March 11th yielded the nations largest one day gain in the stock market in more than five years as the Dow Jones industrial average rising by more than 400 points.
Look out, though. Fed officials are the first to acknowledge that their initiative attacks only one problem, the liquidity squeeze at big banks. It does nothing about the central risk to the U.S. economy: an unprecedented crash in home values that is sapping households’ wealth and confidence while putting an enormous strain on the banking system.
Right now most economists expect the U.S. to experience a mild, short recession in 2008. But there is at least a possibility of a steeper decline that the traditional recession remedies—interest-rate cuts here, deficit spending there—won’t be able to handle.
Many consumers are rightfully concerned that a tragic incident could possibly occur such as the stock market crash in the late twenties. Although the level of the current recession is not expected to reach that altitude, it is most certainly a possibility. The United States government and the Federal Reserve need to continue to work on providing insurance policies to ensure the support of fellow Americans. Failure to do so could result in a potential downward spiraling effect on the U.S. economy and the government as a whole.
