A good news packed within a bad one

The US economy is set to emerge from recession in the second half of this year as consumer spending and the housing sector recover, but 2008 turned financial heroes to zeroes unemployment will rise well into 2010, according to a survey.

The Blue Chip Economic Indicators survey of private economists released showed that 86 percent of respondents believed that the economic downturn would be declared to have ended in the second half.

"Real GDP contracted very sharply during the first quarter of this year and will continue to shrink, albeit more slowly in the second quarter before turning very modestly higher in the third and fourth quarters," the survey said.

Much of the anticipated turnaround in the economy, now in its 16th month of recession, would be driven by some improvement in consumer spending, housing, business inventories and exports. Yet, above-trend growth was not expected until the second half of 2010.

Gross domestic product plunged at a 6.3 percent annualized rate in the fourth quarter of 2008, the steepest quarterly decline since 1982. The economic downturn will next month become the longest U.S. recession since the Great Depression.

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Can debt be a solution to the crdeit crisis?

A nagging question which is haunting the government efforts to revive a dormant financial system especially in US: Can a credit crisis which was the cause of economy slowdown be solved with more debt? The economists have firmly answered a qualified NO to the situation. According to them, it will further worsen the situation and add to the deepening depression, nothing more than this. Then what should be the next move by the Govt. to recover the situation. The government should do its best to restore bank lending to prevent an even worse economic outcome.

U.S. Treasury Secretary Timothy Geithner was only the latest to proclaim what has now become an official mantra. Without credit, which he and others call the "lifeblood" of the economy, you can kiss recovery hopes goodbye. Basically the US economic system is critically dependent on the free flow of credit.

A huge part of the Treasury's economic rescue plan is based on reviving securitization. Experts widely agree that the public sector must enlarge its role during a time of crisis to ensure that the underlying momentum of the economy does not screech to an abrupt halt."In truth, not all economies run on credit. In a legitimate economy, it is not credit that fuels spending and investment, but simply income and savings," said Peter Schiff, president of Euro Pacific Capital in Darien, Connecticut. Prudent lending is a good thing. If creditors have cut back, it is because the risks associated with an environment of turbulence dictate that they should.

Count the number of US banks collapsed this year

With slumping home prices and the worsening economic crisis taking an increasing toll on financial institutions, as many as 22 American banks have collapsed so far this year. 

Collapse of such a large number of US banks, despite a $700-billion bailout package, reflects the deep turmoil of the US economy.

From 2003 to 2007, only 10 US banks were reported to have collapsed. In 2008, the figure has already touched 22, with still more than a month to go…

1. Downey Savings and Loan
   
2. PFF Bank and Trust
   
3. Security Pacific Bank
   
4. Franklin Bank SSB
   
5. Community Bank
   
6. Freedom Bank
   
7. Silver State Bank
   
8. Columbian Bank and Trust
   
9. First Priority Bank
   
10. First National Bank
    
11. ANB Financial
    
12. IndyMac Bank
    
13. Washington Mutual
    
14. Alpha Bank and Trust
    
15. Meridian Bank
    
16. Main Street Bank
    
17. Ameribank
    
18. Integrity Bank
    
19. First Integrity Bank
    
20. First Heritage Bank
    
21. Hume Bank
    
22. Douglass National Bank