Us Bailout of Fannie Mae and Freddie Mac Not Likely to Improve Us Economy

14 January, 2017

The local KLSE finished on a lacklusture performance despite news of the US bailout of mortgage giants, Fannie Mae and Freddie Mac. The market closed at slightly above 1,000 points with most counters showing losses as political uncertainty continues to spook the market as the September 16 deadline looms.

So, will Washington’s bailout of these two giants help heal the ailing US and world economy?

Experts are predicting that the massive bailout will not be the shot in the arm for the depressed US economy as the US Government originally hoped.

Analysts predict the vicious cycle where housing, credit and financial problems force Americans to hunker down further – hobbling the economy and in turn aggravating those very troubles – won’t be easily broken.

“The negative psychology has become embedded and will take time to unwind,” said Brian Bethune, economist at Global Insight.

“It is not instant coffee.”

It appears that the sub-prime effects have been further reaching than expected. The home, an essential but expensive asset, has become such a difficult and risky investment to make now as brokers battle record high foreclosures and unsold houses on top of credit tightening by banks. On top of this, a five year high unemployment rate of 6.1% has been recorded in August 2008 with over 605,000 jobs axed over this 8 month period.

The situation will get worse before it gets better, analysts predict.

Hundreds of thousands of more jobs probably will be cut through the rest of this year; another half million may be lost during the first quarter of 2009, according to some projections.

It does look like worrying times ahead as the downturn of the US and world economy seems to be on a downward spiral that has not hit rock bottom yet.

It will only be a matter of time before Malaysia starts to feel the effects of the economic downturn as well. Hence, save your money and invest wisely as rainy days may be looming ahead.



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