Riding Out a Recession

Uh oh, the R word is upon us. The economy has been like sixth grade dodgeball class for a while now, and we just got smacked hard.

Today Merrill Lynch just reportedly lost 9.8 billion dollars. This is a few days after Citibank stunned us with their own loss of 9.83 billion dollars.

What is more shocking than the loss is the bad write offs. You see, the loss in profits is offset by, well, their profits. Kind of like when we do a net worth and save a hundred dollars but lose a hundred and fifty bucks in the stock market. The loss is only fifty bucks on paper, but our wallet is screaming dude, you just lost me a hundred and fifty bucks!

"Citigroup's record loss was caused by write-downs from soured mortgage-related securities and reserves for current and future bad loans totaling $23.2 billion. Responding to a string of dismal quarters, the bank said it would also lay off another 4,000 workers, on top of announced reductions of 17,000 employees, and cut its dividend to conserve $4.4 billion cash annually."

Maybe it's the Rust Belt girl in me, but when money factories are laying off workers and bleeding cash from a severed artery, the recession is on. So what's one to do to ride out the storm?

Jean Chatzky's Eight Ways to Ride out a Recession is a great way to start. Forbes also has a multimedia 11 Steps to Weather a Recession. Both are short and sweet, and a reminder not to panic. After reading much of the suggestions, it's really the same as any other time. Pay down your debt, build an emergency fund, and reign in spending. It's just that our interest rates got mugged, our net worth is walking the plank, the job market might be a little hairy, and lots of people in suits will be on TV stern faced and frowning when throwing out very big numbers regarding very big companies. While distressing to some, it doesn't control how much we spend and how much we save. Unless, of course, you get laid off.

I'm no economist, but I have to say this recession in particular is pissing me off. Fancy pants with MBAs and bonuses the size of a small nation's GDP found a way to make a $hitload of money off of, frankly, moronic number crunching, and the banks and rating agencies all went along with the scheme. So now we get to ride out the storm slowly plugging along, and they get bailouts from Asia and the Middle East to the tune of 59 billion. Sigh.

But back to not panicking. Help (ie a stimulus package) may be on the way. In the meantime, hold on tight. Because as Money magazine's Riding out a Recession reminds us, most recessions don't last a long time.

photo by Mr. Wright via flickr