Is it me or does it seem like many people don't realize how truly bad our economy is at the moment? Yesterday the Dow Jones Industrial Average dropped below 7,000 for the first time since 1997 (keep in mind that the Dow reached 14,000 as recently as Oct. 2007; see graph above). At the end of trading today, Citigroup's (one of the largest full service banks in the world) stock price was an unbelievable $1.22 per share (it was in the $40-$50 range prior to the economic crisis). In the fourth quarter of last year, the GDP fell 6.2%, the steepest decline since the 1982 recession. Not surprisingly, people are not buying cars or houses. Over the past year, sales are down 53% at G.M., 48% at Ford and 40% at Toyota.
In other bad news, insurance giant AIG reported that it lost $62 billion in the fourth quarter of 2008, the biggest quarterly loss in U.S. corporate history. After the bailing out AIG to the tune of $150 billion in November, the government announced a restructured bailout plan, extending $30 billion in additional aid to the company. You might be wondering why we need to keep throwing taxpayer money at this problem:
AIG is so big and sprawling, so intertwined with institutions around the globe, that its downfall could set off a vicious chain reaction. Upheaval on such a global scale would plunge the U.S. economy deeper into recession, drive up unemployment and stifle hopes for an economic rebound any time soon.
Geez. I thought we were there already.
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