March 25, 2008

Consumer Confidenvce at 5 Year Low

Posted in Articles, Consumer Confidence, Economic Indicators at 11:47 am by davidprudente

Here’s an article from CNN that reports Consumer Confidence is at a five year low. If you recall, we discussed consumer confidence earlier in the year when we studied Economic Indicators. How is it that consumer confidence drives economic behavior?

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3 Comments »

  1. Matt Steinberg said,

    http://www.dukenews.duke.edu/2008/03/fedtip.html

  2. Matt Steinberg said,

    how would the fed go about shifting its focus from protecting banks to protecting markets?

    what does it mean by capital markets, not banks, now represent the primary source of corporate financing

    what is a governmental “liquidity provider of last resort.” what would it do and how would it do it?

    -check out my cousin’s blog, the one who just got a job with lehman bros.
    http://eloy-youngmoney.blogspot.com/search?updated-min=2008-01-01T00%3A00%3A00-05%3A00&updated-max=2009-01-01T00%3A00%3A00-05%3A00&max-results=17

  3. davidprudente said,

    Three questions…but first my two cents:

    I don’t necessarily agree with the professor from Duke that we will see market failure. While the signs of recession are strong and clear, I still thing our financial institutions are strong.

    1. How to protect markets. From time to time, the Fed has jumped in to shore up financial markets because of various fundamental problems that have arisen. They did this after 9/11, also in 1994, and if I recall in 1987 after the stock market collapse. Basically, they move money into the market and ensure that banks have enough access to liquidity. During the S & L bailout in the 1980s, the Fed (or was it the Treasury department) acted as a clearing house for real estate.

    2. Capital markets = stocks and bonds. Instead of taking a loan to expand, businesses today are more likely to offer bonds or stocks to finance capital purchases…do you remember what the benefit of doing this is? What is the businesses liability in each case?

    3. The Government can literally infuse cash into markets if they are concerned about a market failure. This doesn’t happen often.

    Good questions.


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