Commentary on the Economy: As the economy continues to worsen, people resume losing their savings, most are burying their heads in the sand

Commentary on the Economy:

As the economy continues to worsen, people resume losing their savings and their houses, and most are burying their heads in the sand...

As the economy continues to worsen, people resume losing their savings and their houses, and most people are burying their heads in the sand. The administration will destroy your children’s future. Think we pay high taxes now? Who do you think is going to pay for all of these bailouts; it won’t be the people on welfare, the unemployed, or the illegal aliens. It will be people like you and I that work for a living and pay taxes.

Think things are going to get better? Well think again. Even though my clients all made money in 2009, I have not heard that statement from too many other people. So, what are you going to do? Listen to your incompetent stockbroker, your tax collector accountant, or your life insurance financial planner who helped you get into this situation? While there are signs that some of the principal indicators have stabilized to some degree, but it’s at a minuscule level, and we’re not seeing corporate investment starting to pick up or consumers starting to spend again.

To put it in simple terms, the traditional methods by which economies generally come out of a recession are lacking at this time. This being said, hopes that the American economy, which led the world into recession, might lead it back out this year, have been diminishing quickly. In March, Warren E. Buffett, wrote in his company’s annual report that the economy will be in shambles throughout 2009, and most likely, well beyond. As if to highlight the problems, the Institute for Supply Management also reported that companies in the US said business was getting much worse, particularly regarding jobs. The February employment report showed a decline of 785,000 jobs, which made it one of the largest one-month declines in employment in virtually 60 years.

Throughout February, the US revised its estimate of fourth quarter gross domestic product to show a decline at an annual rate of 6.2 percent, the worst in more than a quarter century. The continued plunge of the stock market and economy has shocked investors and governments. If this is so, then why did the federal government just rescue the A.I.G. for the fourth time in six months, and why was the government willing to spend $30 billion more of taxpayers’ money for very little return.

The government, which owns nearly 80 percent of A.I.G., did not take more equity in A.I.G., and also converted its preferred shares, which paid a 10 percent dividend, into shares that don’t pay a dividend at all. One of the biggest worries relating to this, besides the considerable collateral damage to the banking system, is a risk that most people don’t know about. Lance Wallach, CLU, ChFC, CIMC, speaks and writes about benefit plans, tax reductions strategies, and financial plans. He has authored numerous books for the AICPA, Bisk Total tape, and others. He can be reached at (516) 938-5007 or lawallach@aol.com. For more articles on this or other subjects, feel free to visit his website at www.vebaplan.com.