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Pray tell, what is the current situation?

Currently we have a situation where the financial market is dropping sharply, due in large part to bad loans. The recent bank failures have highlighted this. There is a very real possibility that credit could shrink. While yes, this is only possible, it is something to be concerned about. Our economy is already weak and while not actually in a recession it is close.

Another aspect to consider with the current financial situation is that the market is in large part psychologically driven. Uncertainty in the markets is pushing it down even further. If the stock market continues to decline as it has, it is possible that the economy could be pushed further down.

You need to seriously educate yourself on this crisis. This is the worst financial crisis the USA has experienced since the Great Depression.

Please don’t let that reference lose you. My point is, the crisis is extremely serious and urgent. If people lose confidence in the market, activity stops and there is no jump starting it.

Major institutions have lost confidence in the markets and are hoarding cash rather than lending it out. Money to the economy is like blood in the body. When the heart stops pumping blood, the body dies. When the markets stop pumping money, the economy dies. As it is much easier to keep a man alive than to restart his heart with a defibrilator, it is much easier to keep the economy alive than restart the process of getting people to lend, borrow, buy and invest.

When people lose confidence in the market, they cause bank runs, drain money from the banks, causing bankruptcies.

The logjam in lending is occuring among the huge lending institutions, so you are not yet seeing it in your daily life. If that happens, if you see stark evidence of this in your daily life, it is because the markets are already dead and the money stoppage is trickling down. By that time it is too late to do anything, so you really don’t want to see 1st hand evidence of this in your life.

Credit is very hard to come by. Here are 3 articles describing how hard it has become for companies and people with good credit to get loans:

http://www.cnbc.com/id/26904496

http://money.cnn.com/2008/09/25/news/companies/banks_lending/index.htm?postversion=2008092515

You may scoff at the urgency to get institutions to lend again, but it is a very real problem. In the meantime, businesses that need operating capital to pay creditors and can’t get that capital are having to declare bankruptcy.

This urgency goes way beyond your ability to get a new credit card.

This crisis is for real. Please read more about it.