What Will We Buy To Help Us Through Hard Times?

After a week of sometimes frantic, (and even fatal), consumer stampeding for holiday bargains, The Financial Times of London posed the penultimate question for store-goers: “What will we buy to help us through hard times?”

In the USA, sales of flat panel, digital TVs were in high demand, while in the UK, the Sun reported that sales of maternity dresses, of all things, were up. The Economist found evidence that physical therapists were a hot ticket to help anxious workers “de-stress.”
Discover the most sought after products in this economy

Being Thankful and Thoughtful This Holiday Season

With a new federal government coming into office, a new economic team brainstorming visionary, new ideas, and new hope for the greening of American jobs, transportation, infrastructure and a sustainable energy future,  Americans can find at least one thing to be thankful for this Thanksgiving holiday — the thoughtfulness of everyone working to find solutions to the crisis.

The government unveiled two new programs Tuesday that will provide $800 billion to try to help unfreeze the market for consumer debt from home mortgages to credit cards.

To try to increase the availability of home loans to borrowers, the Federal Reserve said it will buy up to $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. The Fed also will buy $500 billion in mortgage-backed securities, pools of mortgages that are bundled together and sold to investors.

The program on consumer debt will lend up to $200 billion to the holders of securities backed by various types of consumer loans. It will be supported by $20 billion of credit protection from the $700 billion bailout package that was enacted last month.

In a promising sign that homeowners’ mortgage rates could tumble, rates on Fannie Mae and Freddie Mac debt fell Tuesday after Treasury Secretary Paulson announced the new plan.

The holiday retail forecast, bleaker than in year’s past, may also offer some semblance of a silver lining to consumers through a number of eye-popping deals in the days after Thanksgiving.

Among many in the retail sector, Wal-Mart is paying attention to customers. The nation’s biggest retailer recently announced a new plan called Operation Main Street.  “We anticipate saving customers $200 million” through the program, which discounts some of the most popular store items, Wal-Mart spokeswoman Melissa O’Brien said. The company has been promoting its $35 complete Thanksgiving dinner for eight, including a turkey and all the necessary ingredients.

All of us at Efinancial extend our very best wishes to you and yours this holiday season. Thanks for sharing your thoughts at Efinancialblog.com!

Steering through the Automotive Crisis

This past summer hit American auto makers hard. Gas prices were at record highs. People began driving less. A wave of demand swelled for hybrid cars, most of which are produced by foreign car companies.  As if this were not enough, the economic crisis now in place dealt another blow. The first thing people stopped doing (other than dining out) is buying new cars.

America’s “Big Three” are now asking for a $25 billion dollar bailout from the federal government.  General Motors has claimed its corporation will run out of money by the end of this year or early next year. Similar situations face Chrysler and Ford Motor Company.

Aside from the huge loss of jobs that would occur if these companies went under, the financial crunch could also cause the price of new cars and the cost of replacement parts to skyrocket.  Were companies to stop making replacement parts, current owners would be hard pressed to maintain their older vehicles.

Are we being driven to the brink of an abyss by a reckless auto industry? Should the government bail out the car companies at this critical time?  Would you buy a car from an auto maker who was in bankruptcy? And what about the millions of electric, hydogen or bio-fueled cars we will need in the decades ahead to replace the gas guzzlers?  You take the wheel.

G20 Marks Shift In Economic Power

Nothing is harder than to determine the historic significance of events when they are happening. Yet the meeting of the heads of governments of the Group of 20 in Washington at the weekend looks as historic as the crisis it responds to, according to the Financial Times. It might even prove the one bright light in the gathering darkness.

Historically, world economic summits have been comprised mostly of the world’s leading democracies (the US and the UK for two), but for the first time, countries like India and Brazil were welcomed to this convocation. Recognizing the global economy is expanding, the need to meet with the leaders of rising powers was more pressing than normal and displayed the gravity of the situation.

The G20 leaders said they would require regulators to set up “colleges of supervisors” to monitor global banks and said ministers would report back by March 31 on issues such as strengthening of the credit derivatives markets and review of financial sector pay schemes, with further reforms to follow. Read more about global solutions to the economic crisis

China Makes Economic Strides

The world is increasingly flat: land, sea and mountains no longer form boundaries to divide us. We can now press a button and make major changes to an economy or a company on the other side of the world. As a result, our economics are highly interlinked and what affects one of us can affect us all. As the saying goes, we are only as strong as the weakest link in the chain, and our global economy has many links to connect.

This could not be truer than the bonds of our relationship with China. Many products Americans use every day are made in China. U.S. corporations have very large hubs in China and we trade with China on a massive scale. Our economy affects China, and vice versa.

