This past week produced economic data that looked bad to say the least.  Job losses are the highest since hurricane Katrina and the amount of people seeking benefits is actually higher than the months after the catastrophe.  Job losses are both a lagging and a future economic indicator as they judge how corporations are cutting back and also shows that the production of wealth is also limited.

Wealth can only be generated by producing more than you need.  In this case, lets take a lemonade stand as an example.  Sally has a lemonade stand, to do business she need her factors of production, lemons, water and sugar (promotion not included).  She buys $5 worth of lemons water and sugar which will produce 5 gallons of lemonade that she can sell for $3 per gallon.

Sally’s investment is a mere $5 but she is able to produce $15 worth of lemonade.  In this example she can sell her $15 in lemonade and produce a $10 profit, which is wealth.  She provides a good or service that people want (lemonade) for a higher price than it costs her to make.  Customers are happy because they have their lemonade and she is happy because she has produced a profit.

The job market slowdown shows either an increase in productivity, unlikely, or a decrease in overall business activity.  Workers are needed to produce goods and profit for a company, so when they are laid off, it appears that business activity and wealth creation are temporarily slowed.

A corporation could lay off workers for a variety of reasons, but it is usually to cut costs and limit the amount of one good they can produce.  Corporations would much rather have a smaller workforce work at 100% capacity than a much larger force work at 70% capacity.  The difference between 70% and 100% is waste to a company.

When the job market slumps it is indicative that the “wealth creators” are also taking a slump.  If this is the case, the overall size of an economy is shrinking because it is no longer producing as much as it once was.  In this case, 80,000 jobs were lost indicating that the economy will shrink as it produces less.

No wonder why job losses have Wall Street in an uproar.  A cut of 80,000 jobs means less is being produced.  The economy is by all definitions shrinking, or showing the effects of a recession.

Historically the market has boomed after Federal Funds rate cuts.  The ease of finding low rate credit makes its way to financial markets, serving up a boom period every time rates are lowered.  This time, no matter how low rates are going, the markets are not responding.

The credit crunch is still underway.  While the Federal Funds rate is approaching new lows, there is still mal-investment to be taken out of the system.  A recession is a normal part of the business cycle, the market moves to expel any unnecessary credit.  The last few months of price action is housing and in corporations can be seen as this removal of credit.

In the past, lowering the rate and opening up the Reserves to more money would create more new credit than was disappearing.   While this does produce short term inflation, it would also boost confidence until the money supply could then be deflated later.

Unfortunately the money supply has not been deflated since 1929, the last great depression.  Almost all depressions are created from a contracting money supply, the Federal Government knows this and will do anything in its power to avoid it.  The real problem isn’t in the current M0 money supply of $900 Billion, its in the M3 supply of over $10 Trillion.

While just $900 Billion in hard currency is in print, $10Trillion exists in the form of credit and loans.  Just simple mathematics will tell you that the amount of credit is ten times higher than the actual amount of cash.  It is natural for a market to try to correct to its actual value, the last 10 years is full of too much credit resulting from housing and loans against the inflated value of homes.

The Federal Reserve has the tough job of keeping the money supply at the same number to thwart of deflation and keep inflation worries away.  If the market doesn’t respond to this next half-point cut, chances are that we’re not going to see a rebound any time soon.

The Federal Reserve is under constant criticism of its actions on interest rates, money supply and other monetary policy issues.

Right now the Federal Reserve has a critical decision to make, should it continue to expand the money supply and risk hyperinflation, or should it let the money supply level out or even contract to keep inflation from running rampant.

Basic economics tells us that a short term cash infusion does spur the economy.  The addition of wealth comes from a public that can’t tell the difference between inflated money supplies or normal supplies.  When credit is added quickly, the price of goods has yet to reflect the new amount of money, creating instant wealth which then deteriorates over time.

The Federal Reserve should keep better tabs on the current state of inflation.  Some economic indicators came out just a few days ago pointing to an inflation rate much higher than expected, wholesale prices were reportedly up 7% across the board.  The current situation puts the fed chairman between a rock and a hard place.  Creating more credit would give a short term jump start to the economy while eventually raising prices all around, and cutting the money supply would mean an immediate recession.

The problem is that we try to bail ourselves out rather than go through the normal business cycle.  In business there is a normal credit cycle of a few years of prosperity followed by a small correction.  This cycle has been forever changed by the increased amount of credit in the system due to the Federal Reserve and the buildup over time.  We’ve evaded numerous recessions simply through inflation, as the numbers get bigger and the bottom gets lower a period of recession will be worse as time goes on.

