Crunch is going to SQUEEEEZE you harder

I see this week that the US Federal Reserve has said that the prospects for the economy in the USA have worsened for 2008.

The Federal Reserve Bank has reduced their rates three times since mid 2007 and they are now at the lowest level in two years.

During his speech on Thursday the Fed announced that they may take substantive additional action to try and support growth and also to reduce the “downside risks".

US stocks have responded positively as the Dow Jones industrial average climbed by almost 1% and the NASDAQ rose by just over half of a percent.

Mr Bernanke said that the facts he had suggested "that the baseline for real activity in 2008 has worsened and the downside risks to growth have become more pronounced".

The US is facing a major challenge in dealing with both a diminishing housing market and rising inflation as oil and food prices rise.

Mr Bernanke also explained that the issues with the slowing housing market and in particular the sub-prime mortgage crisis, was having on the wider economy.

Banks must write off billions of dollars of investments linked yet again to sub-prime debt and went on to say that the financial situation "remains fragile, and many markets remain impaired", explaining that saying that major banks are still exposed to the credit crunch.

This week Merrill Lynch said the US had already entered a recession and even Goldman Sachs suggested it is heading in that direction.

Anyone who thinks the worst is past could be in for a shock and it’s imperative to shape up before the credit crunch squeezes you.