Sep 05, 2008
If you’ve been feeling pain at the pump and in your wallet, I’m sorry to tell you, but it’s not going away any time soon.
Not to be a bearer of bad news, but don’t expect this financial crisis taking place across the country to disappear quickly. In fact, the dreaded global downturn is now beginning to emerge in international markets as well, and it’s better for us as students to be prepared and manage our finances in a proper manner with these times ahead of us.
This financial crisis is now a global financial crisis, and as far as the U.S. is concerned, it wouldn’t be farfetched to say that although we’ve seen major issues, the worst is yet to come. The last few weeks have been brutal for the housing sector, worse than the two previous quarters.
According to Merrill Lynch, CEO Herbert Allison has stated in an interview on CNBC’s “Fast Money” that investors threw away shares of home funding giants Freddie Mac and Fannie May in record numbers this year. Freddie Mac and Fannie May own half of the nation’s mortgages and the government, as a form of damage control, may nationalize these two companies.
FIU students will be indirectly affected in a major way, for our state is only one of three in the country officially in an economic recession, according to Senior Economist for Wachovia Financials Mark Vitner in an article published Aug. 1 in the St. Petersburg Times. The other states are Nevada and Michigan. To make matters worse, the hurting economy is now going overseas – but what has arguably kept our country afloat is our weakening dollar.
Our dollar has allowed the U.S. economy to export to international markets that were never able to acquire American goods and commodities. The dollar was cheap while the euro and other economies were strong.
Unfortunately, this cushion is now ending and the inflation will now balloon emerging markets. Jaime Giraldo, a senior engineering major, agrees.
“It doesn’t look very good,” Giraldo said. “The one thing that we can hope for is that the government initiatives start working sooner rather than later.”
With inflation increasing, it would come as no surprise that most commodities will stay where they are in value, if not grow. And yes, this includes gasoline prices.
So if you are tired of seeing $4.99 per gallon at the pump, get used to it – but it will more than likely not go higher than $5.10 or $5.15, according to Chevron’s CEO David O’Reilly.
To international business major Julian Gastelbondo, the government hasn’t done enough, or not as much as it can for the national financial crisis.
“Dragging on the economy even more than necessary is the weak dollar. Why hasn’t this administration done more to pump up the dollar?” Gastelbondo said.
To some, such as current Citibank Latin America Account Executive and FIU alumnus Sergio Barahona, part of the problem with the economy was brought on by the people themselves who counted on non-existent capital as investment.
Now, areas hit hard like South Florida have to hang on.
“Some of these people are in economic troubles now, and this includes many of my friends at FIU,” Barahoma said. “They took the money available, used the government backing for these unstable bonds. They took on unprecedented risks by keeping these mortgages in their own portfolio instead of selling them out to the market, and basically ignored the red flags.”
Red flags can be avoided when handling personal finances during such a risky time.
Before this economic crisis is over, there has to be tens of billions of dollars in consolidation, or merging, from banks, economic institutions and mortgage lenders that were the main players in this housing crisis driving our economy.
This may even include midsize banks that we have come to trust in our communities in South Florida such as troubled Wachovia or Bank United.
Many of us are leaving the University and entering the real world during a precarious economic time. Despite the shaky atmosphere of our economy, this can work well to our advantage. If we use the proper tools and make sound financial decisions, we can adapt to these unstable times by not living beyond our means.
“Live the life you can afford,” said Natalia Camargo, a junior majoring in business. “The days of credit leniency are long gone.”