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U.S. Recession Probably
Unavoidable |
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The American
economy accounted for about 26 percent of all global economic
activity in 2007, and now concern about a U.S. recession is
affecting the whole world. Wall Street appears set to join the
global markets for a very rough ride.
Japan's Nikkei-225 share index dropped 5.7 percent---the worst
in 17 years The Hong Kong market fell an additional 8 percent,
while the Bank of China posted a huge loss in an American
sub-prime related investment. The Bank of America’s net income
sank 95 percent and the bank took a $5.3 billion write-off in
the fourth quarter. Wachovia's fourth quarter earnings sank 98
percent to only $51 million and the company had to take a $1.7
billion write-off. Oil prices also
fell on recession fears and crude for February delivery lost
$3.21 down to $87.36 a barrel.
As the real threat of recession looms, President Bush and
congressional lawmakers met on Tuesday to discuss details of a
financial package to jump-start the faltering economy. Such
a package will include an immediate $150 billion stimulus plan.
Hoping to halt a further market meltdown and prevent a
recession, the Federal Reserve took action and lowered its
overnight
lending rate by three quarters of a percentage point to 3.50% on
Tuesday. This was a rare move seldom taken between the Fed’s
formal meetings.
Despite the spectacular growth of many foreign economies such as
China, India and Brazil, the world cannot easily withstand a
severe downturn in the U.S. economy which consumed $2.1 trillion
of foreign goods.
Unless President Bush takes additional steps to rescue the
ailing economy, a recession is probably unavoidable. |
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