Fed chair: Economy faces 'numerous difficulties'

July 15, 2008 4:11:36 PM PDT
Soaring gas prices and a tumbling stock market are just two of the factors that have created an economic hardship on millions of Americans. While the future looks very uncertain, economists are urging people to not hit the panic button just yet. Tuesday, Federal Reserve Chairman Ben Bernanke said rising prices for food and energy were also elevating the risks of inflation. The recent federal takeover of a bank also has many wondering just where their home is safe these days.

July is supposed to be about having fun, vacations, picnics and barbecues. But, this year, it is about rising gas prices, mortgage payments, plummeting individual retirement accounts and falling stock prices. This has become a summer of discontent and a jumpy July.

Millions of Americans are not enjoying the summer because they are worried about surviving financially.

"I have the same fears as everyone else: I've watched my 401K plummet. I think you're just worried about survival at this point, you know, trying to keep your ahead above water," said Jeanette Jackson, concerned citizen.

"People need to cut back, pay off debt," said Richard Boyd, concerned citizen.

Mesirow Financial chief economist Diane Swonk says she does not even look at her statements from her 401K plan. She says this is not a time to panic about your losses.

"There's a lot of stocks that are undervalued today, and many 401K's are buying low," said Swonk.

Swonk says, in the past, consumers felt it was their right to own a home. It has now become a privilege and it is more difficult to get a mortgage in today's times.

"You're going to have to be the most qualified of borrowers to get credit," said Swonk.

Swonk says it is difficult to appraise a home in this market. What's her advice to anyone facing foreclosure?

"Contact your bank. The last thing the bank wants to do is take the loss on your property. It's more expensive for them," Swonk said.

The feeling of people ABC7 talked to is that unemployment is rising and incomes are not keeping up with the cost of living.

"I got two kids in school now, and I worry about how to save for their college," said Bill Tong, concerned citizen.

"I'm hopeful that we're going to come through this ok. But it's been a scary time in the United States, having really been brought to its knees in this way," said Brian Gillen, concerned citizen.

Swonk says the important thing is to remain calm. However, she believes people will not be able to retire when they want. Most will have to work past retirement age and much longer than planned.

In Washington, Tuesday, congressional Democrats said they are working on another stimulus bill to help jumpstart the economy.


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