The Economy

The economic crisis of 2008 was one of the biggest news and political stories of the year with good reason. A crisis in the credit markets caused by failing assets in the housing finance sector spread to other areas of the financial industry and eventually resulted in the collapse or near collapse of several large financial institutions. This unprecedented failure in the credit markets is now spreading to the credit card sector, a medium of exchange for many rental businesses.

The financial crisis has contributed in a big way to tipping the economy into a deeper recession that has unemployment moving sharply higher and economic activity sharply lower. Both the Federal Reserve and the Department of the Treasury have moved to shore up the economy with massive infusions of cash in an attempt to thaw the credit markets and restore confidence in the consumer. The Economic Stimulus Act of 2008 also provided direct cash payments to taxpayers as well as tax incentives to encourage investment by businesses in new plants and equipment. Thus far, these measures have not been enough to turn the economy around although some will argue they have kept things from getting far worse.

ARA supported both the economic stimulus package and the financial sector rescue package passed in the summer because we believe that government intervention, while unpalatable is necessary to avoid a deep and prolonged recession and broad-based deflation. The fall in housing prices as well as oil prices in recent months are but two of the many commodities that have had their price drop significantly over the past two years. It is clear that the incoming Obama administration and the Democratically-led Congress will work to pass another very large stimulus package at the beginning of 2009. We expect this package to contain a number of measures such as an extension of investment incentives like Section 179 and the 50 percent bonus depreciation provisions of the first stimulus bill as well as significant spending on infrastructure. Return to this site in the coming months to remain updated on these issues and how that may affect your rental business.