The market has already priced in a half-point cut, which would mean 1.75% in rate cuts in just two months.  While this might make investors happy, this is not a good thing for the money supply.  $160Billion in fresh credit has been created since December, a 1.6% increase on the M3 money supply.  Annualized, that is a 6.4% inflation rate.  An inflation rate that high is simply financial stupidity.

Debt Consolidation is an easy and rewarding option for anyone who is trying to eliminate debt and money issues from their lives. Unfortunately, so many people are unaware of what debt consolidation is or what it can do for them, that they do not consider it a viable option even when it could be their life preserver.

In today’s world, it is actually quite easy to find yourself completely buried under mounds of debt without ever really knowing or understanding how it happened. Luckily, the answer to your problem really does not have to be difficult at all, as debt consolidation can be easy and extremely beneficial for anyone who seeks it out as a viable option.

Debt consolidation made simple is completely possible as long as you do all of the necessary reading, learning and research beforehand to be properly prepared. By taking care of your debt consolidation by yourself, you can actually climb out of all this turmoil all on your own without having to rely on anyone else for help.

Debt consolidation companies and loans are not always necessary, as you can accomplish all of the same things on your own as long as you understand how to do so. If you do not believe that you can do it on your own, there are plenty of companies who will walk you through the process, but the fees tend to be a little steep, and these companies are not actually doing anything for you that you could not already do on your own. So why not try to accomplish debt consolidation efforts on your own? There are advantages and disadvantages to this process, but rest assured, it can be accomplished.

If you do decide to accomplish debt consolidation all on your own, then you should know that it would be an incredibly wise decision to seek debt and credit counseling first so that you may gain a better idea and understanding of what goes into debt consolidation and how it works. It is better for you to go into this process completely prepared above all else, because understanding every facet of the process will make sure that you are protected and successful more than anything else.

The first step in accomplishing this is to make a complete assessment of how much debt you are actually in, how old each individual debt is, and whether or not your creditor has been sent on to a collection agency. You should begin with the highest bills that you owe, and work on contacting those creditors or collection agencies first. These are the debts which are most likely going to threaten your property and other important assets, so address them first.

Now that you have a basic idea of where you stand with your debt, creditors and debt collection agencies, you can begin to look for debt consolidation resources which will be at your disposal during this process. With this in place, you can begin to contact your creditors one by one in an attempt to create deals and settlements for paying each debt off individually.

I’m pretty sure that many of you are not aware that it’s free to get your credit report once per year.

There are several websites that make it possible, or you can contact your credit reporting bureaus individually to request your report. Under federal law, you can get a free copy of your credit report once per year. Regardless of whether you believe your credit to be perfect or not, you may find that it is a good practice to obtain and look over your credit report at least once per year.

Why? First of all, there may be errors on your credit report, and looking is the only way you will ever find them. If a dispute must be made, it is better to do it now than to wait until you are trying to buy a home or a car and find yourself denied because of a credit error.

It is also a good idea to check your credit report and score simply to know where you stand at all times. Is your score high, or not? Are you paying your bills on time, or have you been reported as paying late on more than one occasion? There are many reasons to consider taking a look at your credit report, and not a single reason not to.

Your credit report is full of useful information. Look over who your creditors are, and what the status is on all of your loans, credit cards and other accounts. Make sure that all of your credit card companies are reporting your on-time payments, and keep your credit report from reflecting errors.If you have a decent grasp of your credit status and score at all times, you can more effectively plan for the future, and keep track of your finances in the present.

Simply jump online and look for a free copy of your credit report and score. You will certainly be glad that you did when you realize how useful it is to know where your credit stands.

To get your free annual credit report, go to www.annualcreditreport.com or call 877-322-8228.  Alternatively, you can complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Here is the quick way to increase your credit score with just minutes of work. Pay down a balance, or at least most of it if you don’t have enough money.

Try to get a higher credit limit by calling your credit card issuers. If you have a decent credit score you should be able to get a credit limit increase. In addition to this, you can close down a few accounts if you have too many. It is said that perfect number of credit cards is somewhere between 4 and 6. Any more than that could hurt your score.

These are quick ways to somewhat increase your credit score. Considering you didn’t have any major credit lapses. Now did you?

Regardless, don’t expect your score to improve over night. These things can take time. You can also read my article on the site “how to improve your credit score” for more tips.