Stock markets fall, American banks are looking for a way-out. Let’s make a conjecture – what can happen in the nearest future? CreditCardFlyers.com financial writers expect lower rates but higher commissions. The US citizens are recommended to apply for a credit card right now.

The World Stock Markets
This week started from fall of the world stock markets. The US Mortgage crisis threatens with recession of the world’s biggest economy and worries investors both in Asia and in Europe.

  • The fall began with Asian markets. The fund trading in Japan ended in index drop of Nikkei 225 by 3.86%, the minimum for the last 2 years.
  • The major British index FTSE 100 was down by 5.5%.
  • In Paris and Frankfurt the indices went down by almost 7%.
  • The indices also fell in China, India, Singapore, Taiwan, and the Philippines.
  • The same situation is observed in Russia. The Russian Trading System index missed 7.38%, having fallen lower than 2000 points. The Moscow Central Stock Exchange index lost

7.47%. Russia’s most powerful corporations like Lukoil, Norilsk Nikel, and others became 0.4% cheaper.

Bush’s Plan for Overcoming the Instability of the US Economy
President George W. Bush proposed to try to reduce the tax burden and release the economy. In the meantime, the USA economy is what really worries overseas investors. Thus the nation’s building volume in December 2007 declined by 14% – to 1,006 mln. buildings, that is the worst result since 1991.
In this connection many economists apprehend recession of the US economy. It can directly influence the Asian companies profiting on the US market, thus causing lack of confidence from the side of Asian investors.
What adds to difficulties, the consumer activity declined by 0.4% as against the previous year. This fall may spring from the dropping demand for constructional materials. The small demand, in its turn, is the result of the mortgage crisis. Many institutions lose on bad mortgage loans that were initially given to people with bad credit history (sub-prime lending). Due to changed refinance rate, credit payments made the banks sell property of borrowers. Eventually, the prices for real estate went down.
All in all, lower prices for fixed property and the growing unemployment may impact the economy growth that has lasted for 6 years.

Citigroup. Not the One Having Problems
The biggest US banks Citigroup, Merrill Lynch and Bank of America declared debt write-off of about 35 billion dollars. This depressing indicator of the economic leaders has negative impact on financial markets. Particularly, the adverse impact was caused by Citigroup reports and the unexpected fall of retail sales in the USA in December.
Uncle Sam’s memory is still holding the details of last year’s subprime-mortgage crisis. The losses have exhausted the banks’ capitals and now are making them find additional sources. Such source of income as credit cards is also in danger because of the economy slowdown.
At the moment the mass delay in paying off loans is increasing. The US financier’s main concerns are:
• Banks’ lack of means. American banks are in strong need of funds. Possible sources are foreign investments, stock, or high-technologies. As was said, the stock market fall holds back this possibility. Other sources are money inflow from loans. However, the population is not ready to take new loans. There remains the variant of using deposits, but Americans who are in debt and cannot take loans, naturally cannot make deposits.
• Increasing interest rates. Against the backdrop of losses the US banks have toughen their lending terms. This means companies and individuals have difficulties with taking loans. Meanwhile, consumer spendings make up the two-thirds of American economy. A smaller volume of loans given will reduce consumer spending and provoke recession of economy.

Possible Ways Out

As banks and other financial institutions are the key factor in the economic drop, they may start lending to businesses and consumers and recover the economy. To implement this, the Federal Reserve will lower the Fed Rate, supposedly, from 4.25 (as of change was December 11, 2007) to 3.75. However, there is an alternative of reducing the Fed Rate by 0.75%.
The mortgage rates will be cut down during the next 5 years. As for corporations, it was decided to include business tax benefits and lower households taxes into the budget of 2008.
As regards to average credit borrowers, we can expect lower rates but higher commissions. There surely will be a period when the Federal Rate will let the US citizens take more loans. Common Americans are recommended to use the opportunity. It is reasonable to apply for a credit card just in the period when the APR is low and the fees are adequate. If your credit is higher than the average, consider applying right now.

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2 Responses to “While the World Stock Markets Fall, It’s High Time – Take Credit”

  1. Cdan said:

    I don’t understand all that panic – I guess that many people will make profit from the decrease of Fed Rate. The mortgages rates will be lower, I have a good credit – so why worry?

  2. Burger_King said:

    Hah, banks used to get a lot of our money! No wonder that they panic now as their profit is going down. I don’t believe that they will make the rates lower – they want to earn as much money as they did before, right? So I guess APRs will increase.




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