Recently, China passed a $586 billion dollar stimulus package. Asian financial markets skyrocketed in response to this boost, especially in face of the otherwise bleak news of slowing growth and pending layoffs that were expected to come in the future.

Will China’s stimulus package help the American economy? Will it bolster Asian economies? How does the global economic picture affect your job, your lifestyle and your economic outlook?

Life Insurance During Divorce

Life Insurance is often a critical asset in a divorce situation. Often the divorce decree will state that one of the spouses is required to buy a new life insurance policy with the former spouse as beneficiary. The idea is to provide a lump sum in place of the alimony and child support payments to the spouse. For purposes of this life insurance during divorce discussion we’ll assume the divorce decree requires the husband to pay support (alimony) to his ex wife and also to pay child support.

The decision of who will own and pay for the policy is often a point of contention in negotiating the divorce decree. If the spouse receiving maintenance is owner of the policy she must use her after tax dollars to buy it, lowering her perceived after tax income from the alimony. Many times she will agree to let the ex-husband own the policy and promise to keep it in force to satisfy the divorce decree. There-in is a potential problem. If the husband owns the policy and pays for it and simply names his ex-wife as beneficiary he has the option to change the beneficiary in the future! The insurance company is not required to notify the beneficiary of the policy that a beneficiary has been changed. Due to privacy regulations, the carrier won’t discuss the beneficiary designation with anyone but the owner of the policy, or someone the owner has signed an authorization to discuss such matters with. Learn more about managing life insurance after a divorce

The Future of American Healthcare

In an ailing economy, a weakness in one part of the system has a tendency to affect other parts. Warren Buffet described America’s financial crisis as an athlete who had suffered a heart attack. When the patient is the financial sector, and the patient is flat on its back, the risk of failure is writ large and intervention must be swift. “We need to get the athlete back on its feet,” said Buffet.

What kind of setbacks in one part of the economy will lead to a domino effect that triggers other losses? The automotive industry made its case last week for government help that would stem the tide of job losses and help retool America’s transportation fleet for greater fuel economy. Still another dreaded consequence of rising unemployment threatens America’s health and well-being. That threat is manifested in the health care industry and the prospect of millions of uninsured families and children.

Just as toxic debt has harmed our banks, the widening gap between affordable health insurance and uninsured Americans holds us all hostage, either leaving individuals at bankruptcy’s door or the American taxpayer holding the door, and footing the bills, at hospital emergency rooms. America’s health insurance malady quickly worsens as more and more people start to lose insurance due to layoffs or closures.

What measures can the government and insurance companies take to treat America’s health care insurance crisis? Does American health care need first aid now? What’s your diagnosis?

A New Chief Executive has been Hired

Yesterday, Barack Obama was elected to become the 44th President of the United States, with at least 349 electoral votes and about 52% of the population. Given the protracted length of the political campaign season, the American people have at least some idea of the policies that will shape the economic landscape over the next four years. Clearly, with change as a mandate, it is safe to say there will be some fundamental shifts ahead in our economic outlook. At the same time, new initiatives will be constrained by a large national deficit.

The expectation of greater cohesiveness in political circles and the notion of heightened government regulation may instill the necessary confidence to stimulate the lending and spending of money in the current economic environment. The steps a government takes are also reassuring to outside investors such as the refuge international investors have found in a strengthening U.S. dollar.

Will the Obama presidency be able to turn around the economy, and how quickly?  Will investments in a national transportation infrastructure and alternative energy programs be part of the greening of America? And how might the U.S. government and president Obama buttress the automotive industry to save energy, jobs and the economy? What’s your view?

Can We Gain Without Pain?

America’s next president, and its newly elected congressional representatives from all fifty states, will soon confront the challenges of a daunting financial crisis, the likes of which we have not seen since the Great Depression. The odd part of the campaign trail leading up to Election Day is that the candidates for political office have been rather soft-spoken about remedying the problem. Campaign pronouncements have been muffled and candidates adverse to describe how each of us will need to exact some degree of personal sacrifice during these trying times. The implications that have been made during this political season suggest that merely a minor change will make a major difference.

Over the past several years, the federal government has cut taxes in the wealthiest percentiles, financed two wars, and recently authorized vast investitures to shore up our financial system. The “make good” on these commitments has seemingly been passed along to future generations to handle, even while modern “baby boomers” have Social Security and Medicare entitlements coming due.

Tax cuts alone will not stimulate the necessary solution. Nor will tax rollbacks, or even closing tax loopholes. A new sense of purpose and a new sense of urgency seem warranted. Across the nation, divided Americans will need to exert their will and marshal their efforts as Americans united. What shall our government ask of each of us and what must we ask of ourselves?