January 29, 2023

La Ronge Northerner

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Economic recessions have a positive side

Economic recessions have a positive side

President Franklin Roosevelt said in his first inaugural address in March 1933: “So, first of all, let me affirm my firm belief that the only thing we have to fear is fear itself.”

It was the Great Depression. The unemployment rate was more than 25 percent. An estimated 12 million people are unemployed, about a quarter of the civilian workforce.

“More than 11,000 banks out of 24,000 have failed, destroying depositors’ savings,” according to to the National Archives.

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Fast forward to now, and as bad as things are – high interest ratesAnd the high inflationAnd the stock market downturn The economy didn’t collapse like it did during big disappointment.

I must say this because, as Roosevelt pointed out, fear itself can lead to actions that worsen your financial situation. While many people are in pain, there may be ways to mitigate the downside.

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Here are seven positive advantages if we are heading into a recession.

1. Home prices may finally fall to reasonable levels. Yes, mortgage rates are higher, but the upside to this is that sellers in many markets will have to lower their application prices in order for buyers to qualify for the loans.

With cheap loans disappearing, there will be fewer bidding wars to raise home prices.

Mortgage rates exceed 6 percent for the first time since 2008

2. Savings rates are going up. At least one of the brightest aspects of the Federal Reserve raising rates to fight inflation is that banks are paying people more to keep their money. My credit union has a special 20-month offer on a certificate that will pay me 3 percent annually.

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“Many potential savers may not have noticed that returns were on the rise,” said Mark Hamrick, chief economist and director of Bankrate.com’s Washington bureau.

Hamrick said make sure to shop around.

“Why leave money on the proverbial table when you can keep it in your account? The key is to make access to money a priority when an urgent development occurs.”

By the way, no, you You should never stop contributing to your retirement plan. Historically, over time, the market recovers. If you bail now, you will miss out on the refund.

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3. Bond inflation may rise even higher. The I Savings Bond Series was created as a hedge against inflation. As of the end of October, the bonds were paying 9.62 percent.

There are two components to bond yield I – constant rate and inflation rate. The flat rate, which is now zero percent, applies to the bond’s 30-year life.

6 key things to know about inflation-indexed bonds that pay 9.62%

The flat rate of newly purchased bonds and the semi-annual inflation rate are announced by the Treasury in May and November.

If inflation remains high, bonds may pay more in November.

To purchase an electronic bond, you must create an account on TreasuryDirect.gov. Individuals can purchase up to $10,000 of electronic bonds in a calendar year.

4. The dollar is king. Although a lot is in flux, if you have plans for it travelling abroad, the dollar may go much further. This week, the British pound fell to low all the time against the dollar.

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Dollar Rally Could Help Fed Fight Inflation

5. Unemployment is still relatively low. People with jobs and money can spend on luxuries like vacation.

Despite high prices and rising interest rates, millions of Americans take leisure trips.

More than half of Americans plan to travel on one or both holidays this year, even though airfares will be 43 percent higher than last year, according to HuberTravel booking app.

However, the unemployment rate rose to 3.7 percent, according to For Bureau of Labor Statistics. So, if you are worried about your job security or stagnation, just cancel your 2023 vacation plans.

Finally, cheaper travel is back

6. Your used car is worth more. If you want to upgrade to a newer car, and your car is in fairly good condition, you get more for your replacement.

Prices of used cars and trucks jumped 7.8 percent, according to Latest data From the US Bureau of Labor Statistics. Unfortunately, new car prices are up 10 percent from last year.

7. Student loan forgiveness is coming. Roosevelt used his executive power to wage war against the economic emergency sweeping the United States.

President Biden is doing something similar by forgiving student loan debt to help distressed borrowers. Biden announced a One-time forgiveness program This will eliminate up to $10,000 in federal student loan debt and up to $20,000 for Bill Grant recipients for individuals earning $125,000 or less annually or less than $250,000 for spouses.

Central Bank of Oman: The cost of the White House plan to cancel student loan debt is $ 400 billion

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As the Biden administration announced last year a A time-limited waiver to help forgive more debt under the Public Service Loan Forgiveness Program.

Act quickly to sign up for the waiver. The deadline is October. 31.

Of course, times are tough — and for some people, a lot more than others. But remember that fear will not help you make wise financial decisions.