As uncertainty hangs in a cloud over Wall Street, investors, analysts and consumers are wondering what is in store for the nation's financial future.
The Business Forecasting Center in the Eberhardt School of Business at University of the Pacific in Stockton, has been tracking trends and developments in the economy since 2004.
The director of the Forecasting Center, Jeff Michael, PhD., took a few moments to talk with News-Sentinel Business Editor Marc Lutz about the current economic climate in the U.S.
Q: Is this the most dramatic reordering of Wall Street since the Great Depression?
A: I think that's true without a doubt. We're seeing the fall of some of the large investment banks. (Monday) we (saw) the two remaining large investment banks changing over to commercial banks.
We're certainly on the cusp of some large changes in the financial sector. We don't know what forms those will take, but we know they're going to be significant.
Q: If a person can scrape together the down payment, is it a good time to buy real estate?
A: I think it is, if you're planning to stay in it for a while. Real estate prices have finally come down to a level that make sense with the local income base. That doesn't mean prices couldn't fall a little bit more.
Q: Should people buy gold?
A: I know people are interested in gold (and) are questioning the value of the dollar, but I wouldn't recommend it as a long-term investment.
Q: Have we hit the bottom of the real estate market yet in Lodi? How do we know when things will turn up?
A: If someone is waiting for prices to bounce way back up to the level we have seen in recent years, I wouldn't wait for a 20 percent appreciation. It's not likely to happen.
Q: Why shouldn't the federal government help people make their mortgage payments instead of bailing out big Wall Street firms?
A: Again, so many details of this are murky. As the government acquires these mortgage assets, it could be that homeowners could be afforded a way to stay in their homes.
Q: Are credit unions safer than banks in this type of economic environment?
A: I don't think so. In both cases your deposits are federally insured up to the limit.
Q: How much will this federal bailout cost for regular taxpayers?
A: Right now there is no way to know. It depends on a few things. It depends on how the treasury decides to price these assets and what they'll pay for them. And it depends on how the market develops as we go forward. One possibility is that it could cost people nothing, but then it could cost people the $750 billion that was paid up front.
Q: Should we have just let these major banks fail? Why can't we just let the free market correct itself?
A: That's something of a philosophical question. The concern is the continued wave of panic and a deepening recession in the economy. If we go into a deep, multi-level crisis, taxpayers could lose a lot more.
Bailing out bad business practices isn't good for the economy in the long run either.