USC-Col 2006-Honors Finance/Econ Grad MD

@VIC: A Radically Different Context for Value Was Going On Outside

I agree that an investor should approach anything of substantial value in this market with caution because the market is going through an entire sell-off. I believe that an increase in the money supply would be a grave mistake, considering that inflation is rampantly high. In other words, a massive increase in the money supply is going to make dollars worth substantially less. Printing money is not the answer because if we print more it'll essentially be monopoly money. I think the Fed's decision to dole out loans to company's such as AIG, to lower the discount rate to banks, and to intervene when they believe banks are going to fail are actions that are preventing the depression spoken of. They are inadvertently putting money into the money supply, such as AIG's bond collateralized loan made today. Without the global banks infusion of U.S banks and businesses with cash, without the established FDIC, and without the technology that eases communication and accessibility, we would already be in a recession. My question has always been...Is it necessarily a recession? Or is the economy just naturally correcting itself. For example, a lot of homes and mortgages were overvalued for the past few years by mortgage brokers who had their best interest at heart, and not necessarily the consumer. I just believe similiar to some economist, that the housing market is correcting itself. In other words, the housing market is just returning to what it would have been naturally had their not been an artificial price increase. Should we necessarily panic with the current recession symptoms? It just seems that the stock market is correcting itself. Similiar to the tech bubble, were we currently in an energy and financial bubble? All that is occuring now is the stock market is returning to levels it would have been at originally had the mortgages industry not done so well for a while, and had the energy stocks tripled on the backs of oil demand increase and global unrest. For the economist out there better than I, is this necessarily a recession, with leading indicators of a global stock market sell-off, or is the stock market at levels it would have been if their were no influences that inflated and overvalued a lot of stocks over the past 7 years?