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Another sign of our wonderful leadership????
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Economy sputters with 0.6 percent growth

By JEANNINE AVERSA, AP Economics Writer 3 minutes ago

WASHINGTON - The economy nearly sputtered out at the end of the year and is probably faring even worse now amid continuing housing, credit and financial crises.


The Commerce Department reported Thursday that gross domestic product increased at a feeble 0.6 percent annual rate in the October-to-December quarter. The reading — unchanged from a previous estimate a month ago — provided stark evidence of just how much the economy has weakened. In the prior quarter, the economy clocked in at a sizzling 4.9 percent growth rate.

The gross domestic product (GDP) measures the value of all goods and services produced in the United States and is the best barometer of the country's economic health.

Many economists say they believe growth in the current January-to-March quarter will be even weaker than the 0.6 percent figure of the previous quarter. A growing number also say the economy may actually be shrinking now. Under one rough rule, the economy needs to contract for six straight months to be considered in a recession. The government will release its estimate for first-quarter GDP in late April.

In another report, fewer people signed up for unemployment benefits last week, although that didn't change the broader picture of a deteriorating jobs market. The Labor Department said jobless claims fell by 9,000 to 366,000, a better showing than many economists were forecasting. Still, unemployment is expected to rise this year given all the problems clobbering the economy.

The newly released fourth-quarter GDP figure matched analysts' expectations.

Thursday's report underscored the damage to the economy from the collapse in the housing market, which has dragged down housing prices, pushed home foreclosures up to record highs and has led to a glut of unsold homes.

Against that backdrop, builders slashed spending on housing projects by a whopping 25.2 percent on an annualized basis in the fourth quarter, the biggest cut in 26 years.

To limit the damage from the crises, the Federal Reserve has taken a number of extraordinary actions. It has slashed a key interest rate over the last two months by the most in a quarter century. And to relieve turmoil on Wall Street, which intensified after the crash of the country's fifth-largest investment firm, Bear Stearns, the Fed has resorted to its greatest expansion of lending authority since the 1930s. Big securities firms will temporarily be allowed to go to the Fed directly for loans — a privilege that had been afforded only to commercial banks.

Consumers, whose spending is indispensable to the economy's vitality, boosted buying at a 2.3 percent pace in the fourth quarter. That was better than the 1.9 percent growth rate previously estimated but still marked a slowing from the third quarter's 2.8 percent pace.

Businesses — nervous about customers' waning appetite to buy given all the problems in the economy — cut back sharply on their inventories of unsold goods. That shaved 1.79 percentage points off fourth-quarter GDP, the most in more than two years.

Spending by businesses on equipment and software, meanwhile, rose at a pace of 3.1 percent in the final quarter of last year. That was slightly less than previously estimated and marked a slowdown from the prior quarter's 6.2 percent growth rate.

Businesses profits also took a hit in the final quarter. A measure linked to the GDP report showed that after-tax profits fell 3.3 percent at the end of last year, after being flat in the prior quarter.

There was a bright spot in the mostly gloomy report, however. Sales of U.S. goods and services to other countries grew at a 6.5 percent pace. That was better than the 4.8 percent growth rate previously estimated, although it was down sharply from the prior quarter's blistering 19.1 percent growth rate.

U.S. exports have been helped by the sinking value of the U.S. dollar, which makes U.S. goods less expensive to foreign buyers. The U.S. dollar recently plunged to record lows against the euro and has fallen sharply against the Japanese yen.

The drooping dollar can aggravate inflation pressures.

An inflation measure linked to the GDP report showed that overall prices increased at a rate of 3.9 percent in the fourth quarter. That was not as high as previously estimated but marked a big pickup from the third quarter's 1.8 percent pace.

Another gauge showed that "core" prices — excluding food and energy — grew at a rate of 2.5 percent at the end of last year. That was down from a previous estimate of a 2.7 percent pace but was up from the prior quarter's 2 percent growth rate.

The new core inflation figure is above the Fed's comfort zone — the upper bound of which is a 2 percent inflation rate.

Although the Fed's No. 1 job is trying to save the economy from a deep and prolonged recession, it is also keeping close tabs on inflation and soaring energy prices.

