We recently had a guest who was involved in banking in the UK and currently lives in France. Last week when the markets and financial issues reached an all time low, we were discussing the future and impact this may have on small to medium size businesses. He indicated if the financial problems we are having continue the dollar as we know it will soon be worth nothing…scary. Here is an article on the topic I found, which gives a nice foundation for our fears.
What the crisis means to you
By Patricia Sabatini • Scripps Howard News Service • October 5, 2008
The financial upheaval sweeping across the country in recent weeks has left many Americans feeling as though they’ve been hit with a Taser.
Billion-dollar bailouts and bankruptcies among the nation’s financial titans, a wobbly economy and crumbling stock and job markets have jolted the steadiest of citizens from Wall Street to Main Street.
As lawmakers and other powerful elite debate the intricacies of how the crisis arose and what should be done about it, the average Joe has more basic concerns: How safe are my deposits, my stocks, my home and my job? Here are some answers:
What about my job?
The economy has shed more than 750,000 jobs so far this year and more cuts are projected. Employers slashed payrolls by 159,000 in September, the most in more than five years, a worrisome sign that the economy is hurtling toward a deep recession.
The Labor Department’s fresh snapshot, released Friday, also showed that the nation’s unemployment rate held steady at 6.1 percent as hundreds of thousands of people streamed out of the work force for any number of reasons.
“I wouldn’t be surprised if job losses stretch out another nine months,” said Stuart Hoffman, chief economist at PNC Financial Services Group.
Continued declines are expected in manufacturing, construction and the financial services sectors, including mortgage finance, real estate and insurance. Layoffs also are spreading to retailing, business and professional services, such as law and accounting, and most recently into the leisure and hospitality industry, including restaurants and lodging.
What about my house?
Housing prices continue to sink, so sellers may be disappointed in what their homes can fetch. Buyers may find it more difficult to get a mortgage as lenders tighten standards and become reluctant to qualify borrowers who haven’t sold their existing home.
But for buyers with good credit who don’t have a house to unload, this could be a great time to plunge into home ownership, since prices are down and mortgage rates are low, hovering in the 6 percent range.
How safe are my bank deposits?
Millions of depositors have begun to worry about the safety of their savings in the wake of more than a dozen bank failures this year, including the federal bailout of Seattle-based behemoth Washington Mutual and Monday’s government-assisted sale of the nation’s fourth largest commercial bank, Wachovia, as it sank amidst the subprime mortgage meltdown.
With uncertainty growing, now is not the time to keep deposits in any one bank account that exceeds federal insurance limits.
The bailout passage approved Friday by Congress temporarily increases from $100,000 to $250,000 the amount of bank deposits covered by the Federal Deposit Insurance Corp.
Coverage does not apply to the contents of safe deposit boxes or to investments, meaning the FDIC does not insure money in mutual funds, stocks, bonds, life insurance policies or annuities, even if they were purchased from an FDIC-insured institution.
Rules can be confusing. Consumers can get an idea about whether their deposits are fully covered by using the FDIC’s Electronic Deposit Estimator at www.fdic.gov, or by calling 1-877-275-3342.
What will happen to my stocks and mutual funds?
On Monday, $1.2 trillion was erased from the stock market in the biggest sell-off in two decades. So far this year, major market indexes, including the Dow Jones Industrial Average and Standard and Poor’s 500, are down roughly 20 percent.
No one knows how low stocks might go, or how long it might take for the market to recover.
But that doesn’t mean it’s time to panic.
“Unless you believe democratic capitalism is set for permanent ruin, you continue to invest,” said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Green Tree, Pa.
The Associated Press contributed to this report.
Easton / Newman Field, MD