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U.S. Economic Overview 2009

Written By Brian Hicks

Posted August 29, 2009

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

Just what has the bulls and bears pulling their hair out in another low-volume, pop-and-drop week?

A $9 Trillion Deficit in 10 Years!

Nine trillion dollars. That’s the estimated size of the U.S. deficit for the next 10 years. . . and is also about $2 trillion more than the Obama administration predicted back in February 2009.

It also means that the dollar will collapse under the weight of the debt. The only question is when the dollar will fall apart. . . not if. You see, eventually efforts to inflate our way out of the crisis will come back and bite us hard in the backside.

Our Banking System is not improving, according to the FDIC.

The FDIC just added 111 more lenders to its problem bank list, which now stands at an incredible 15-year high of 416. But, of course, the FDIC won’t release the names. That’d be too helpful.  We can tell you that at risk, we’re talking $300 billion.

Even more devastating, the FDIC’s deposit insurance fell from $13 billion to $10.4 billion. And, if need be, they can borrow up to $500 billion from the Treasury for future failures and rescues. . .

This is why I believe it’s not a matter of if, but when.

"The Great Enabler" is Still in Charge

According to the press, Ben Bernanke is a hero.  He prevented the Second Great Depression, to which Obama rewarded him with another term. The President believes that Bernanke provided "extraordinary leadership during the most difficult crisis we’ve faced since the Great Depression," said David Axelrod, Senior Advisor to the President.

It’s got to be a joke.

And at the same time, the masses say the recovery is here. . . and the "sheeple" believe it.

But there is no recovery.

Fannie and Freddie are soaring, but the housing story remains the same; there are record numbers of empty homes.  And with incomes still falling, there’s no real reason to expect a rebound in home prices.

Jobs are still being cut. The Post Office, for example, is cutting 30,000 jobs.  

World trade isn’t in recovery. The Baltic Dry Index is down 45% in three months; China is in a bubble; the Cash for Clunkers program really hasn’t done anything positive.

But Bernanke is a hero? And we’re "recovering"?

Bernanke is a major reason we got into such trouble.  Remember 2007, when Bernanke told Congress that the growing troubles in the market for risky mortgages "thus far doesn’t appear to be spreading to the overall economy"?

But we must also admit, there’s good news to be found in this bleak situation.

According to the Commerce Department, new home sales were up for the fourth straight month. Sales of single family homes were up 9.76% in July, to an annual rate of 433,000. Unfortunately, year over year, sales are still down 13%. And the median new home price is down about 12% to $210,000.

Orders for durable goods were up about 5% last month, according to the Commerce Department.

The economy shrank at an annual rate of 1%, a better-than-expected read and further evidence that the recession is nearing an end. But while most analysts believe the economy is now growing, they caution that any rebound will not be accompanied by rising employment.

U.S. consumer spending was up in July, thanks to the Cash for Clunkers program, but household incomes were flat.

And after two months of declining, consumer confidence shot up to 54.1 — just short of recent highs.

Sure, the number grew cheers, but remember this: Unemployment is still rising. In fact, the real U.S. unemployment rate is 16% if "persons who have dropped out of the labor pool and those working less than they would like are counted," said a Federal Reserve official.

Plus, the nation is still dealing with record debt. And for America to show any real growth, we need to cut back on debt and create jobs. Here’s how ugly reality really is:


Consumer spending has clearly hit a wall. Our debt has finally become too much of a burden. Your home can no longer be used as a personal ATM. Adding to the bleak housing situation is the fact that Option ARMs are just now starting to reset.

The only certainty we have going forward is that Bernanke will continue to throw everything plus the kitchen sink at the problem. . . which will eventually lead to hyper-inflation.

Don’t shoot the messenger.

Good Investing,

Ian L. Cooper

P.S. We’d love to get your insight on the markets, and what you think of the topics we cover weekly here in your Wealth Daily Weekend Edition. . . you can talk to us directly by clicking on "Comment on this Article," and we’ll feature them in the weekly articles.

P.P.S. In case you’ve missed any of the recent top stories from Wealth Daily and our companion publications, we’ve included them here:

Natural Gas Price Forecast: Investors are Betting Millions on $10 Gas
Natural gas may be plunging to seven-year lows, but one fund is betting heavy that the commodity will rebound by more than 200% over the next six months. . . and we’re looking to profit right along with them.

Renewable Energy Market Growth: The Middle East’s Oil Reach-Around
Energy & Capital Editor Nick Hodge discusses renewable energy growth and how Middle East oil countries are using oil profits from their front-end business to reach around and invest in clean technology on the backside.

$45 trillion is riding on this secret summit
This meeting will determine which cars we’ll be able to drive; how many hours we can run hot water in our homes; how much we pay in electricity bills each month. . . and to whom we’ll end up writing out the checks.  And if you know what’s discussed behind closed doors, you can get in on the money-making opportunities. . .

Solar Power Stocks: You Cannot Disregard the "Unknowns" When it Comes to Solar Investing
This past Friday, while the market was barreling north, thanks to the obligatory positive remarks made by Ben Bernanke, an analyst from Jefferies & Co. issued downgrades on a number of solar stocks.

Investing in Oil: Is the Next Oil Rally is in Sight?
If you’ve been expecting oil prices to plummet below $50 per barrel, you’re probably going to be waiting around for quite a while. . . still, Editor Keith Kohl explains the buying opportunity right in front of us.

North Dakota’s Recession-Proof Secret
These days, while most of the country hopes to merely ride out the recession, North Dakota’s celebrating a new linchpin in their economy: light, sweet crude oil. . . and you can get in on big profit before this news makes national headlines. . .

China Gold Demand: China Overtakes India in Gold Demand
Gold World’s Greg McCoach discusses how China’s gold demand has now overtaken India’s for the yellow metal.

Hotel Stocks 2009: Hotels Set to Catch the Swine Flu
Wealth Daily Editor Steve Christ take a look at swine flu investments and explains why the H1N1 virus will be bad news for hotel stocks.