Edwards: Recession may be just around the corner

Published 10:11 pm Wednesday, October 8, 2008

With the economy continuing to decline, one local professor said that “R” word may be a whole lot closer than he thought last week.

“I think it’s pretty clear we’re heading into a recession,” said Judson Edwards, an associate professor of economics at Troy University. “I think it’s far from just a financial crisis.”

Edwards, who spoke on the economy in a lecture at Troy Bank and Trust two weeks ago, said the situation now is a lot tougher to predict.

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“It’s hard to predict how this is going to play out,” Edwards said. “I think what we do know is it’s looking a lot more like a recession than it did a few weeks back.”

Edwards said in past economic recessions, consumer spending was stable, but this time, it’s at the forefront of the issue.

“It’s a different kind of situation to predict and hard to tell how much of it is just the financial crisis and how much is fundamental economic problems,” Edwards said.

In the stock markets, theDow Jones industrial average lost another 189 points, or 2 percent, to close at 9,258. It was the sixth straight day of losses for the Dow. The index has shed more than a third of its value, nearly 5,000 points, since its all-time high, set one year ago Thursday.

The Dow opened down more than 200 points. Within an hour, it was up almost as much. A late morning sell-off gave way to an afternoon rally, and the Dow was ahead for the day in the last half-hour of trading — then took a dive at the close.

But, even as stock markets continue to drop even after an economic bailout, Edwards said residents should still avoid panic.

In fact, Edwards said for some, it could be an opportune time to buy into the stock market.

“It’s so hard to speculate the right time to get in the market or get out,” Edwards said. “For young people, this may be a great time to get into the markets because there could be some bargains out there that could be worth more in the long run.”

But, for those on fixed income and looking at their 401 K retirement, there’s no getting around it — times are hard.

With a financial bailout now underway, Edwards said residents should not be weary of having to bear the government’s debt.

“People don’t like that the government is getting involved in a financial crisis or the mortgage market, but this isn’t a new thing,” Edwards said. “Another part people are feeling in the media is that somehow they’re taking taxpayer dollars and giving it back to big business.

“They’re selling government securities (to pay off the bailout).”

For a better understanding of some of the economy’s fundamentals, the financial workshop can be viewed online at www.business.troy.edu.

The Associated Press contributed to this report.