Bernanke warned of a worsening economy on Valentine's day (2/14). He gave a pessimistic outlook for the next year. He signalled to watchers that the Federal Bank would be cutting interest rates in March and April in an effort to combat the US economy falling into a recession.
He and treasury secretary Henry Paulson believe the government needs to intervene to prevent the economy from falling in a rapid recession. That Americans are drowning in the mortgage mess, lack of jobs, and rapid inflation of goods.
Paulson believe the US will not fall into a recession because of the quick stimulus package approved by Congress this week. Where people are being sent refund checks to help stimulate the economy. However he did call for interest rate freezes on ARMs and extending foreclosure periods for homeowners in trouble.
What do I think? While I don't think we're in an official recession (defined as a decrease in gross domestic product) I believe Americans are in trouble. We are being hit by $100/barrel oil, $4/gallon milk, skyrocketing health insurance premiums, and stagnant wages.
Right now the average person like myself is wondering why do things feel tighter than say 2 years ago, but we're making more money? Because we really are not making proportionally the correct amount of money to keep up with skyrocketing food, heating, and transportation costs.
2 years ago my $100/week grocery budget was generous and mostly organic. $100/week barely covers shopping with coupons, less organics, and less fresh fruits/veggies. $100/month used to cover 5 tanks of gas, now it's $150/month for the same 5 tanks of gas. My driving habits haven't changed, we haven't moved, changed cars, etc, it's just that gas went from under $2 to $3.xx. My heating bills used to be $200/month for 150 therms, now it's close to $400/month for 150 therms. The house is the same, the weather the same, but the cost per therm has doubled.
But has my income doubled to keep up with these increases? No. So I am feeling the squeeze. And I'm sure I'm like most other consumers, except that I am fortunate to work in a field with excellent medical insurance premiums. Which while they have increased by 33%, instead of paying $60/month we pay $80/month is low by any standards.
So no, I don't think we're in a recession Mr. Bernanke. But I do think we're in a worse place than we were 2 years ago. And I do think that the average person is feeling the squeeze in places other than just mortgages. And that our salaries are not keeping up with prices of goods we find necessary to purchase.
But what else can we do but keep on plugging away? Pray to hang on to our job. Keep on working hard to avoid the eventual layoff? Plan for the worse, hope for the best.