The markets didn’t take well to the Federal Reserve’s announcement that they will be buying sizable amounts of Treasury debt and possibility other paper to keep everything afloat. Equities markets fell close to 3% wiping out most of this year‘s gains. Commodities also fell despite the Obama Administration’s decision to eliminate tariffs on imported raw materials with the intention of stimulating industry, or possibility this move caused the drop of commodity prices as it destabilized the domestic market as well as pointing out that the bottom is falling out.
The US trade deficit continues to worsen, reaching 50 billion for the month, its getting especially bad with China. The talking point is that retailers are buying extra consumer goods from China with anticipation of a big fall season but wholesalers are down so this seems unlikely, not to mention the increasing number of jobless and the spreading poverty from the depressed wages and less hours worked. US exports are down across the board as well making the deficit worse from the other end. Oil prices have been sagging or the deficit would be truly staggering.
China has taken the bold move of eliminating 2000 old factories, steel and cement mills with an eye toward energy efficiency and cutting pollution but likely they also see an excess of capacity. China has also cut imports of raw materials as well as imports of manufactured goods.
Back in the US, record low interest rates on home mortgages did nothing to stimulate a lackluster housing market. Jobs available last month were only one fifth of the total of officially unemployed plus there are millions who no longer go to register with Job Service so they aren’t counted. Then there is an even bigger number of people trying to subsist on part time work that are vying for available jobs. A large number of people have dropped out of the job market to go back to school but they are starting to emerge to find no jobs.
Millions of workers have retired creating a surge in the Social Security system but these people are burning through their savings and would go back to work if given a chance. Social Security benefits have not been increased because of an official lack inflation but the prices of things the elderly need to buy continue to rise.
Viral emails are being circulated to convince people that Obama has frozen their Social Security payments but of course the benefits are determined by a formula put into law by Ronald Reagan with a cost of living formula intended to slowly cut real dollar benefits. So the new retirees who have been paying double payroll taxes for the last 25 years find they can’t begin to live on the benefits that would be 70% higher if a realistic method had been used. The
Charitable organizations are crying foul over the move by Congress to eliminate 12 billion dollars from the Food Stamp program pointing out that is as much as charities provide in food bank and meal services in an entire year. Democrats did this to fund an emergency jobs bill as the tax loop hole they closed on outsourcing jobs wasn‘t enough money for Pay/Go requirements. Republicans are crying foul as the Democrats want to put the funding for Food Stamps back in the budget by closing still more tax loop holes. To add yet one more straw to the camel’s back, even if the Bush tax cuts for the rich are allowed to expire, the average person with a million dollar income will still pay 1500 dollars less taxes than in 2001. That would buy a lot of canned goods. www.prairie2.com