.