Oil prices are topping $105 a barrel. Gasoline prices have marched higher, too. High energy prices can spread inflation if lots of companies boost prices charged to customers for a wide range of goods and services. High energy prices also can be a drag on overall economic growth by crimping consumer spending.

The combination of slowing economic growth and rising inflation make the Fed's job more difficult. It also has raised fears the country may be headed for a bout of stagflation, a scenario the U.S. hasn't experienced since the 1970s. Fed Chairman Ben Bernanke, however, has said that's not the case.

I'll tell ya, I've never been this worried about the economy. I'm more worried with each piece of information I hear and article I read. With government spending so out of control and no candidate looking like they are likely to try and reel it in, I'm very concerned about where it's ultimately going and how long it's going to take to rebound from it.

The rest of it is out of the government's control, even though the candidates would like us to believe differently. People with out of control credit usage are finally having to pay the piper and the agencies who frivolously gave it out are doing the same.

I think we're in for a long haul, and I don't feel a bit optimistic about it.

I thought our economy was doing well? I thought pouring billions into another country would help us? I thought passing laws against gay marriage and strippers would help?

What a mess. And who do we have to blame? Us. We keep electing these screwballs (both GOP and Democrat).

Good points.

It bothers me that our government is throwing billions of dollars into a war that should not exist, yet our economy here at home is suffering and the dollar is continuing to tumble on the world market.

I also agree w/you that most Americans are not very disciplined. They borrow and borrow and borrow. As an off-shoot of that...........

As you probably know, I have two children in college. You wouldn't believe the amount of credit card offers they receive each and every day of the year. It sickens me that credit card companies use the sorry plight of most collegians' economic status against them, putting them further into debt and "owning" them for years after they graduate. Credit card companies are the scum of the earth.

Sorry......had to get that out there.

I recently went to a seminar on the foreclosure crisis, and boy, what a mess.

I'll say this right off. People who got in over their heads and should have known better, I have no sympathy for.

However, the financial institutions and mortgage companies are very much to blame, too. Many mortgage companies literally refused to obtain any kind of credit information or salary information from people before they approved them for these huge loans. So, people were getting these exorbitant loans at these insanely low interest rates even though they weren't even close to qualifying for them.

This is because the money for these companies is in the paperwork. You get that through opening the loans, refinancing the loans, and foreclosing on the loans. Most foreclosures happen in refinance situations.

Then, the banks/mortgage holders come along when the house is in foreclosure and work out "payment plans", which often amount to paying close to 100% of your salary just in your mortgage payment. And when they would say they'd allow you to not make payments, or not make full payments, that whole time you weren't making the payments, you'd accrue late payments and interest.

Banks/mortgage holders were also putting money into "suspense accounts." That just means that if you're mortgage payment was, say, $2,000, and one month you didn't pay the full amount, but paid the full amount the next month, they wouldn't put that next month's payment toward that month. What they'd do is put it in an account and you'd be incurring late fees on not only the first month, but also the second month. The money wouldn't be released from that account until you caught up COMPLETELY, which was often impossible.

So, the government created these programs to help people out. However, it's almost impossible to qualify for those programs. I forget the name of the big one, but you have to have perfect credit to begin with, AND your credit has to be in decline. Really, how many people do you think are going to fit into that category?

It's gotten bad enough that it's becoming more and more common for people in trouble to literally mail their keys to the mortgage holder and just walk away from the house.

Minorities (especially blacks and latinos) are also disproportionately steered toward the types of subprime loans that cause these problems. Blacks with very good credit are 1 1/2 times more likely to get steered toward the bad subprime loans than similarly situated whites. Latinos with very good credit are more than 2 times more likely to get steered toward the bad subprime loans than similarly situated whites.

Also, I spoke with one guy who works for a county recorder's office. He said that for a while, whenever they'd get a mortgage in their office from Ditech.com, they'd set it aside because they knew it would be in foreclosure within a year.

This housing crisis is likely to continue, and that just destroys an economy because when people see the value of their houses go down, they stop spending as much, which has an effect on the economy as a whole.

Interesting and thanks for the knowledge.

And yes, there is a reason the banks want us to refinance. I own two homes and have some land. Similar to the credit card offers that young people receive, it's amazing how many refinancing opportunities home-owners receive.


