US Economic Growth... Well Kinda

The United States economy is at a fork in the road. Which way and where it will go? Nobody really knows, even if they don't tell you so.

How to Hedge a Failing US Economy

The finance blogs and finance bloggers of the world have been speaking of a dooms day looming in the not so distant future of the American economy. The really scary part is that they all have strong arguments.


There is a large supply of worry, and perhaps even a larger supply of reasons to be worried about.


In researching the current state of the American economy I had a few moments to think about what would be a good investment.


I asked myself; where should one put their hard earned money?




The Answer will shock you...









I think the most appropriate way to hedge ones portfolio at this point is to invest your time in a garden.


See the thing about this whole situation is that we as a country have messed with things like stimulus, bail outs, zero interest rates, new legislation, more regulations. and the like so much that there is little else to throw at the next unknown problem.


If things go bad again... It won't be because there is a shortage of money. No, It will be because there is no money of any standard or clearly determined value. Our economy will shift back over to the bartering system.


I am just not sure that are economic wheels can take another pot hole, recession, depression, or whatever.


We are already driving this thing with a spare tire (and on "E" thanks to BP).


The way i see it the US is still on track to a recovery, our economy is still growing, the illusion of money is still alive and well. However, there is just not a whole lot of great looking tricks to patch a tire if we catch another flat.


We can hold this thing together as long as everything runs smoothly, or if destiny blesses us with just a bit of luck we should all be just fine and dandy.


 I fear that any sort of bad luck in the near future could really F**k us.


But then again what do I know?


Let's get to the latest numbers that everyone is talking about...



GDP and Economic Growth

Where is The US Economy Going?

Over the last quarter the economy has grown at a rate of 1.6% which doesn't really sound all that bad to me. However original guidance predicted 2.4% which means that estimate fell by about 33%. On the brighter side analyst on wall street were expecting 1.3% so in that respect we are up 20%. I think that the fact that we are growing at all is either a miracle or a damn lie.


Over the last four quarters GDP has averaged 2.9%, The Experts on the matter say that unemployment will only get worst unless we have a GDP growth rate of 3%.


US Consumers



The US Consumer has actually been spending more on everything except for housing. Not to long ago I posted that the housing market was stabilizing but apparently I am a big fat liar.


Housing Numbers

Consumers are Spending - But Not on Housing

From the home sale numbers that have been released I estimate that at the very most in the month of July only 23,000 homes were bought and sold. This is less then an avg of 500 per state though trust me when I say that state home sale numbers differ tremendously. That does not say much for the previously posted story on the housing stability theory.

 In fact you have to go back half a century or so to find home sale numbers that low!

The home sale numbers have droped 33% year over year and they were not doing so well last year as you already know unless you have a world of warcraft account.


On top of that the Make Home Affordable Plan, Obama's mortgage assistance programs, has had fewer and fewer loan modification workouts come through HAMP, the modification program. The Obama modification plan, or more accurately HAMP has been a tremendous success by any comparative measure. But just the same, as of late, the HAMP performance has been a bit sluggish.


However the Obama Plan made an additional Hardest Hit Fund Payment to an additional five states that were hardest hit by the financial crisis.


I believe the foreclosure prevention assistance payout through the Hardest Hit Fund was 600 million dollars. Combining that with the original 1.5 billion dollars that stimulus total adds up to 2.1 billion dollars.

I think Obama is doing an amazing job overall on this side of things. Obama's housing and financial stability efforts have been tremendous.



The US Job Market



The private market is actually still producing new jobs. In July we had 71,000 new private sector work force additions. However the US economy as a whole shed a total of approximately 130,000 jobs.


These job losses were in large part due to the temporary census jobs that have come to an end. In July this number was around 145,000 jobs terminated. In June 225,000 jobs were lost. That is a total of 370,000 paychecks that are no longer going to be spent every other Friday... That is just no good.


But let us not get to hung up on that large and very scary number. The good news is that the private market is hiring and not firing. This is a blessing and a glimmer of hope for homeowners.

Stabilizing The Housing Market – How America Did It

The mortgage loan and housing crisis created tremendous economic anxiety and directed the American economy towards a black hole of financial hardship.

Though the US economy is not out of the recession or perhaps depression, things have appeared to settle down a bit.

It looks as if the housing market may be stabilizing. This sis a article exploring the steps and actions that were taken to stabilize the US housing market.

Key Actions of Housing Recovery

• The FHA's Efforts and Powerful Initiative

• Their efforts to spend capital on mortgage assets and securities when private capital was no where to be found.

• Political backing of their efforts to reform the financial markets and particularly the practices and operations involving debt and risk management.

• Obama’s Making Home Affordable Plan

• HAMP Modifications have helped 1.2 million homeowners obtain a loan modification

• HARP Refinance

• Lender Incentives

• Freddie Mae as acting agent for the MHA-C or the compliance assurance operations

• The Plans overall flexibility and agility to structure and restructure programs as they are needed.

