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Carnival of Personal Finance 223: Financial meltdown, a year later
Here is an introduction from Editor-in-Chief Daniel P. Ray:
A year ago this month the financial industry nearly collapsed.
AIG. BofA. Citi. Lehman Bros. Goldman Sachs.
All familiar financial pillars whose foundations crumbled. Some fell, others were propped up with bailout money and unprecedented, McGuyver-like reaction from the Fed ("Hm. I have some duct tape, and this toxic asset sponge and this printing press. Here I come to your rescue, capital market!"). Many say it saved us from Depression, the sequel, while those who drink their capitalism neat rail against the Fed actions as unwanted mixers, diabolical socialist plots or worse.
A year has passed since. Though unemployment remains stubbornly high and 94 banks have failed so far this year, Fed Chairman Ben Bernanke was hopeful enough to say last week the recession is "most likely" over. Wall Street and the national economic engine is still turning, though still frequently misfiring and spitting sand out the tailpipe.
But back here on Main Street, there's no jubilation. No one's coming out of the bomb shelters blinking and smiling as green shoots reach toward a bright sun. Even if the forecast has improved, it's still gloomy out here.
Fortunately, a lot of smart personal finance bloggers have stepped up to offer some good advice to help get us from here to that sunny day. Here are the best and most useful pieces of advice and most-compelling personal stories from the bloggers, assembled for this, the 223rd edition of the Carnival of Personal Finance.
If you couldn't tell, the theme is "Financial meltdown, a year later."
"I want everybody here to hear my words. We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences and expect that next time, American taxpayers will be there to break their fall." -- President Obama on Sept. 14, 2009
Ohhh, how much we have learned in the last year. But will things really change in the long run? President Obama seems to think so. Will we consumers forget what we learned as soon as the economy turns rosy again? Let's hope not. I hope this economic crisis will continue to remind us all to not take our jobs for granted, to not spend like there's no tomorrow and to not live entirely on credit.
Here are some of our favorite posts submitted to this edition of the carnival:
"I've been on Wall Street for many years, and I've never seen a weekend like this one. We are unwinding what has been years of silliness in the financial markets, and the silliness is being vaporized as we speak, unfortunately with the stock price of a number of companies involved in it." -- Michael Holland, chairman and founder of the New York-based investment firm Holland & Co., on Sept. 15, 2008
One year and one train wreck later, the American economy is doing much better, but we are all still a little wary. Can we really trust those guys in black suits? Is it really safe to invest? Will I lose everything? These posts below offer insight into investing -- even in hard times.
Frugality and saving
"If money isn't loosened up, this sucker could go down." -- President George W. Bush on the bailout package on Sept. 25, 2008
This economy has been devastating for millions of Americans and has forced many of us to tighten our belts. Some of us have lost jobs and even lost homes. Many people who were previously doing just fine found themselves cutting corners and paying bills late. Being frugal actually became hip, with new lingo such as "frugalista" surfacing. These posts offer tips and advice on cutting costs, even when you think you have already trimmed all the fat.
Debt and credit
"...[T]he economy is weaker than it appears. Using GDP growth and unemployment, the U.S. economy is healthy. But the level of debt (both consumer and government), the real estate 'boom' that seems based on leverage and loose credit ... and the poor employment situation (especially the low level of participation) indicate an unhealthy economy. I believe this recovery is being built on a marshland of debt." -- Financial blogger Calculated Risk on Feb. 20, 2005
Debt and credit: the two key terms of the collapse. Too much of our economy was founded on wealth that didn't exist. While it was painful when the bottom fell out, the silver lining is that many of us are more cautious about spending way more than we have. Let's just hope that the government can follow suit. Read on to learn more about how to use credit wisely.
"... [I]n this most volatile and dangerous macroeconomic, financial, and geopolitical situation, the risk of a U.S. recession turning into a systematic financial meltdown cannot be ruled out."
-- Economist Nouriel Roubini on Aug. 7, 2006
Roubini, once labeled "Dr. Doom" for his lonely pre-recession pessimism, was right. Too many shaky elements led to one nasty collapse. If you don't watch your finances closely, you may find yourself in the same place. Maybe you can pay all your bills, but the minute you lose your job, you don't have any savings to keep you going. Maybe you contribute to your 401(k), but you can't pay your credit card's minimum payment. It takes time to find the right balance, and the posts below will help you gain additional money management skills.
"... [C]apitalism without financial failure is not capitalism at all, but a kind of socialism for the rich." -- James Grant, of Grant's Interest Rate Observer (in reference to the subprime crisis) on Aug. 26, 2007
The economic crisis has been tragic, but it seems to have left most people with a different perspective about money. Maybe we shouldn't be living in such excess. Maybe our investments shouldn't be so based on speculation. Maybe we shouldn't buy a house that has a mortgage we can barely afford. Read on to learn about some of the other lessons learned from the recession, in addition to information about how the health care reform may affect us.
Even several years before the crisis, many economists were warning of impending doom. These loners were ignored, and we all know what happened next. There were several great entries that did not fit into the other categories, but rather than ignoring them, we happily feature them below.
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