Ammo..........you have some good points. But, I think I'll leave them alone right now. *L*

I do not speak to defend the present administrations' lousy prosecution of the war in Iraq. The war was ill conceived and administered even worse. It is now turning in our favor...as much as can be hoped for.

To blame Bush for all our messes is juvenile and you all know that. Unfettered spending on dead end programs have been occuring since the 1960s with both Dem and Repub controlled Congresses in charge.

The nation became addicted to subsidies for this and that...tax ememptions for this industry and ill advised loans and give aways all around.

The general public fell for every new con game which crooked lending groups threw out there. Who in their right mind signs up for a credit card with rates as high as 23%????? Who takes a credit card without being able to read the fine print.

The general tenor of these posts above suggests that the government needs to protect us from what we take gladly from the gov't...it needs to protect us from ourselves when we are too weak to say NO! to credit card lenders or cheap rate financing with dangerous potential traps for non payment.

The government needs to get the Hell outta the way and let the foreclosures continue as a reminder to our future generations that credit is dangerous and needs to be avoided. Ask any grandparents who lived through the Great Depression how they feel about credit cards and speculative gambles....
they know better...now new generations will see what granny already new.

The government can't help you from yourself...only you can protect yourself.

Let the game play out...the cycle will come back up soon.

You're entitled to your opinion, Ralphie, but I just plain disagree that allowing these foreclosures to just happen is a good thing. You're operating under the assumption that it is the consumer's fault for getting into foreclosure.

Many people who are facing foreclosure aren't in that situation because of something that was their fault. They had a major medical expense, a death, or a job loss. The job loss part is something that can be blamed on our present economy.

And, you're operating under the assumption that people are taking these subprime loans with full knowledge of what is going to happen to them. It is fact that many people received these loans because of what amount to "dirty tricks" by mortgage lenders (i.e. not asking for credit history, salary information, etc.). There are actually many cases of people voluntarily providing this to mortgage lenders and the lenders not accepting it because they just didn't want to know about it!

And, I understand your argument about the cycle of the economy. However, I'm not sure we've seen a crisis like this before, so we can't say for certain how the "cycle" will play out. We had big problems during the Depression, which cause a worldwide Depression and helped bring about WWII, which is truly the only reason we ever got out of the Depression. So, to just say the blanket statement that the economy will fix itself is kind of like sticking your head in the sand.

Should the government bail everyone out? Certainly not. But the government also should certainly not stand by as unethical and predatory lending problems run rampant.

JMHO

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I can second that, getting those credit card offers every day. Never took on a credit card though...I want to ring my one friend's neck who has like 9 credit cards, but she just doesn't "get it."

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I think it's funny that the schools are intent on teaching the dangers of drugs and the joys of safe sex.. but never mention money to kids. Keep in mind that I believe it is primarily the responsibility of the parents to teach ALL of these things... but if the mission of the schools is really to teach kids about "the real world" that they are entering, then teaching them about earning, saving, and borrowing money should be a part of it..

You're right, DC. And, it couldn't be just a "don't get a credit card". I think if you truly show a kid how much those things cost with interest rates, etc., you could really get through to them.

I know it was just so darn easy when I was in college to charge stuff. It always reminded me of the Simpsons:

Marge: How could you spend 4.6 million dollars in a month?
Homer: They let me sign checks with a stamp, Marge! A stamp!

Interesting point DC...perhaps schools should have a personal economics class or two. I know a lotta friends and myself who didn't exactly get the implications and responsibilities that came with all the credit card offers thrown our way in college. Some parents themselves would have benefitted from personal finance classe in their youth (My Mom). My Goodness! DC and I are actually agreeing on something!

That's funny, we've been having that conversation a lot recently. Finance should definitely be taught in schools because the majority of parents are doing a very bad job teaching it to their children. It's a very important issue for surviving in this world out on your own. I have two very good and stable parents and they never really taught me about finance and my ignorance caused me to do some stupid things early on.

Once again Jules, that's completely your fault. You should have educated yourself.

LOL...I didn't sink badly into the quagmire as some Brownsfan....but the problem is endemic to many in my generation. Credit cards can seem like money for nothing...untill that first bill comes in.

