New home sales were up in March but this was driven by the incentive program and some economists are predicting sales to drop to new lows. Durable goods orders are up if you don’t include sagging sales of aircraft and other transportation equipment which produce a negative number on overall orders. Aircraft is supposed to be one of those things that we can export to China but they aren’t buying that many. China is gearing up build their own in the future and already supply a lot of the aircraft parts used in the US.
Weekly unemployment numbers are down but mostly from hiring at the Census Bureau. Public employment is poised to drop sharply as local governments are forced to deal with their collapsing tax base. 300,000 teachers are expected to be cut in June but it won’t stop there. States and municipalities stubbornly refuse to tax the rich or the corporations they own choosing instead to heap more fees & service cuts on the middle class.
Seven bank failures in Illinois top the list today with the largest tied to the family of the man running for Obama’s Senate seat. Republicans are trying to make hay from this as if the bank failures had nothing to do with Republican policies. Eight banks failed last week and the FDIC has a hard time keeping up with the press releases so there could be more closing announcements by Monday. The seven today cost about a billion to clean up as did the eight last week but the deals to unload these banks contain guarantees on the outstanding loans so the cost could go much higher.
China has yet to do anything about its currency exchange rate with the US and China is feeling the pinch of domestic inflation. Obama is again saying publicly that China needs to take action. Brazil and India are putting pressure on China as well on the eve of the G-20 meeting. The USD continues to gain against the Euro as the crisis in Greece threatens to spill over into other Eurozone countries. This makes some imports cheaper and US exports to Europe more expensive but with China manipulating its currency most prices in the US remain unchanged. But Americans have less to spend as their income continues to fall and more and more people are out of work.
Some Fed District Governors are openly expressing worry about all the funny money inflating the markets and providing no jobs. The risk of hyper inflation is largely controlled by China but things could still get out of hand as US corporations are sitting on record amounts of cash. The biggest risk still remains deflation as this is driven by defaulting debt and that’s one thing there is no shortage of. www.prairie2.com