Tuesday, June 16, 2009



All this talk about the economy is a downer, but as depressing as it might be, you should still know the jargon so you'll understand what's going on.

Here's a short lesson for people who think a bailout involves a sinking ship . . .

#1.) BAILOUT. As you may have heard, some businesses are just "TOO BIG" to go under. Before President Bush authorized a $700 billion bailout plan in October, the last bailout went to the airlines. They got $15 BILLION in 2001 after the 9/11 attacks crippled the industry.

#2.) CONSUMER CONFIDENCE. It's a gauge of how good the average consumer feels about the economy. The monthly Consumer Confidence Index is watched closely by investors, and in October of last year, it hit an all-time low.

#3.) DEFLATION. It's a general decline in prices. That might sound like a good thing, but it has major consequences. When prices fall, consumers actually spend LESS, which results in more unemployment. And deflation could be followed by massive INFLATION . . .

-. . . which means a rise in the general level of prices. And when that happens, each of your dollars buys fewer goods and services. In other words, your money is now worth LESS.

#4.) STIMULUS. A stimulus could be a tax rebate, a boost in unemployment benefits, or increased government spending on public projects, which creates jobs. The most-recent stimulus was in May of last year when payments of $600 were sent out to qualified taxpayers.

#5.) RECESSION. It's a significant decline in economic activity that lasts more than a few months. On average, recessions last around 14 months, but according to the National Bureau of Economic Research, the United States has been in recession since December of 2007.

#6.) DEPRESSION. It's a prolonged recession that includes extremely high unemployment, falling wages, and the general collapse of the economy. Things might feel bad now, but during America's last depression in the 1930s, unemployment hit 25 PERCENT. (RealSimple.com)


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