Can the federal Aid save the financial market?

  • Federal Aids Vs Recession fears & corporate profits

The Federal Reserve of the United States of America, together with the governments of the other countries has pumped in the required amounts of money to hoist the financial flags but the launching of bank rescues was not fully effective in eliminating the fears of recession that are still driving down the commodities and the stocks in the U.S. It’s the poor profits generated by the corporate world that is held responsible for not allowing the faith to get restored once again.

The latest program of Washington for helping the financial markets amounts to $540 billion that has been channelized to set up five special purpose vehicles. This shall enable buying certificates of deposits as well as commercial papers from the mutual funds suffering currently because of investors backing out lately.

Henry Paulson (Treasury Secretary) is supporting the idea of the fiscal stimulus program, which inevitably is a proof of the Bush administration accepting the government’s responsibility to bring the economy up. But shall it cover the trouble spots such as Pakistan, Ukraine and Iceland? Since Japan and France has extended the help to banks; now the intervention of IMF is required to set the balance.

Inter-bank costs for lending have dropped again; this is a tentative signal of a renewed confidence in the financial system. With the Treasury buying off all the mortgage loans, there are high chances of the credits crossing the freezing points. Question remains, in which direction and shall it be enough to buffer the difficult months before the conditions improve? Even a resilient economy is not enough to answer that.

  • Role of the federal reserve banks around the world

Speaking on a global basis, the promise is of $3.3 trillion. This shall guarantee the bank deposits and inter-bank lending to surface once more. Lawrence J. White (Professor, Economics, Stern School of Business, New York University) commented on the issue – “With honesty on bank balance sheets and enough government bucks, private investors will come back in. But Government investment should be structured to ensure the government earns a profit if and when the banks’ shares rise.”

Whether or not it shall transform into a reality is debatable, for U.S. stocks though experienced a brief rise, slid back with The Dow Jones Industrial Average closing down 2.5 percent while NASDAQ Composite Index went down by 4 percent more. And the stronger dollar resulted in sending the gold and oil prices about 4 percent lower than the previous counts, while Japanese stocks closed 3.3 percent higher and European shares at around 0.8 percent. Canadian banks have now lowered their rates on prime lending for lowering the funding costs, providing customers lowered rates on an array of loans.

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Survive your endless Debt problems

Anyone with his common sense intact shall normally stay away from incurring a debt. But situations often drive the majority to fall for some loan program; worse, when you borrow little amounts and notice suddenly one day the accumulated volume. Still we forget one teaching of life: One must learn to live on what he earns.

  • How to manage your debts?

Firstly, you must get rid of the habit of making excuses. The credit card companies are not to blame but your own impulsiveness. Unless you get that straight, no debt management program is going to help. And of course, don’t lie to yourself regarding your spending habits if you want to set up a more realistic budget comprising:

  • Amounts payable to the credit card account exceeding the minimum. Over long run, this shall save you a great deal which would otherwise go for paying the interests.

  • An amount to push into an emergency fund weekly, which could be a savings account. It shall help you to deal with unexpected expenses; if you have to borrow money, borrow from yourself and pay back the withdrawn amount immediately after you receive some money.

  • List all of the debts you’ve incurred. The list should feature the debt with the highest interest rate at the top and the lowest at the bottom, with everything else in between. This shall help you to determine which ones are making you the pauper. Pay as much as you can the highest-rate balances while for the lower rates pay the minimum balances. It shall help you clear them off without making you feel the pressure. Also, use any extra cash to pay down existing debts.

While the above points can allay your agonies up to a great deal, to speed up the debt clearing process, you must also develop a habit to spend less. The best place to develop the habit is to avoid eating outside whenever possible, spend in cash and put a stop to premium cable-TV channels. If nothing becomes possible, then the only option remains is a debt consolidation program.

  • A complete debt management program

There are debt management programs but what we don’t understand is a home-equity loan is not to be used for paying off a credit card debt. Most of us create this mistake since the interest rates are lower than what the credit cards charge, but later on, bigger troubles may loom when legality comes into question. And of course, a complete debt management program won’t also ask you to cash your 401(k).

Instead, it shall ask you to consolidate your debts, make your credit cards retire but one (for dire emergencies) and hold on to your patience to earn big dividends in the near future.

  • Debt consolidation methods

There are lots of debt consolidation methods to suit your needs, but on a broader sense, you may divide them into secured (require a collateral against the money lent; hence attracts lower interests) and unsecured (doesn’t require the collateral; hence, interest rates are more). However, the methods, apart from the above points, are pretty similar.

It’s only a debt management company that shall provide you this service in exchange of a payment of a cumulative amount every month to the creditors. The debt management company shall then distribute this amount accordingly. However, for the commercial setups, the debt management company pays off various creditors first and then breaks up the total amount in equal parts over a certain tenure. The payment terms remain based on customized agreements. A relief from the burden of high interest rates, for sure.