Can Obama ressolve the recession??

The significance of US presidential campaign in 2008 had appeared a bit more apprehensive in terms of few absolute thought outs from the US president. Obama's economic stimulus plan on resolving the recession & restoring the economic strength & stability has earned an amount of applause from global audiences. Accordingly, he had put forth the urgency of passing the roughly $838 billion to force fluid in to the economy & to follow up the following resolutions:

• Creation of over 3 million job while focusing in priorities like health care, energy, and education that will jumpstart economic growth.

• Investing in the science, research, and technology that will encourage in widening up new medical breakthroughs, new discoveries, and entire new industries.

Further, Obama has also clarified the fact that as the major portion of employment facilitates by the private sector, he has extended most of his measurement pills to promote the private players & assured in federal government assistance.

However, as we all know, any monitory reform policy requires more concern & placement of such rests in several consideration. Consequently in pursuance of all his prospective proposals, Obama was challenged by republicans on further justification of spending & questioned on his foreseeable economic reforms.

how to OVERCOME the recession..?

On my previous articles I have depicted on the deep & dire decor of recession, how heavily the economy is hopping in to the hardship. Hence it is quite obvious that there will be a desperate attempt among us to come out of this severe situation. but HOW?.. lets find out few solutions.

It is regardless to mention that many of us are already cramping into the financial crunch. Amongst them few might had to sacrifice their home or filed bankruptcy or badly indebted whatever the case may be, the system still holds enough hope for them to earn an amount of oxygen. Accordingly, there are certain debt settlement agencies constantly engaged in negotiating with creditors to reduce the debt burden on behalf of the borrowers. Another viable option could be debt consolidation that accumulates all the debts & discharged off to the respective creditors on behalf of the borrower & arrange a fresh loan at cheaper rate for long term & or comparatively higher rate for short span of time. Alternatively, before taking any frantic decision on debt, it is essential to look through legal provisos to defend your rights & safeguard your interest.

Although, financial crisis is a crucial consideration in the current circumstances, proper financial planning can be a productive tool to play out the penetration & particularly for a fruitful future.
Revision of plans..
Everyone lays out a list of their essentials & accordingly they works out a financial plan to fund those needs. In many occasions people finds themselves in financial trouble as they fails to follow up the future facts. However, it is obvious to have a prudent plan to protect the future. Hence periodic revision of financial set outs is essential taking in consideration of socio-economic conditions, political outlooks etc. & most importantly the repayment capacity & risk taking capability of an individual. In the present scenario every such plan should be revised to rule out the needless norms.
Risk tolerance capability..
As I have hinted earlier financial plan should be followed up in accordance with the risk adherence ability of the planner.In the recent past, easy availability of funds has erased out this critical concern among common people & consequently resorts in recession.
Periodic review of portfolio..
In any circumstances.. periodic review of one's investment options & effective diversification is always desirable. An effective portfolio should be mixed up in such a proportion that can optimize the profit taking the investment risk at minimum. In order to pursue a wel-balanced portfolio a proper combination of fixed assets along with liquid assets like stocks & bonds is to be maintained taking in to consideration of several other factors. As such in the present circumstances long term investment in fixed assets appears more justified than opting for short term stock options.

recession: facts & figures

On my previous article I have discussed on various facts of recession. Lets have look on the statistical figures to estimate the quantum of current economic circum. Although few years back few economist dared to predict a possible recession addressing US housing bust and consequent effect on the rest of the world, no one had paid much attention. Today everyone is taken muse concerning the deep dire of the financial disaster & worried upon whether the worst is yet to come.

The fear of recession in US had appeared in early of 2008 & finally floated the floor in April. In January08, IMF predicted that global growth will fall down 4.9% to 4% & two months later they revised the figure announcing the forecast may fall down further. Consequently, as the US economy holds 21% of the world economy, it was obvious that if recession comes it would have world wide impact.

As I have stated in my previous article, correction in US housing market & sub prime lendings ware the major contributors of US recession, the following figures will be relevant to justify my words. In march08 it was estimated that 8.8 millions home owners or approximately 10.8% of the total homeowners had been vacated their place as their home turned worthless than their mortgages. Accordingly, mortgage backed securities of multinational banks gradually lost their values. Hence global banks, investment corporations & brokeing houses have had to book a loss of an estimated $512 billion inspite of earnest effort of the US federal reserve to inject fuel in to the economy. The crisis was led by Bear Sterns, one of the world's largest investment bank was taken over by JP Morgan with some financial assistance from US federal bank & subsiquently Lehman Brothers, the fourth largest investment bank in US had filed for bankruptcy & accordingly followed up by Citi Group & Merrill Lynch on writing off huge amount of losses around $55.1 billion & $52.2 respectively. Further Merrill Lynch was absorbed by Bank of America. Freddie Mac & Fennie Mae ware the two major mortgage cmpanies of US are subsiquently natinalised to prevent them from going under. Henceforth, as the banks & other financial institutions are the backbone of all other industries the rust of recession rattled out over the rest.

before searching for the SOLUTIONS.. it is essential to know what are the REASONS behind the RECESSION.

RECESSION referrs to the period of reduced economic activity. An economy is said to be in recesseion on the basis of few presumptions like under preforment for several quaters, slowdown in GDP, unemployment factoretc. Although recession is accoutable on these mere predictors but the reasons for a country in recession confinds in several preceding decades. Hence, recession is not a sudden saturation rather a cumulative phenomenon of past. Lets take look on what are the probable factors that amounts to recession in present terms:
Common Contributors:

• Gradual increase in the price of oil & foods in global market results in decrease in consumption. Hence transportation cost kept increasing over the years significantly & standard of living went lower & adversely affects in GDP.

Country Specific:

• In US for past several years availability of essy inflow of foreign funds led to a major economic boom in housing sector at cheaper rates. Accordingly all the loan agencies followed up & relaxed their lending terms in order to attract more & potential borrowers disregarding principal prudence of disbursment. Further, as the property value kept incrising, refinance & second mortgage became popular. However since 2006, the scenario had changed dramatically. Overbuilding of houses led to a surplus over the demand & results in downturn in home prices in many parts of US. Henceforth, refinace became more difficult. For such, many homeowners who had been facilitated, turned in to default due to drastic turnaround of the entire scenario.
• On the other hand, as long as sub prime lendings & refinance was an lucrative investment option, most of the major fund houses & American & European banks kept purchasing such loans from loan agencies as mortgage backed securities to diversify their portfolio. Afterward, once the housing market got over optimized & deflation starts all the home owners, borrowers, lenders & mostly major multinational banks felt the heat & hurdle of surveillance. An huge amount of loss became obvious among those giant financial players. Henceforth many investment corporations & companies & fund houses had found no other option than to file bankruptcy & rests are staggering in liquidity crunch . Accordingly as many other international financial backbones were severely suffered, an wave of panic started soaring up across the globe.
  

For an obvious obliviation of all of the above, US economy got stuck taking rest of the world in stagnant.

On the above article I have tried to present a simplified synopsis of the entire scenario. Lets have a look on my next article on how heavily the ongoing recession costs to the world at large.