I've always thought that instead of requiring 4 years of math or english in high school, they should be requiring 4 years of economics. We were required to take one semester of economics our senior year, and it was more of a brief crash course than anything else.

Well, I did over time. You can't keep blaming your parents forever, and way too many people blame their past for their present.

I agree 100%. I have only asked my parents for money once, and that was only a couple hundred dollars because of the way my paychecks fell. I always took responsibility when I ran into credit card debt, etc. I wish more people would do that.

I just don't agree with the implication that people who are in debilitating debt got there because of their own actions (or inactions), and therefore deserve what they get.

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I have two very good and stable parents and they never really taught me about finance and my ignorance caused me to do some stupid things early on.

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Me too. My parents handled pretty much everything for me all the way through college, my tuition, my car payments, insurance, everything... then one day it got dumped on me... I had no idea what was coming. I learned too late that bad credit (or overextended credit) is a lot like Herpes... it doesn't take long to get it but it takes forever to get rid of it..

And I am a firm believer in personal responsibility too.. but there is a reason Visa and Mastercard make a fortune and there is a reason they spend millions and millions on targeted advertising... because it works. Heck when I was in college you could charge hundreds of dollars and pay it off $15 a month.. what a freakin' deal. I had a part-time job, I could handle $15 a month.. then when that was fully racked up, I could get another one. I could just as easily afford $30 a month.. then they raised my limits from $500 to a $1000... and so on and so on.. until I was in deep poop. The money I could have been living off of was going to the credit cards so any money I wanted to spend went right back on the credit cards... Yea, I should have been smarter, I should have recognized... but I was 21, 22 years old and had no idea where this road was taking me. Heck, I assumed that in a year or two I would get out, get a good job and pay this money off in no time... well it doesn't always work like that. Trust me, my kids will hear about personal financial responsibility until they are sick of it.. hopefully they can learn from my mistakes.

I think you guys assume a lot when it comes to "our schools."

I am a teacher and I talk about to my students about the "real world" every single day of the year. Yes, every single day. And it's multiple times a day.

You see..........as every good teacher knows, there are about seven steps to teaching a lesson. First, you need to hook them. Second, you then give them a reason or rational for learning what you are about to teach them. The last thing you do is reflection, where you discuss what you learned and how you can use it in your own world.

All three of those steps teach kids about the real world. The hook has to be something they can identify with, which has to deal w/the "real world." The rational is huge. Logical minds need to know why they need to learn this. Explaining how something will be used in the "real world" is making it "real." Finally, having students reflect on what they've learned is where real learning takes place. They must be able to not only process all the information they have been exposed to, but they must analyze and evaluate it. Otherwise, they would not be able to verbalize it and actually create a scenario of how they will use it in the "real world."

I think there are a lot of people out there that want to blame "our schools" for every problem in America. The schools do have their issues, but most are a by-product of a nation that has a increasingly high number of dysfunctional families.

One more thing............I hope you do understand that what we teach in "our schools" is severely influenced by No Child Left Behind. I would welcome any of you to come into my school and see the children we deal with and then review exactly what No Child Left Behind mandates. I think your tone would change quickly. No Child Left Behind is an impossible law that is forcing school districts to jump through hoops. It's more about looking good than being good. You can thank your politicians for that one!!!!!!!!!!!

General reply....

The foreclosure crisis is going to get even worse. The high rate ARM loans are at their highest interest rates this month and next. We probably won't see the effects of this until closer to the end of they year. Right now it's quite possible that home owner's that signed subprime mortgage loans in 2005-2007 are seeing double payments from what they first were. Jumbo loans will be at their highest soon, too.

Credit card companies love college kids. They are credit dumb and use what credit they are extended. It has taken me to age 37 to get out of the mess those cards got me into. I believe we should start teaching kids finance VERY early. Hell, just the other day, my 17 year old nephew asked me the difference between a checking and savings account. I honestly couldn't believe my ears.

Also, 337 opting out DOES work. I have been opted out for some time and don't receive any offers (other than from current creditors).

Wow. You have my sympathies. Those are the types of evil ploys that I was speaking of earlier. It makes me sick they exploit kids like that. And they get away w/it. Our government doesn't allow kids to drink at the age of 20, but it's okay if they go into debt that will severely hamper their lives for a decade or more.

