So Goldman Sachs think their so smart. Pay attention to this because these guys have a pertty good track record for their accuracy. They are stating that unemployment will be at 6.5% by 2009 and that the Fed will lower their rates from the current 4.25% dowen to 2.5%.
When I first read this this morning I kind of thoguht "Yeah right!" But then when I really began to ponder this, I remebered these guys are pretty good. From where we sit right now, this sounds ludicrous. But when you put it into perspective, it could really happen.
Think about it for a minute, what would happen if the Fed did lower rates all the way down to 2.5%? The same thing that happened last time they did it! The refi boom would be storming back into town baby! But then we have an unemployment prediction to go along with that and we need to put that into persepctive as well. Looking back at the first month in office for Bush, the unemployment rate that month was 5.7%. The highest it's been since he took office was 6.3 in June 2003. The lowest it's been since Bush took office was 4.4 in December 2006 and March 2007. So up until now it's actually been somewhat stable. So for it to go from 5% today, all the way up to 6.5% some things are going to have to happen that would force the Fed to lower the rate to 2.5%. 9/11 was the incident that forced the Fed to begin lowering rates, but that's not I'm implying here. I'm of the thought more along the lines of something economically, perhaps a recession as everyone in the media is calling for.
Let me give you something else to watch: increase in the hourly wage. This is highly inflationary and can lead to economic pressures for employers. As wages go up, employers can't afford to hire more people. In fact, earlier this week we had a report about an increase in wages nationally. The belief that day was that employers were paying thier current employees more, so that they didn't have to hire more people. Here in California where the minimum hourly wage went up t $8 an hour, this can have an effect on our states economy. But then again, if you like socialism, this is the place to be. This state will give an inmate on death row a liver before they will allow a citizen to have it. I keep asking ymself why I still live here, and the answer is always the same: I can make more money here, before I run away to a state where I can keep my fortune. I'm not convinved I'm the brains in the family okay.
Just a thought for the day.
Love ya
Ed
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