- Michael Alter
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Fed Chairman Bernanke Takes Steps to Restart the Economy
Ben Bernanke has spoken. The Fed chairman and the Federal Reserve moved recently to stimulate the economy when the policy-making committee cut the federal funds rate – the rate at which banks lend to each other – to just one percent. This represents a half percentage point cut from the previous 1.5 percent rate. By contrast, during the summer of 2007, this rate was 5.25 percent.
There is more good news. Treasury rates have stabilized. The value of the dollar and the yen are soaring. The price of oil has fallen to less than $70 a barrel. The New York Stock Exchange rose nearly 900 points in a single day, following the lead of markets ranging from Tokyo to Hong Kong to London. The inflation rate is just 4.9 percent. Unemployment is 5.7 percent – a lower proportion than was seen during previous recessions of recent decades.
And, according to NAI Global’s Capital Markets Update, the doomsayers who describe the current situation as “the worst economic situation ever” either are very young or have short memories. The seemingly endless stagflation of 1973 – 1981 was far worse; so was the collapse of the savings-and-loan industry from 1989 – 1993. The dot.com failure and September 11 wiped out more wealth when compared with the GDP.
Commercial real estate is in far better shape than the early 1990s, thanks to lower vacancy rates, higher rents and shorter construction pipelines. Delinquency rates are virtually non-existent, though that situation could easily change. Published in September of 2008, NAI Global’s report projects that recovery will occur within nine to 15 months.