Congress Attempts to Stimulate the Economy

Earlier in the year the US government sent out ‘stimulus’

checks to every taxpayer. The idea behind the move was that if consumers had extra funds available they would purchase goods and services. Unfortunately the move did little to stimulate the US economy. The US has lost approximately 170,000 jobs so far this year and the future looks anything but bright. US auto makers are in serious trouble and many plants are scheduled to close with job losses in the thousands. Consumers are uneasy about the future and instead of spending their stimulus checks as intended most chose to save it for the future or use the money to pay bills.

First Stimulus Package Ineffective

Despite the ineffectiveness of the stimulus checks Ben Bernanke the chairman of the Federal Reserve and congressional Democrats are proposing another round of stimulus checks. Earlier in the year congress sent out about $100 billion dollars in stimulus checks. Since then consumer confidence has evaporated and retail sales have fallen significantly in the last three months. Bernanke feels that the earlier $700 billion dollar bailout is starting to work but the effects will take months to be felt. Bernanke told congress that there is a likelihood of an extended economic slowdown and a second round of stimulus checks would help to get the consumer economy back on track. Fears of a US recession has fx traders around the globe uneasy and many predict a decline in the US dollar.

An Attempt to Stem Rising Unemployment

The checks are also meant to address increasing unemployment. When sales are down employers are forced to trim jobs which causes a ripple effect of rising unemployment. House speaker Nancy Pelosi (D-Calif) stated, “Chairman Bernanke made it clear that a new economic recovery package is critical to boost our weakening economy, Chairman Bernanke added his voice to the chorus of economists, experts and policymakers who insist that America needs a job-creating recovery package to get our economy back on track and to restore consumer and investor confidence.” Pelosi argued that the stimulus package was necessary to avoid a recession. Fears of a recession have prompted many fx traders to buy dollars to avoid risk in a volatile market situation.

Stagnant Job Growth

Job growth in the US is stagnant and it would take the addition of 125,000 jobs per month just to keep unemployment from rising. The stimulus may also provide a refinance provision to allow homeowners to refinance mortgages and help alleviate the credit crunch. Typically congressional sessions after an election are considered ‘lame duck’

but due to the severe economic crisis the US faces it is a certainty that congress will stay in session and pass the stimulus bill before the Christmas holidays.

Profit Taking On Forex Markets

Since the US dollar is the world’

s reserve currency any political and financial moves made by the US are felt globally. A strong US dollar is essential to a stable world economy. In Forex markets the dollar is still strong but fears of a recession are causing markets to be less than stable. Despite the abysmal performance of world stock markets, Forex markets and fx traders still offer opportunities for profit taking.