With the news of Lehman Brothers filing bankruptcy, the biggest bankruptcy in history, I could barely concentrate at work today. They are calling the collapse of Lehman Brothers the
"Armageddon" of the financial market. Every moment I had available at work today, I was on
WSJ.com,
NYTIMES.com or CNN.com. Interested in the news not because I had any financial stakes, but because the failure of another major financial institution is just one more key indicator of the fragile state our economy is in. Over the weekend, the Federal Reserve Chairman Ben
Barnanke and Treasury Secretary Henry
Paulson called an urgent meeting at New York's Federal Reserve branch to meet with thirty Wall Street Executives to discuss the critical state of Lehman Brothers and the financial impact of its demise. I would have loved to be a fly on that conference room wall. Having majored in Economics in college,
every time the Federal Reserve gets involved, or in this instance with Lehman, not involved, I'm right there following the news. Like Edith Wharton is to a Literary student or Picasso is to a Art History student, Alan Greenspan, former Chairman of the Federal Reserve, was my revered one. With the news of Lehman Brothers, Alan Greenspan was interviewed on This Week with George
Stephanopolous. I found one of his statements very puzzling. He said that the probability of the U.S. escaping a recession is less than 50%. And other economists are backing his statement. The increase or decrease rate of the economy's GDP (Gross Domestic Product) is an indicator of whether we're in a recession or not. And since the GDP rose by 3.3% in the second quarter of this year, that is being used as evidence that we are not in a recession. But still, are we not in a recession right now? Yes, I know, who am I to question
the Alan Greenspan and other notable economists, but hey, this girl still needs clarification. I do have some ammo on my side. In last week's issue of the The Economist, it stated that the way we define a recession creates a lot of confusion - "the standard definition of recession needs rethinking." So, let's look at the
other factors: number of foreclosed homes continues to sky-rocket; cost of gas and food at an all time high, rate of unemployment increasing every month (and now Lehman Brothers' 25,000 employees are jobless); the government bail-out and demise of Bear
Stearns, Freddie Mac/Fannie Mae; Merrill Lynch being saved by Bank of America; and
AIG, Washington Mutual and U.S. automakers in serious financial trouble. The financials woes of all those major investment firms, banks and companies will only trickle down to the rest of us. Maybe the reason why the Federal Reserve, economists and the government are saying that we are not in a recession is because they want to restore our confidence in the financial system and not have us do anything rash like cash in our 401k or withdraw all our money from banks and stick it under our
mattresses. So,
once we are in a recession, what's the solution? In the interview, Alan Greenspan said the only way to end a recession in this situation, is to stabilize the real estate market. How do you stabilize the market with no end in sight of foreclosures and in this case in Chicago, an over supply of condominiums with one mega complex being built on every corner?
Well, I'm going to stop now. I can go on and on with comments and questions. Maybe it's a good thing I ended up in the ad industry promoting beer. There isn't too much to question about beer.
p.s.
I chose the picture above because all the news coverage today were showing last night's footage of former employees carrying boxes of their belongings and putting them into the trunks of all the waiting limos. One last question, if you just lost your job and your stock in the company is now worthless, do you think it's a good idea to be spending your money on hiring a limousine to pick up your belongings?
Maybe you should be spending it on beer. No point of having the "recession" hurt the beer industry.
Starbucks Salted Caramel Signature Hot Chocolate
