Grim Economy In 2008, Fed Chairman Bernanke

The chairman of the U.S. Federal Reserve testified before Congress today and said the outlook for the economy was not strong for 2008. Finally, representatives in Washington are listening to voters back home that have been concerned about the U.S. economy for months now. The sad truth is that there is little Members of Congress or President Bush can do, in the short run, to stimulate the economy. Some Congressmen were talking today about creating a targeted rebate to taxpayers of somewhere between $200-$600, but most likely that won't work. The U.S. economy has always gone through boom and bust cycles and it will continue to do so in the future no matter what elected representative decide to do in Washington.

This boom and bust situation is just an off shoot of capitalism. In a capitalist country, like the United States, during good economic times small companies become large and large companies become enormous as they are bought, sold and merged in a type of business feeding frenzy. Somewhere toward the end of a boom cycle, as good prospects for purchase and merger begin to get harder to find, companies start buying anything. That reality is what is happening right now as major companies, like Citibank, found themselves eager to get into the sub-prime leading market when normally a company of that asset size would look for safer places to invest it's money.

After many years of good economic growth, the United States is now facing a down turn because of excessive risk taking during the boom years. It will be easy for political leaders to blame these latest problems on greed, but in reality the U.S. system of business and commerce requires a boom and bust component. For a company, nothing is more important than growth. Once a business grows all it can in the marketplace, it must find other businesses to either buy or merge with in order to continue it's growth. Eventually, a company cannot grow anymore and once their growth becomes stagnant, investors look for other companies and this whole cycle starts all over again.

The past few years there have been some bad choices made by some really big companies. Those bad choices will now be punished and the pain of these decisions of a few will be felt by all. Unlike other financial downturns of the past, this time it will be the financial markets that will lead to the next bust cycle. As poor lending judgments in the housing and retail credit markets work their way out of the system. This too shall pass and good times will once again come to the United States. However, few people really want to admit to the down cycles in the U.S. economy because quite frankly most people don't want to hear the truth, if that truth is bad economic news.

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