Thursday, October 1, 2009

US economy is still struggling

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Oct. 1 (Bloomberg) -- U.S. stocks fell the most in three months as Treasuries and the dollar rallied after a decline in a gauge of manufacturing and an increase in jobless claims spurred concern over the strength of a recovery from the recession.
Unquote

Several economists have expressed the worry that the current recovery is due to the government stimulus. After the stimulus is spent, the economy will face the same difficulty as before - reduced consumer spending and confidence.

The underlying problems of the free market economic system has not been solved - high unemployment, extreme disparity of income, high dependence on mis-priced leverage, bubble in asset prices.

Interest rate is now too low, due to the infusion of public money. When the infusion stops, interest rate will have to increase to a higher level, and that will also affect the stock and property markets.

My view: Do not rely on low interest rate for too long. Do not invest and lock up your money on low interest rate for a few years. Do not invest in property or stocks at inflated prices.

Tan Kin Lian