Man..........like I said before..........This is a huge concern of mine because I have two kids in college. I preach to them about the dangers of credit cards. But, they are of college age, and you just never know. After all, they are smarter than their parents are now.

If it does then I am going to call the number. All I do it toss them right in the trash.

You want to hear something funny. My wife got into a car accident a few weeks ago (not her fault) and no lie a week later in one day we got 20 letters from lawyers and chiropractors. The next day we got about the same number and the 3rd day around 10 more. The one letter said they search public records and heard about her accident. And I wonder why lawyers get a bad name I couldn't believe it.

hmmmmmmmm.......I don't want to get into the "no child left behind debate" as many here know I also am a teacher...yet I am working at a franchise book store now...for many reasons (one of the main ones..a bad romantic choice) I don't think Verse, that anyone was blaming the schools..I think it was just a suggestion to add something to current curriculum.

Vers.. first of all, I understand the repetitive nature of learning.. I also understand that some of what teachers teach has "real world" implications... not once did you even address my point, which is that if schools feel compelled to teach about the horrors of drugs and the need for responsible sex, why can't they work in a little teaching about debt and credit and savings... that's all I really want to know.

You have a habit of getting awful touchy and defensive when the subject of education comes up and I understand. What you need to realize is that when most of us rail on education, it's geared far more toward the bureaucrats that run it than it is at the teachers themselves. I have all the respect in the world (and quite a bit of empathy) for teachers who are trying to do a good job.

I wish I could say I'm offended as a lawyer, but I know what you said happens.

DC...........my tone doesn't always portray how I feel about the individual poster. I've come to realize that. *L*

I wasn't really upset w/you, the individual. Sorry.

I do think that it is important to teach children about the dangers of drugs and to educate them about what can happen if they are sexually promiscuous. I also agree w/you that students need to be taught about financial matters.

What I failed to express is that I, as an individual teacher, do teach that on an everyday basis. There is no bigger hook w/today's youth than money. There is no bigger rationalization for today's youth than making/losing money. And when reflecting, they certainly understand the value of the dollar.

I would prefer living in a society that values character over money. I would prefer that people were more philosophical as opposed to materialistic. However, I am enough of a realist that American culture centers on the Almighty dollar. Believe me when I tell you...........I do indeed teach my students about economics.

Oh, and sorry for going off about education. I do get sick of hearing how our schools are to blame for everything. I do realize that no one really wants to hear a teacher complain......so I won't go into a lot of it. But, it's tough in there, man.

Hell, about the only thing I like about the job anymore is the kids. And I love them. Thank God. Because believe me, there are many times I want to go back into business and make three times what I do as a teacher.

This thread is the VERY reason why I want to do this:
https://www.dawgtalkers.net/showflat.php?...true#Post369258

Perfect example of why some basic, 'how-to' advice is needed in the US.

In a perfect world I would love to travel and give educational talks but that would be so labor and money intensive to get it going. A website isn't much, but it is a start...

I think one big problem with our society and credit, is that people don't look at it as a purchase, they look at it like a payment.

That 50" TV, oh it's $2000, maybe another time. What, I can get it for $35 a month? I can afford $35 a month, I'll take it.

And the borrowed time concept, I know too many people that do the "same as cash" deals, but don't make any payments until they have too, and often incur interest charges for that "same as cash" period.

To me bottom line is it's each and every persons own responcibility to live within thier means, no matter what thier income is.

I work with people who are always complaining about it's the banks fault, morgage companies fault credit card people fault, but then they go out and spend alot more than they can afford, but it's somebody's else fault they cant pay thier bills when they come due.

I do realize it's not always the case, but for alot they simpley dont know how to manage thier money.

just my .02

I might get deleted for site pimping, but I hope the refs allow this because it truely will help people.

If anyone is truely interested in helping their financial situations, here is a great place to get FREE lessons on personal finance.

The Motley Fool
http://www.fool.com/pf.htm?terms=personal+finance&vstest=search_042607_linkdefault

Parents can sit with their kids for a couple of evenings and go through it. Those who are in their 20's can take some time away from the beer, XBox, and Myspace pages and do themselves a favor. Don't wait for a President to teach you...it isn't his job.