• The Marketing and Advertising – aka the out reach efforts of the Making Home Affordable Plan

• The Hardest Hit Fund – Foreclosure Relief

• Home Buyer Tax Credit
• The home buyer tax credit added a great incentive for first time home buyers.

• The Nearly 25 Billion Dollars Given to US Housing Agencies
• US Housing Agencies were able to keep lending while other private lenders were saddle bagging cash out of fear and financial panic.

• 1.4 Trillion dollars of Purchases by the FED and Treasury to Keep Credit Markets from Choking
• Thank God. We would be Russian otherwise.

• Financial Support for Fannie and Freddie

All of these actions taken by our collective American government has really helped stabilize the US housing market.

Financial Reform Pushed Through By Democratic Majority and Three Republicans

A New Financial Industry Reform Bill Has Passed

Well 2,100 pages of potential American Policy and Law fixing to keep a tighter watch on the financial industries practices of marketing products to the American Consumer is on its way to Presidents Obama's Desk. Obama is expected to sign.


From what I have read thus far this bill is not really “known”.

That is a confusing way for me to put it but everything I have read has been vague at best.

ABC has said that the bill will add some consumer protection agency to keep a close watch on lending practices. Also Bond rating agencies may have to come up with a new business model which is well.... long over due.

Another potentially big aspect of this thing will effect derivative trading and the regulations that are put on private equity and hedge funds. That will be interesting to see play out.

Overall I think the financial markets do need some shape up or restructuring I guess I am just not sure that a 2100 page bill that no one really seems to understand or have even read seems a little fast.

I do believe and have faith in Obama to make the right decision on this one. He truly believes something needs to be done. I will support his decision regarding reform of the financial industry.


Related Articles

Reform or Refrain - Regulating the Financial Industry

Goldman Sachs Settles with SEC

Flaw of American Tax Law

Banks Lowering Debt Levels to Pretty Up Balance Sheets

Reform or Refrain - What Will Become of the Push to Reform the Financial Markets

It is no secret that the financial markets have not performed at there best. The free market by default will always be on the move, sometimes up, and sometimes down.

The last few years has been a bit skewed if we go by the history of the financial markets. We have not seen performance this low since the Great Depression.

Should the government reform the financial markets and current regulatory practices?


The federal government has already stepped in and bailed out or contributed to the financial stability of most of the large financial institutions and banks who are in large part the reason for the economic down turn of the economy. Just as the the government has reasoned that they needed to step in and aid the financial institutions so to do they believe that they need to step in and take a bigger presence as a government regulatory force in the broader financial markets and financial services industry. However as one might imagine there has been some negative feedback from the financial institutions and from many politicians.

Shouldn't the government step in and play a larger role given the fact that they already have stepped in the form of financial aid to these very same institutions? Many say yes. However just the many say no. The argument and rebuttal to this proposal is that regulators and the government will have a negative impact on the markets as they will increase artificial constraints and will increase the degree of uncertainty for investors.

This seems a fair argument as regulatory bodies will make mistakes as they are only human in the end. plus there is also room for the unseen and unintended consequences that seem to always pop up when Uncle Sam gets in the way and these blunders are not easily changed if they don't work. Plus it is arguable to say that the regulatory bodies have done a mediocre job thus far in enforcing the current line up of rules and regulations that are already in place for financial markets and the business world.

On the other hand there does seem to be a obvious problem with the markets at this given point and time. Also to be fair to the regulatory bodies such as the FED and the FDIC there are some loop holes that need to be fixed so that these guys can have the control they need over non bank deposit financial institutions whom leverage up to obscene levels and add systemic risk to the downside for everybody. Such institutions are not subject to the same liquidity or capitol levels that the typical savings and loan bank is held to. Thus these guys potentially can take things to far and as of now it seems as if they have.

Given these above notions I would like to hear what people think. Should there be added regulation to the world of finance?

If yes what do you think should be done?

Ben Bernanke to serve another term as the Chairmen of the Federal Reserve

August 2009

President Obama interrupted his vacation this late August to publicly announce that he is appointing Ben Bernanke to serve another term as the Chairmen of the Federal Reserve.


Obama did not shy from elaborating on his reasoning or feeling towards Ben Bernanke's work, He had more then enough praise for the current and future Chairmen of the Federal Reserve to hold a few press conferences. Obama was sure to lay claim to the fact that it was bernanke's extraordinary effort, quick and innovative thinking and problem solving that prevented the American Economy from spiraling down into a second great depression.

Congratulations to Ben Bernanke on his appointment to serve a second term as the Chairmen of the Federal Reserve. Let us all support his efforts to steer us back on the road to financial prosperity and away from that horrible world of foreclosure and mortgage default.