2 - THE ECONOMIC NEWS ISN'T ALL BLEAKWhat happened since the collapse of Lehman on Sept. 15 was a global, synchronous Refers to events that are synchronized, or coordinated, in time. For example, the interval between transmitting A and B is the same as between B and C, and completing the current operation before the next one is started are considered synchronous operations. Contrast with asynchronous. cessation of all but nondiscretionary economic activity in the wake of the near-collapse of global credit markets. And it happened over the course of weeks, not years. But if things came to a halt more quickly than ever before, they could also restart more quickly than ever before. So writes Zachary Karabell, president of River Twice Research, who calls attention to some positive signs.
First, we haven't seen war, revolution, the collapse of states and governments, or massive demonstrations sweeping the globe. It is remarkable how relatively stable things are in light of what has happened.
Second, consumers in many parts of the world are in relatively good shape. A third of American households have no mortgage. The savings rate Savings rate
Personal savings as a percentage of disposable personal income. in China is 50%. The accumulation of wealth is still massive in the US, Europe, Japan, China, the Gulf region, Brazil, India and Russia. Even at its most promiscuous, the credit system didn't allow consumers to take on the obscene leverage that financial institutions did.
People have also reacted swiftly to the current problems, paying down debt and paring back purchases out of prudence or necessity. That's a shortterm drag on Verb 1. drag on - last unnecessarily long
last, endure - persist for a specified period of time; "The bad weather lasted for three days"
2. economic activity, but it will leave consumer balance sheets in good shape going forward. Low energy prices and zero inflation will boost spending power The power of legislatures to tax and spend.
Spending power is conferred to state and federal legislatures through their constitution. Judicial Review of legislative spending varies from state to state, but the law of federal spending informs courts in all states. . Even if unemployment reaches 9% or more, consumer reserves in the US and world-wide are deeper than commentary would suggest. Household net worth in the US is down from its highs but is still about $45 trillion. As the credit system eases, historically low interest rates also augur augur: see omen. debt refinancing Refinancing
An extension and/or increase in amount of existing debt. and constructive access to credit for those with good histories and for small business creation in the year ahead. Entrepreneurs often thrive when the system is cracking.
In addition, corporations generally have very clean balance sheets Clean Balance Sheet
Refers to a company whose balance sheet has very little or no debt.
A company is told to "clean up" its balance sheet if they are exposed to large amounts of debt. with little debt and lots of cash, unlike the downturns in 2002 and in the 1980s. And government has more creative ways to spend, which both the current Federal Reserve and the incoming Obama administration intend to do.
The last months of 2008 will go down as one of the most severe economic reversals to date, and on a global scale. But it is foolish to assume that this period provides a viable guide to what lies ahead.
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