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Rescue package aside, economy faces deep challenges

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posted on Sep, 29 2008 @ 09:22 AM
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Rescue package aside, economy faces deep challenges


www.mcclatchydc.com

The congressional compromise drafted over the weekend to rescue Wall Street, assuming it wins approval, is expected to fend off a potential meltdown of financial markets for now. But it won't cure much of what ails the struggling U.S. economy.

Many economists believe the U.S. economy is in recession, or so close to it that it's almost an academic question. The weekend compromise in Congress doesn't fix that, but it prevents things from getting worse by calming the jittery credit markets, which are vital to the ability of corporate America to fund itself through issuance of short-term debt.

Finance is something that happens in the background, like the fan belt on an automobile's engine, a whirring that goes unnoticed over the sound of the road. Everything runs with the help of these credit markets, and when they stop working, as they did on Sept. 17, it gets attention quickly.

"People watch the stock market, but that is not the key here. The credit markets are the key," said David Wyss, chief economist for the rating agency Standard & Poors in New York.
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posted on Sep, 29 2008 @ 09:22 AM
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This really is the issue.... if inflation continues to rise, and there is no reason to believe that it won't with record oil prices and wages remain stagnate, which they probably will with little or no credit available... then we are only at the tip of the iceberg... after all it is the marginal and bad loans that are defaulting now.... if it plays out like I think it will it is the second wave of more foreclosings by more solid borrowers is one to be really worried about.... after all the marginal loans are just that, marginal... when the rest start going is really when the poop will hit the fan.

www.mcclatchydc.com
(visit the link for the full news article)



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