The Recession: Not Just Your Parents’ Problem

Published April 1, 2008
One Comment (at bottom of article)

By Peter Salerno

Well the recession is here. We may not feel it on our campus or even in our private lives but it is most certainly here. First. let me define what a recession is for all the readers who do not know. It’s an elongated period of time when a nation’s economy begins to slow down or condense. There are a few telltale signs of a recession’s presence: people purchasing fewer goods, a decrease in factory production, growing unemployment, a slump in the personal income of citizens, and an unhealthy stock market.

George Soros argues, “The current crisis is not only the bust that follows the housing boom, it’s basically the end of a 60-year period of continuing credit expansion based on the dollar as reserve currency.”

The quote gives us a better understanding of the path that we took to arrive here in a recession. The housing market was doing great, too great. In December 2007 house sales dropped the greatest amount in a quarter century. The median price of a home declined for an entire year, for the first time in 40 years. If you couple this housing market with the fact that the Fed set credit at its cheapest in years you get a cesspool for unintelligent investment.

Now the second part of the quote blames the recession more squarely on the 60 years since we took ourselves off the gold standard and made the US dollar our standard. Over the past 5 years gold and the US dollar have gone in opposite directions. And the stability of the dollar has suffered at home and abroad.

Now that we are in a recession what can we do to remedy it? Our government could choose to try and prevent the slim but very dangerous slide into an even more serious recession. There are three options that policy makers have to prevent this from turning into a serious recession. The first option is to help the banks, loaning billions of dollars to banks for responsible lending and borrowing to help them get back in the clear. The problem with this measure is that homeowners will not see any relief.

The second option would be direct help to suffering homeowners who need lower interest rates and the staving off of foreclosures. The third option is to help the lenders and holders of mortgage-backed securities in order to unfreeze credit markets. All these options will have their cons. The biggest problem is that the burden of giving help will be put on those who do not need the help. Taxpayers will shoulder the overwhelming amount of this.

Even though this recession is taking place at a time when we are in college it will affect you just as profoundly as it has affected our parents. If when we graduate the country is still in recession how do you think the job market will be? How easy do you think it will be to buy a home, or invest confidently? These economic problems are not only for the business and political science students to worry about, they are for all of us to worry about.

No matter what line of work you get into, this recession will affect you, and to rely on your parents to fix the problem would be foolish. Their must be a concerted effort of spending smart and tightening purse strings. It is our responsibility as the next generation to begin forming intelligent habits monetarily and limit the useless, gluttonous use of the dollar.

Print This Article

Comments