Blog 2: Federal Reserve says record-low interest rates needed

The head of the federal reserve Ben Bernanke said in a testimony before the congress that rates of interest will remain low for an extend period. Although the American economy is growing the unemployment remains high.

The Fed has begun undoing some measures taken during the financial crisis. They increased the discount rate to 0.75% from 0.50%. This is the rate which banks must pay to get an emergency loan. The reason for doing it is that the economy is recovering and the sustainable improvements on the financial market.

The most economists do not expect that the Fed will raise his rates for some months. Its fund rate is since December 2008 between zero and 0.25%. This is historically low and the raise from the discount rate has posed some questions about the position of the Fed.

According to my opinion I think that it is good that the Fed gently undoing the measures taken during the financial crisis. In times of crisis you have to take extremely measures but after it you must undo these that the market can recover it self. The fact that the Fed didn’t raise the fund rate may be a wrong decision because when you assure the people that the interest remains low. This can give them the chance to buy things later instead of buying them now.

There is also the budgetary deficit of US government which will rise to a record of $1.56tn according to US president Barack Obama. I understand that the financial crises request never seen measures but the US government stays to invest money in the economy. I think that the market must recover itself and all the bad companies must disappear from the market by going bankrupt. Nobody is investing in a company that is nearby a bankrupt.

Source: http://news.bbc.co.uk/2/hi/business/8534848.stm

Biggest fall since the Second World War

I found on the internet an article about the impact of the financial crisis on the Belgium economy.

Last Year Belgium was also hit by the global recession due to the financial crisis of 2008. The Belgium economy shrank as much as 3 percent. This is the biggest fall since the Second World War.

At the end of 2008 de Belgium economy even shrank as much as 4 percent but in the first half of 2009 there was a slight growth which continued to rise in the second half 2009. This was the result of investment of the Belgium Government, they increased their investment with 7, 4 percent.

The investments of the companies and the consumers decrease as much as 6.5 percent for the companies and 2.8 percent for the consumers. The Governor of the Belgian National Bank, Guy Quaden expects will recover and will know a growth between 1 and 1.5 percent during 2010.

I think that this shows that the Belgium Government had taken good measures to restrict the impact of the financial crisis on the Belgium economy although the budgetary deficit has grown again. The Government has to search a way of resolving the deficit without reducing the chances of the companies to recover of the crisis. If we compare Belgium to the other members of the European Union Belgium not even the worst member of the Union. Greece has many problems to reduce their budgetary deficit.
Many consumers have already gain again there loses on stock exchange in the first months of 2009 and will increase their investments on stock exchange. This shows that also the consumers have gain again their trust in the companies.
The financial crisis maybe not over yet but the worst part is probably past.

Source: http://www.deredactie.be/cm/vrtnieuws.english/news/100217_economy_shrinks