The Dow Jones and Your Credit

dow jones current

Dow Current – The Dow Jones eventually excels 9000 for the first time since Jan. Is this just a Bear Market Rally? In spite of corporate Americas positive revenues reports and the statement of 3.6 percent gains in existing home sales, there looks to be a regiment of researchers around that would say the 34 % gain since the DJX’s low in March will not continue.

Some analysts indicate that there is a high risk that corrections in the market are inevitable and that history would show that retracements of one third to two 3rds may be coming.

While many would say that the U.S. Is showing signs of a recovery, some are asking for a plan to negate the consequences of an inflation that’s's predicted to follow the ending of this recession. Without an efficient plan in place the fears of inflation may have a negative result on the markets in the future. Inflation has a direct result on Credit and Credit rates.

The Federal reserve sets Monetary Policies which are the first tools in controlling inflation. One policy is to fight inflation by setting higher interest rates ( slowing the increase in supply of money ). Keeping a balance in the interest rates is a difficult issue. Keeping interest rates too low leads to deflation which many economic experts believe is an issue for our modern economy because of a danger called a deflationary spiral. One of the worst commercial disasters in history has a link to a deflationary spiral, and that was the Great Depression.

The Great Depression, or Black tuesday, the day of the great market Crash, on October twenty-nine, 1929. The Dow Average increased fivefold up till Sep 1929, after which, for 6 weeks the Dow fell sharply leading to just about 13 million shares sold as stockholders lost faith in the Stock Market and panicked to attempt to save whatever was left of their investments. A phenomenal thirty bill dollars was lost in just that one week in October alone.

By the middle of 1932 the DJX was down a staggering 89 %, all because of the Federal Reserve’s policy to try to drop interest rates to revive growth. Today, while most US people rejoice in the news of a dropping interest rate, there is a silent fear among the few that may remember the devastation of that unforgiving time in history.

Since December of 2007 the core rate of inflation in America dropped less than one percent as compared to the Great Depression where the core interest rates dropped yearly as high as 10 percent. The Federal admits that while this is a good sign of a recovering economy, they still need to be extraordinarily mindful of and keep a close watch for the signs of deflation. However, because some of the steps taken to battle the current credit crisis, particularly with the mortgage backed securities, the inflation risks today are quite different than in any of the prior recessions.

For the moment, credit interest rates are stable and should be raised a little in the future to account for moderate inflation. Recent studies have suggested that the number of Yankee households behind on debt payments is decreasing, and that a pivot point in the economy is near.

While there are no simple selections for the federal reserve to act now, with unemployment as high as 9 % and repossessions causing havoc, a plan must be in place to contain inflation when necessary.