Economic Plan B

Listen to this 'Talk of the Nation' topic

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Here's hoping the dollar rose doesn't wither. Source: distinguish hide caption

itoggle caption Source: distinguish

There's been a lot of bad news about the economy recently — inflation is up, the housing market is a mess, gas prices are high, unemployment is growing, the dollar is weak, and, not surprisingly, consumer confidence numbers are low. There's talk among some economists of a possible recession, and now the word "stagflation" is circulating. Amid all the questions and concerns, people are reconsidering their options and restructuring their game plans. I've heard about all sorts of tactics people are using.... Some parents are taking their children out of private schools and putting them in public ones. Others are selling their homes, cars, or stocks. And a few are even dipping into their 401Ks. In the wake of our current economic state, are you looking at your assets differently, or altering your medium-to-long-range plans? And what are your questions about stagflation?

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Any chance congress will repeal NAFTA?

Sent by S | 2:17 PM | 2-28-2008

1) Replace the president;
2) stop talking about recession and thus stop feeding the fear and;
3) widen our 5 year memory span as consumers and realize that "recessions" happen almost every decade. We are late.

As great as our market is that is how bad our market will be. Perhaps inflation should level off?

How about stopping the war. Make those owe up to starting this war under false pretences and be persecuted for it accordingly. Apologize (with monetary compensation) to the world. All that money can then be re-routed.

But, first and foremost, STOP TALKING ABOUT! Our littled minds run on media and fear.

Fear will keep people's money in their wallets and THAT is not what we need.

Say, tomorrow, you go on air say "Wow, the stocks are up, real estate has leveled, interest rates are really good right now. People will spend. And spend a lot. Thus, halting this recession.

Sent by James | 2:23 PM | 2-28-2008

In my family, we have been hammered by student loans. We were naive enough to have consolidated back in the 1990s, and during the 2001 recession, the consolidation status barred us from refinancing -- i.e. consolidating again, to take advantage of better rates. We are in our 50s, household income under $58K, and student loans at $130K. One defaulted in the 90's, which blew my credit, and so we have only one credit to live off. It is horrid! We have vowed not to put our children through this. The road to higher education ought not to put us in the role of Sisyphus.

Sent by Pat Spencer | 2:24 PM | 2-28-2008

What will it take to get the Dollar value stronger?

Sent by Tanja | 2:28 PM | 2-28-2008

Why is not paying interest every month a bad thing for the economy?

I keep hearing economist say that that if people pay off debt with their tax rebate, that this won't be good for economy.

That implies that paying interest on debt is helpful to keeping the US economy going. I would like to understand why this is true. It seems to me that if you have no debt and pay no interest, you will be able to spend more of your income, and also save money at the same time.

Where have I gone wrong in my reasoning?

Sent by michael pettengill | 2:29 PM | 2-28-2008

i keep hearing we should keep cash reserves on hand, and be careful about investing in anything.. Now, I have only pension income plus some cash savings. in savings..But the dollar is constantly sinking.. Should i put the cash in eutos, or some other currency than dollars for inflation-proofing; or are there safe investments other than my savngs account, which is now losing value thanks to inflation?

Sent by clay | 2:29 PM | 2-28-2008

I don't get it! There were many many economists and other people who could see this coming years ago. The conservative's approach to economics is simply disastrous. Enormous national debt, enormous trade defecits, non enforcement of financial regulations...

I sold both my condos 2 years ago and the day after the conservatives got elected in 2004, I converted my entire portfolio to gold, gold stocks, and ETF's. I'm now taking profits and rotating into inflation bonds and I buy oil on dips. These policies continue to be a disaster, and the worst is yet to come.

Sent by Paul Zaffino | 2:30 PM | 2-28-2008

Stagflation is not Unusual as your guest claims. Where has he been for the last 10,000 years of human behavior?

Sent by J Warner | 2:37 PM | 2-28-2008

We were looking at buying a larger house, but have decided to stay where we are. Regardless of decent interest rates and home prices falling, the way real estate taxes in Baltimore and the price of everyday necessities are skyrocketing, we're happy to stay put and save as much as we can.

Sent by d | 2:41 PM | 2-28-2008

NPR programs on the economy are moronic and steeped in denial. God help us if we ever need NPR for anything serious! Keep up the good procrastination and bloviation ....... at high wages none of the rest of the population gets! CLICK!

Sent by J Warner | 2:43 PM | 2-28-2008

Well, for us on the lower end of the economy, there is no real plan B. I work two minimum wage jobs to make ends meet, and we still have to stretch. For us there's barely a plan A. The unfortunate thing about our situation is that my fiance and I both have college degrees, just no job prospects in our field, and certainly no money to go back to school.

Sent by Erin Hewitt | 2:45 PM | 2-28-2008

In regard to loans from a 401k - are you not paying the loan back with taxed money and then being taxed again on that money when it is withdrawn?

Sent by Hugh McCabe | 4:01 PM | 2-28-2008

What hasn't been mentioned is that the National garage sale is on. Cars, motorhomes, airplanes and any toy imaginable are for sale at bargain prices. If you are in good financial shape it's a great time to be shopping...

Sent by David Burton | 4:44 PM | 2-28-2008

We don't need to change the President as mentioned above, that job has very little to do with the economy. The Fed is our financial steward.

Further, I'd like to see the president and congress get their collective noses out of the economy. There' short sighted "refunds" won't create long term financial benefits. Also, the Fed should increase the Fed Funds Rate, not keep dropping it. Governement bailouts for the risk takers (borrowers & lenders) is rewarding those who take risk and lose and harmful to the virtues of capitalism. We need an economic slowdown or recession in order to inject new capital into the economy.

People like myself, who've been pulling our own weight, should be able to get some benefit from economic downturns. If you've been saving your money and living within your means, this is the time to invest while everyone runs for the exits.

for the long term savers and investors out there, invest ratably and you'll sail through the dips of the market.

Best of luck!

Sent by Mike Garcia | 4:49 PM | 2-28-2008

tanja asks: What will it take to get the Dollar value stronger?
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the answer would be to stop flooding the world with dollars and raise the interest rates to increase the value of holding dollars. since the FR and the USG is dedicated to the exact opposite policy, and hopes to inflate the debt away, your US$ goose is cooked. The admin and the FRB are the enemy of the dollar's value.

Sent by tritumi | 10:47 PM | 2-28-2008

I was very interested in the recent comments made on NPR by Robert Samuelson, who basically dismissed the idea that we are in a state of stagflation because it hasn't been happening long enough.

But I wonder if his analysis of our economic situation was a little shallow. I think that our last brush with stagflation was much more similar to our current state than Samuelson may have realized, in that it was precipitated not by failed economic policies by the Federal Reserve, but rather because of excessively high energy costs. Oil costs skyrocketed in the 70s, leading to both inflation in the cost of producing and shipping products, and an economic downturn as people tried to protect their wallets.

The same thing is happening now. So, is it really too soon to call our current situation "stagflation?"

I would be very interested to hear some economists comment on the role of oil prices in creating the conditions for stagflation. Am I way off?

Sent by Alan Pehrson | 8:12 AM | 2-29-2008