Well, it looks like the fed is going to take more emergency action with a .75 to 1 percent cut in the federal funds rate. What does this mean? This drastic cut signals that the downturn is out of control, and they are trying desperately to rein it in. This also means that we can expect it to last longer than experts were previously predicting.

Events over the past week have cast doubt on one of Wall Street’s cherished hopes: that the economic downturn lasts only until the summer before rebounding. – marketwatch article

The current Credit crunch is effecting the entire market, and uncertainty is everywhere. The fed is trying to combat this, but it may be beyond their control because of the nature of the new instruments being traded.

Friday, the Fed said it “is monitoring market developments closely and will continue to provide liquidity as necessary to promote the orderly functioning of the financial system.

If the fed does get this under control, have they gone too far to fast? could there be a whiplash effect when the economy turns around, and further send us down deeper?
The fall dollar also has large consequences for the average person, their paycheck is getting smaller every day. Goods they are used to purchasing such as gas, heating oil, and wheat are skyrocketing. Scary times, for sure.

One of my SHTF senarios, infact the one that I feel is most probable is a serious economic decline. This is something that we are currently in the process of going through, and analysts where it will end.

According to a New York Times Article:

On Friday, the Commerce Department’s consumer spending figures supported TrimTabs’ view of a consumer slowdown. It said consumer purchases rose 0.4 percent in January, barely above the inflation rate of 0.3 percent. The data seemed to show that the only money being spent was going to cover increased living expenses. And if you’ve bought groceries lately, these costs also seem far higher than the government posits.

Another worrisome sign is that on “January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure.” (article here) Are they simply updating their policies, or are they aware of something that is coming, and don’t want to panic the masses?

The combination of the signs that one can find everywhere, like in the housing market, all point towards an extended downturn in my humble estimation. I’d much rather look at this with a glass half full perspective, but I’m a realist, and can’t continue to fool myself.

Pull those seatbelts tight, I think we are in for a ride!